Counterfactual thinking involves imagining alternative outcomes for events that have already occurred. It is categorized into upward counterfactual thinking, which imagines a better outcome, and downward counterfactual thinking, which imagines a worse outcome. The document describes two personal experiences that illustrate each type of counterfactual thinking. The first involves a friend getting caught cheating on an exam, where the author imagines being able to help faster. The second involves the author getting caught trying to skip school, where they imagine their mother not scolding them in front of teachers. Both experiences led the author to conclude they involved the respective types of counterfactual thinking.