By Andy Jordan on Thursday, 27 October 2016
Category: Trading General

Overconfidence

When traders are hot and seemingly cannot lose: When they make several trades that perform exceedingly well, there is a surge of human pride. They feel like the pitcher who strikes out the side for all nine innings of baseball. They feel invincible, brilliant, and master traders to say the least. When a trader feels like that he thinks he can do no wrong and make no mistakes. He comes to believe and even say to himself: “Risk, I can handle it. I make such insightful decisions I’m not even worried about risk.”

The brilliant trader feels he is invulnerable. The truth is at that very moment the trader is extremely vulnerable. He could be headed for a fall. He forgets that most performances eventually revert to the average. If you chart the equity in your trading account, and it shows your equity going up parabolically, look out below!

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