Smart yet Struggling? The Irony of Trading Overconfidence

Hi, Brian McAvoy here with Inside Out Trading. And in this video we're going to address a kind of a fun topic because there's several ironies that we're going to discuss. But now it's also seriously, there's a phenomenon that affects a lot of traders that and likely affects you affected me for sure. But and it's important to pay attention to because it's costing you, it's costing you in financially, it's costing you an enjoyment of trading, it's costing you in being able to move forward with your trading. So super important that you take a few minutes and check this out because and it's especially true, ironically, again one of the ironies, this is something that affects higher than people who are above average intelligence. It seems to affect us a lot more than other people or people of average or below average. And it's funny because this is something that affects people who are above average intelligence more so than people who are average or below average. And most traders are above average intelligence wise. Not to sound snobbish, it's just a simple fact. In order to be in a position to trade and have capital to trade generally it's above average. Trading is not an entry level kind of job. So again, not sounding like a snob, simply a fact truth of the trading world. But here's what's cool and I've heard of this before, didn't know that there was actually a study and a name for it, but it's called the Dunning Kruger effect. And it's where you have a cognitive bias where if you're in the, let's say, like with trading, let's say you're in the lower quartile, you're in the bottom 25% of traders regarding skill and proficiency and success and just generally you know how solid and knowledgeable you are as a trader. Generally the people in the lower quartile will way overestimate their abilities and where they are like with any other sport. And like I said, happened to me too. So if this sounds familiar, I'm not judging anybody. It happened to me. I've witnessed it in friends, I've witnessed it in my kids, I witnessed that in my parents. It's like it seems to affect a lot of people and especially if you're smarter than average. This is easy trap to fall into. And here's how it generally works with trading. We first hear about trading or maybe heard about it before, but we finally take a serious look at it and we're like, we look at it's like, oh, yeah, I get it. I understand how it works. I can do that. And so it's real easy for us to jump into it, not really knowing a whole lot. It's like, okay, I understand how trading works. I understand I got to trade forex, crypto, stocks, futures. I got all these different markets I can trade. Okay, yeah, I get it. And so because we understand the arena and the game and what we're supposed to do, we just kind of presume, hey, I. I know all I need to know. Yeah, I'm. I can do this. I'm gonna be good at it. Sure. And so we totally overestimate our abilities. And we. It's like we walk into it because we're smarter than average. And because trading looks so simple, we develop this false overconfidence, and that's the Dunning Kruger effect. And it's ironic because you would think, since generally we are smarter than average, that we would look at it and we would be a little skeptical and say, yeah, it looks simple, but probably not as easy as it looks. Maybe there's some stuff about it I don't know. And I know that a whole lot of people are struggling and not making money, and a lot of people are taking up a brutal beating. For some people, it blows up their lives. Maybe I don't know as much as I think I do about it. And there's a lot of stuff. Some of the difficulties, they're not apparent, they're not easily located. And so maybe I better step back. That's one of the things that usually it takes blowing up your account once or taking a severe beating once or twice or ten times before you say, crap, I need some help. Because we finally recognize. It's like, wow, I'm finally realizing there's stuff I don't know. And the thing is, when we're starting off, if you don't have good help as far as a trainer. Well, yeah, we. Like my first year training, I was my own limitation because I didn't know what I didn't know. I was ignorant of it. I didn't know and I couldn't see what I couldn't see. It was like, if it's in my blind spot, don't even know it's there. And I can't go fix it if I don't know about it. Again, if it's in my blind spot. So it's funny because on the other end of it, and again, you've probably experienced this on the other end, people on the high end of it where they like, yeah, we are approaching expert level and that kind of stuff. A lot of times people in the upper quartile will underestimate their abilities and they become very humble. And so with trading is kind of the same thing. And it's cool because I've been able to watch a lot of people over the years progress through the range from very start, very first starting out to where yeah, they're just, man, they're pretty impressive as traders and just watching how the attitude changes along the way, it's pretty cool. But the main thing is there was a study done about it. Again, the Dunn Kruger effect came from a study and it's a cognitive bias that if you're not aware of it, you can be operating with that false overconfidence. And the problem with that is if you think you know something, if you think you're solid and you know all there is to know, your mind is going to be closed to finding the solution if you haven't already run across it. And most traders it's like, no, we'll jump into it. We think we know, we think we know and we don't. And there's stuff that we're missing and it's those gaps, those missing blocks in our foundation that are hurting us now. But we don't see it until it's too late. Now what can you do about this? Well, if you find that you are having some struggles with your trading, swing by Inside Out Trading.com, book a call with me. We'll talk about your trading, what's holding you back and your best path forward to get past and get on to good, comfortable trading. If you've enjoyed this video, if you would please give me a like and subscribe down below. Help me grow the channel, let the algorithms know that yeah, this is a good worthwhile video. And if you have friends who trade and you think that this might help them out, share it with them. I mean, I do this because I want to help you become a better trader. I'm not here to just pimp systems and signal services and that kind of stuff. There's plenty of people already doing that better at it than me. I'm here to help you become a more competent trader, have a better understanding of trading and what it's like to be to be a trader, how to become a successful trader, become that person that you need to be as a trader. Where yes, trading is easy. It's no more difficult than a regular job, which I'm sure you're the job that you do have your day job. It's way more sophisticated and complicated and requires a much broader knowledge base than trading does. And you handle that just fine. I'd love to get you to the same point with your trading where, yeah, you go to work, you go go to trade. Some days are better than others. End of the day, live our life and enjoy it. But it's not this big emotional ride and it's big struggle that lasts for months or years and it's more of a negative than a positive. I want to help you get it to be a positive. So, again, I hope this has been helpful. We'll talk to you soon. Cheers.