Atlas of Cognitive Biases #15 · Overconfidence. Beginners don't know what they don't know
What it looks like in trading
feeling that “it's easy” after the first profits
dismissing risk management as boring
scaling up quickly after a few weeks
An example from a session
After two good weeks a new trader thinks they've mastered order flow. Six months later, understanding more, they rate themselves much more modestly. That's a common and healthy learning curve.
What the research says
Kruger and Dunning (1999) showed that people with the weakest scores on logic and grammar tests rated themselves above average. Note: later analyses (e.g. Gignac and Zajenkowski, 2020) suggest that part of the effect is a statistical artefact. The basic observation that beginners are poor at judging their own mistakes is, however, well documented.