Kevin Morris

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How does overconfidence bias affect forex traders?

Overconfidence bias makes traders believe they are more skilled than they truly are. Institutions mitigate this by enforcing strict risk frameworks, while retail traders often increase lot sizes after a winning streak. Benefits: confidence drives decisiveness. Risks: unchecked overconfidence leads to reckless trading, ignoring risk rules. Example: after several profitable EUR/USD trades, a trader doubles leverage, only to face a losing streak. The lesson: confidence must be balanced with humility. Forex rewards discipline, not ego—those who acknowledge limitations manage risk better and survive longer.