Definition
After outcomes settle, traders rewrite the narrative to make events appear obvious all along.
Example
A trader claims that last quarter's equity rally "was always going to happen," despite having expressed uncertainty beforehand. The outcome is rewritten as obvious, and the original ambiguity is forgotten, leading to misplaced confidence in future predictions.
Cognitive Driver
Outcome knowledge rewrites memory. Once a result is known, the mind reconstructs the path to make it appear inevitable. This retroactive sense of clarity erases uncertainty, inflates perceived foresight, and distorts learning from experience.
Market Expression
Post-trade reviews attribute success to skill instead of randomness. Missed opportunities are reframed as "obvious in hindsight." Risk becomes underappreciated because past volatility appears more orderly than it truly was. Expectations of future predictability increase without corresponding evidence.
Trigger Conditions
- Large or surprising market moves
- Trades with binary outcomes (data releases, policy decisions)
- Strong emotional reactions to gains or losses
- Environments with heavy retrospective commentary
- Peer discussions emphasising what "everyone knew"
Diagnostic Markers
- Use of phrases like "it was clear," "obvious," or "inevitable" during reviews
- Inconsistencies between pre-trade notes and post-trade narratives
- Lessons learned that reflect outcomes rather than process
- Overconfidence following profitable trades
- Underestimation of uncertainty in forward scenarios
Cost Profile
- Erosion of process discipline
- Inflated conviction about forecasting skill
- Misjudgment of risk due to reconstructed clarity
- Failure to learn from mistakes because uncertainty is forgotten
- Drift toward oversizing or oversimplified narratives
Differentiation From Adjacent Biases
- Not overconfidence: hindsight rewrites memory; overconfidence inflates skill perception.
- Not confirmation bias: hindsight is temporal reconstruction, not selective evidence filtering.
- Not outcome bias: hindsight focuses on predictability, not judgment quality.
Corrective Lens
Preserve pre-trade hypotheses, uncertainties, and scenario maps verbatim. Compare them directly with outcomes to reveal where genuine foresight existed and where luck dominated. Use structured reviews that emphasise process quality, counterfactuals, and the distribution of possible outcomes at the time of decision.