Counterfactual thinking literally means "contrary to the facts". It also refers to thinking about "what might have been"; imagining what might have happened, but did not.

Counterfactual thinking requires the ability to hold two (2) different realities as possibly true so that two (2) sets of similar but separate associations, hypotheses, perceptions about reality are held in suspension pending the development of further information or action. Counterfactual means, literally, contrary to the facts. The term Counterfactual thinking refers to a set of cognitions involving the simulation of alternatives to past or present factual events or circumstances.

Other /More definition:
Counterfactual thinking refers to mentally changing some aspect of the past as a way of imagined what might have been.

Counterfactual thinking means imagining what might have happened, but did not happen; imagining alternatives to past or present events or circumstances; a tendency to believe that a different outcome would have occurred if different events had taken place.