Almost all of us are prone to the mistakes of misinterpreting our memory. People tend to view historical events as more predictable than they actually were. Market crashes, dollar rallies, bitcoin's success may seem logical and obvious after they have already occurred.
Our memory is arranged in such a way that we remember individual fragments of past events. The brain fills in gaps in memory with pleasant memories, which makes us happier, but does not allow us to learn from the mistakes of the past.
This bias results in overconfidence in their investment decisions. It seems to you that you would predict, for example, a rise in technology stocks in the United States, so in the future you can afford to risk more than you can actually afford.
In addition, bias can get in the way of filtering out bad strategies. Imagine that your approach a few years ago produced excess returns, which then gave way to a period of significant losses. Over time, the brain can diminish the effect of unpleasant memories, and you will remember the pleasant feelings from the strategy when it showed income. This carries the risk of returning to dangerous and risky trading.
Keeping clear records of decision making can help protect against this bias.… After a while, you will see that the past was not at all as predictable as it is seen now. Don't be afraid to appear stupid in your own eyes when you buy a stock based on what later turns out to be wrong assumptions. Not a single investor is insured against erroneous decisions.