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While being confident in yourself, in your skills, and abilities is a good thing, being overconfident just leads you directly to make mistakes. When you don't even question yourself if you are doing the right thing, if you are making the right call closing a trade, for example, you're not acting based in reason. Instead, you are investing based on your emotions, on your feelings, on your gut that says that you need to be right. <br><br>For More Stock Market News, Check Out Smart Money Gains.
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One ofthemain reasonsthatlead investorsto fail miserablyis thattheir expectations don'tmatch reality. Thetruth isthat whenyou usuallyread or hear someonetalkingaboutthestock marketand theway they invest orusea specific strategy, they talk aboutitin suchterms thateverythingseems evident and easy. However, haveyouever wondered why somany peoplekeep failing?Why so many individualskeep losingmoneytrade after trade?The truthis thatif investingwas easy wewould all bedoingitand wewould all beextremely rich by now. Dealing With Overconfidence Whilebeing confidentin yourself, in your skills, and abilities is agood thing, being overconfidentjustleads youdirectly to makemistakes. When you don't even question yourself if youaredoingtherightthing, ifyou aremakingthe right callclosing atrade, for example, you'renotacting basedin reason. Instead, youare investingbased onyour emotions,on yourfeelings, on your gut thatsays thatyou need to beright. For MoreStock Market News, CheckOut SmartMoneyGains. Even when someonetells you to seethings froma differentperspective, you justcan't actually seeit oryousimply decideto ignoreitbecauseyouknow whatyou aredoing.And onceyouhavemadeupyourmind aboutsomething, you will look everywhereto seeonly theconfirmation signalsof whatyou believe. One ofthethings that itis importantto state isthat youshouldtrust your skillsand yourabilities. Thismakes youfeel good aboutyourself.However, thereis abarrier.And whenyou crossitto becomingoverconfident, youwill makeinvestmentmistakeafter mistake. Thesemay include:
- Buyinginvestmentsthat areriskybecauseyou thinkthey aren't too riskyfor you. - Avoidingdiversification becauseyoubelievethis isonly somethingfor investorswhodon't knowwhatthey aredoing. - Trading toomuchnotonlybecauseyou"know"whatwill happen "every time". Accordingto thisstudy, theauthorswereable to concludethatmost participants continuously overestimated notonly their past performancebut also their futureperformance.Accordingto them,morethan 30%actually believed that they had beaten themarketwhen, in fact, they hadunder performed itby atleast 5%. However, theproblem is notalways onlyaboutoverconfidence.The truth is that mostinvestorsdon'teven knowhow to evaluate their performanceat all and they don't take alookattheir pastinvestments asa way to learn from their mistakes. Accordingto this study, theauthorsconcluded that investors weren't able to provideacorrectestimate oftheir past performance. In fact, and accordingto thissamestudy,only about30%of investors considered themselvesto be average.In addition, itis important to notice that investors tend to overestimatetheir performance.Inthecaseof this study, they overestimated their performanceby morethan 11%ayear. Need moreofLatest Financial News?VisitSmart Money Gains. Ultimately, wecan say thatunlessyouare humbleand accept thefactthat you canand will makemistakes, youdon't haveabright futureas an investor. Themain secretof becomingagood investoris to learn fromyourmistakes. However, when youconstantly believethat youonly makegooddecisions, thereis no chanceto learn. Infact, you won'teven beinvesting, You will be betting.
