Here is how you can avoid overconfidence bias:
- Think of the consequences. While making a decision, think of the consequences. ...
- Act as your own devil's advocate. When estimating your abilities, challenge yourself. ...
- Have an open mind. ...
- Reflect on your mistakes. ...
- Pay attention to feedback.
What causes overconfidence?
Behavioural finance says overconfidence may be caused by several things, such as: Self-serving attribution bias. Self-attribution bias is the bias where traders attribute their success to their own actions and abilities, while, on the other hand, they refuse to believe that poor trading results are their own fault.
Why is it bad to be overconfident?
Confident You. A downside to overconfidence is that it can actually cause you to make more mistakes than you would if your ego was more balanced. Thinking that you're infallible can lead to poor decisions that cost big bucks.
