Who it's for — Anyone who after a winning streak «knows» where the market goes, sizes up and stops following the plan — often right before the hardest drawdown.
Overconfidence pushes you to overestimate accuracy and control: excessive size, loose stops, skipping the checklist, treating temporary luck as invincible skill. Often follows recency bias and euphoria.
In plain terms — «I've figured out the market» — until one large trade reminds you variance exists.
Warning signs
| Signal | Risk |
|---|---|
| Size above plan after wins | Single devastating loss |
| Stops «widened because I'm right» | Unlimited loss |
| Skip review / journal | No corrective feedback |
| 100% certain forecasts | No scenario management |
Common mistake — Confusing a regime-favourable period with permanent skill — market regime changes; overconfidence does not.
Example — Five consecutive wins: you double size and remove a volatility filter «because I read the market now». Sixth trade — gap against you: drawdown erases half the month.
Summary card
- What it is: excessive confidence after success.
- Antidote: Discipline, size cap, post-market routine.
- Hub: Trading psychology.