Mental elements 'Confidence' and 'Overconfidence' how to manage? ~ 'Confidence' can sometimes be gasoline and other times a pitfall ~

Genesis Mental Management.05

Mental management is an essential management that multi-dimensionally manages the mental state which directly affects trading, enabling small losses and large gains.

Although simply “mentality” can be vague, this time I would like to pick up how to manage “confidence” and “overconfidence.”

◯ It is important to trade with confidence
⚫︎ Without confidence, you cannot enter
→ Even if you enter, you tend to want to take profits quickly
⚫︎ When you feel the chart is wide and clean, you are in a confident state
→ If you can enter at such times and secure profits, you will gain confidence and grow
⚫︎ It is a misconception to have confidence in “having profits in FX”
→ Being confident in your environmental awareness, i.e., in your own environmental recognition skills, is necessary for level-up

What matters is where you place your confidence

◯ It is important to read where overconfidence leads to a big drawdown
⚫︎ The big drawdown follows after holding a floating loss for a long time
→ Unfounded confidence that “it will come back someday” even though the basis has collapsed
⚫︎ If you used high-leverage trades at resistance levels such as support/resistance, highs/lows, Fibonacci, pivots, etc., and it turned into a big drawdown
→ The points you recognized through environmental awareness are not wrong.
However, if you gain confidence that “it will go like this at this point,” it will trigger a big drawdown.
Still, keep respecting the concept of resistance bands.
This is where the difference between the brain for environmental recognition and the brain for discretionary judgment lies.

※ Concept of resistance bands
Points where price movements may rebound, retrace, or reverse.
At such resistance bands, both buyers and sellers cluster, so if the trend does not reverse but resumes in the same direction, it can extend significantly.
Example: If price rises, tests the high of a resistance line several times, reaches a new high, breaks through the resistance line, and continues breaking, this is common.
⚫︎ After thorough money management, averaging down can feel endless and lead to a big loss
→ In a major market move or a long-term chart reversal situation, or policy shifts in fundamentals, severe accidents can occur; overconfidence arises from money management being sufficient.
If this were commonplace, large funds like hedge funds would never lose.
Still, even large players can suffer big losses in a market crash scenario.
However, big moves are understood only after they occur, so stop-loss is also important.
⚫︎ Even when you had huge profits in Tokyo and Europe, you end up with a total loss in NY
→ Winning builds confidence and consecutive wins can lead to overconfidence.
Market openings/closings, economic indicators, and news can cause market shifts that are hard to handle.
It’s important to reset in accordance with market open/close.
If you made profits in Tokyo, stop for today; if you did European morning, don’t trade in the afternoon, etc.
Setting a monthly target helps create a mental discipline that prevents trading during winning streaks.
⚫︎ Ideal reversal judgment! High-leverage entry at market tops and bottoms leads to a big loss
→ If you manage capital with zero cuts in mind, it won’t affect your mental state, but if it does affect you mentally, you should “give up the head and the tail.”
Better to analyze reversals technically, confirm them, and then take positions without affecting your mind.
If you have no immunity to zero-cut, refrain from high-leverage trades.
Zero-cut is viewed as an efficient way to cut losses in markets like those overseas where there is no domestic zero-cut; outcomes depend on your perspective.
⚫︎ Overconfidence that arises when a trading method and money management start functioning
→ The market moves beyond your predictions.
If a daily chart range becomes a false breakout, both method and money management are fragile in front of the mental aspect.
Even if it’s a justification to cut losses quickly due to time inefficiency, it would destroy the carefully built method and money management.
If your original market forecast was simply wrong, overconfidence in method or money management leads to not just money loss but a mental “loss after loss.”
If the basis collapses, thoroughly close out trades.
⚫︎ Overconfidence from trusting others’ environmental recognition or trading too much
→ Not the antonym of confidence, but a common pattern of big losses.
For example, a famous trader says “buy dollars.”
Compelling justification may be convincing.
But technical analysis may tell a different story.
Others’ environmental recognition or trading strategies rest on completely different methods and money management than yours.
If you trust only the direction (up or down) and trigger a big loss, your own trading framework collapses.
It should remain a reference level about what you would do in your own case.
Mentally, this is not only market confusion but also a state where you forget your methods or processes, making management difficult.

After all, not having confidence is bad, but overconfidence leads to a big loss. Perhaps the saying “the next moment is darkness” applies here.
Building confidence on solid grounds while avoiding overconfidence is not easy mental management.
Develop an objective perspective so you can manage mechanically without reacting to every whim.
I plan to continue delivering mental management from another perspective as well.