Overconfidence Bias

Overconfidence bias is the tendency to overestimate the accuracy of your own analysis and the precision of your own forecasts. In trading it typically follows a winning streak: position sizes creep up, the checklist gets skipped, and a probabilistic setup starts being treated as a near-certainty. It also shows up as too narrow a view of what can happen — assuming a range will hold, or that a stop will always fill at the stated price. Because overconfidence tends to raise risk exactly when recent results feel reassuring, its footprint often appears on an equity curve as one outsized loss after a smooth run. Fixed risk-per-trade limits and a written plan do not remove the feeling, but they cap how far it can travel.