<p><strong>Hindsight Bias</strong>, also known as the "I-knew-it-all-along" effect, is a <a href="/NewSite/encyclopedia/cognitive-bias/" class="ency-link">cognitive bias</a> where individuals tend to overestimate their ability to predict past events. After an outcome has occurred, people often falsely remember that they had anticipated it, even if they had not.</p>
<p>Hindsight bias matters significantly in decision-making processes, as it can lead to overconfidence in future predictions. For instance, a trader might believe they could have predicted a sudden market shift, leading them to take unnecessary risks in the future. Understanding and mitigating this bias can help improve decision-making accuracy and reduce overconfidence in trading environments.</p>