Apr 15, 2010

Overconfidence

This word is repeatedly used. And everyone seems to know it's bad. And that 'It has disadvantages to be overconfident'. But how many of them really doesn't fall in this very mistake? Few.
Overconfidence in markets can wipe you out or close the doors of opportunity for you forever. Confidence is Great. Overconfidence is Worst. One learned man even said to the extent that overconfidence is anonyme to confidence rather than non-confidence. So how to make out overconfidence from confidence? Is there a think difference line or a huge mental exercise that it takes? Some of the signs of overconfidence can be very easy to identify.
Many times holding into losing positions or adding to them is a sure sign of overconfidence rather than heuristic described as loss-aversion in behavioural finance.
When a trader makes some money by fluke and start believing he can and profit without any trading system, charts, risk management etc. then he's surely an overconfident.
One thing is clear and holy-truth that Overconfidence is a Guaranteed path to oncoming disaster.
Ultimately overconfidence results in loses and then frustration, then in blaming other and markets for it.

0 comments:

Post a Comment