Overconfidence is a trader’s number one enemy. Why? Because overconfidence leads to overtrading, and overtrading leads to big losses.
When traders are overconfident, they believe that they can’t lose. They think that they have some sort of magical ability to always make the right decision. But the reality is that even the best traders make mistakes. And when those mistakes are made with too much money on the line, it can lead to disaster.
Overtrading is another problem that arises from overconfidence. When traders are overconfident, they tend to trade too much. They might be trading when they shouldn’t be, or they might be holding on to losing positions for too long because they think they can turn it around. Again, this can lead to big losses.
The bottom line is that overconfidence is dangerous. It leads to bad decisions and can ruin your trading career. If you want to be a successful trader, you need to keep your ego in check and trade with humility.