Confidence is the most important psychological tool for the trader, Without Confidence on your abilities and trading system success in trading will be inevitable. When you develop your trading plan, it is obviously important that you have confidence in its accuracy and usefulness and in your belief that you can follow your plan closely and execute it successfully.
Often, traders fall into a mental “I know it all” trap, where they use their confidence to nurture their ego . This generally happens when trader is on a Winning streak, Every trade taken hit target and confidence turns into overconfidence and finer aspect of trades are ignored. Such misplaced confidence can be crippling to trading success, because any potential influence from Social Media, Blue Channels that could sway the trader from sticking to his trading plan will have far more power. For Example As per your system you need to stay long but as market suddenly turn due to some news, you quickly exit your position thinking market has reversed but it turns out to be a small blip and market continue its initial trend.
When a trader is caught in this type of trap, his ability to question his opinions and ideas diminishes. If his initial reaction to a suggestion is to accept it, he loses the capacity to question his acceptance; and if his initial reaction is to disagree, then he loses the capacity to question his disagreement, which can cause even the slightest suggestions from news, colleagues, and other influential sources to be magnified in the trader’s psyche.
If you’re caught in this trap, you’ll tend to make these magnified suggestions your own. When you do this, you give yourself logical reason and justification to act on them, even if it means you have to sway from your trading plan. Falling into this trap is characterized by being confident about things you really don’t know, instead of being confident about the things you know well, such as your trading plan.
The key to successful trading is not to be confident about what you don’t know but to be confident on your trading system. trading plan that you have developed or learned.
To prevent misplacing your confidence, review decisions that you’ve made confidently but that turned out to be incorrect, evaluating exactly where your confidence was placed. Most of the time, you’ll discover that your decision was based on a suggestion not your own, but that you had made your own.
The market wants you to admit when you are wrong. Commit to admit. If the market is always right, and it is, then go ahead and let the market know NOW that you understand and accept its omnipotence. Let everyone know you will be wrong more often than right and that you are OK with that. If the market knows you do not mind being wrong the market will leave you alone.