Moreover an overconfident person trades too aggressively, therefore increasing trading volume and market volatility. Having success with such overconfidence is invariably due to luck, not skill, or at least limited skill. People usually trade for both cognitive and emotional reasons. They trade because they think they have information when they have nothing but noise, and they trade because trading can bring the joy of pride. Trading brings pride when decisions turn out well, but it brings regret when decisions do not turn out well.
People usually place different weights on gains and losses and on different ranges of probability.
Individuals are much more distressed by prospective losses than they are happy by equivalent gains. People are twice as likely to feel the pain of a loss than the joy of a gain, and are willing to take more risks to avoid losses than to realize gains. Looking at your winning investment decisions objectively is easy to do. Yet, most people don't ever take the time to analyze their mistakes. Post-analysis is one of the best learning tools you have at your disposal.