Confidence can be an important psychological tool for the trader – important enough to make the difference between a winning trade and a losing trade. When you develop your trading plan, it is obviously important that you have confidence in its accuracy and usefulness and in your belief that you can follow your plan closely and execute it successfully. 
Often, traders fall into a mental “I know it all” trap, where they use their confidence to nurture their ego instead of using it to be appropriately decisive in their trading and investing decisions. Such misplaced confidence can be crippling to trading success, because any potential influence from the environment (media, others’ opinions, etc.) that could sway the trader from sticking to his trading plan will have far more power. When a trader is caught in this type of trap, his ability to question his opinions and ideas diminishes. If his initial reaction to a suggestion is to accept it, he loses the capacity to question his acceptance; and if his initial reaction is to disagree, then he loses the capacity to question his disagreement, which can cause even the slightest suggestions from news, colleagues, and other influential sources to be magnified in the trader’s psyche. 
If you’re caught in this trap, you’ll tend to make these magnified suggestions your own. When you do this, you give yourself logical reason and justification to act on them, even if it means you have to sway from your trading plan. Falling into this trap is characterized by being confident about things you really don’t know, instead of being confident about the things you know well, such as your trading plan. 
Alternatively, when you have the right kind of confidence, you empower yourself to stick to your trading plan and deflect fear and doubt. Before making a trading or investing decision, be certain that you’re confident about what you’re confident about. The key is not to be confident about what you don’t know (especially when it comes to others’ opinions) but to be confident about your knowledge of objective facts and the trading plan that you have so laboriously developed. 
To prevent misplacing your confidence, review decisions that you’ve made confidently but that turned out to be incorrect, evaluating exactly where your confidence was placed. Most of the time, you’ll discover that your decision was based on a suggestion not your own, but that you had made your own.