If you’ve ever looked back at a market chart and said, “It was obvious,” congratulations: you’ve just been blessed (or cursed) by the Hindsight Halo.
The Halo is that glow our memory paints around past winners. We convince ourselves the breakout was inevitable, the bubble predictable, the collapse foretold. But here’s the truth: in real time, it was noisy, chaotic, and uncertain.
Psychologists have studied this for decades. Our brains are wired to rewrite messy decisions into neat stories. (Here’s a primer from the APA). Investors, meanwhile, turn portfolios into morality plays: “Of course Bitcoin was digital gold. Of course Apple was destined to dominate smartphones. Of course the housing bubble had to burst.”
Except — no. None of it was of course. It was only clear once we already knew the ending.
Why does this matter? Because Hindsight Halo doesn’t just rewrite history, it distorts the present. If you believe past winners were obvious, you’ll chase the next shiny object thinking you’re spotting inevitability. If you believe past losers were obviously doomed, you’ll miss the subtle signals that actually mattered.
Markets don’t hand out scripts. They hand out riddles. And memory’s Halo tempts us to mistake solved riddles for clues to the next one.
Here’s my advice: write down your thesis before you enter a trade. Then, when you look back, you’ll see what you actually believed — not the cleaned-up, memory-safe version.
Because the best way to break free of the Halo is to prove to yourself how foggy the stage really was.
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