Overconfidence | TradeLiga

The lesson in full

In a famous 1981 study, about 93% of the US students asked rated themselves as better-than-average drivers. They can't all be right.
That's overconfidence: believing your skill or knowledge is better than it really is. In trading, it shows up as trading too often and too big.
Economists Brad Barber and Terrance Odean studied 66,465 US households from 1991 to 1996. The fifth that traded most earned 11.4% a year after costs. The market made 17.9%.
The reason: feeling sure leads to more trades. Every trade pays a spread and fees, and the costs eat the returns.
Common mistake
Myth: "I'm 90% sure about this trade." Reality: when people give answers they're "90% sure" of, they're right far less often. Feeling sure isn't proof.
Key takeaway
Let a trading journal judge you, not your memory. Real results show what you're good at, and what you're not.

Overconfident traders tend to... Trade too often and too bigFeeling sure makes people take more and bigger trades, and each one adds costs and risk.
In the US household study, the most active traders earned... Less than the marketThey earned 11.4% a year after costs, while the market made 17.9%. Trading more cost them.
The best cure for overconfidence is... A journal with real resultsA journal records what really happened, so your memory can't flatter you.
You feel 90% sure about a trade. That feeling... Isn't proof you're rightPeople are usually right far less often than they feel. Keep your normal size and stop.