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Lee Bohl on Overconfidence

Lee Bohl discusses several ways that overconfidence can hurt a trader.

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I think one attitude that affects especially new traders is arrogance. If you're good in your field or your professional endeavor you think, 'I can do anything. I can be a great trader.' And sometimes that is true, but a lot of times that isn't. I'll give you an example: A lot of scientists and engineers that I work with are really smart people, and they can take a lot of data and come to a nice conclusion, but that's based on physical laws. The market is made up of people. It is more like social science than physical science. So I think what they do is try to apply that strict group of criteria to something that isn't always rationale and it doesn't work for them.

Another way that arrogance really raises its head in trading is, one, people can't take a loss because if they sell something they're saying, 'I'm wrong.' And they just can't do it, and arrogance gets in the way there. It also gets in the way with profit-taking. You have a little bit of a profit. You can say, 'I can sell it now, and I'm right.' So I think arrogance can affect trading in many different ways.

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