Atlas of Cognitive Biases #18 · Overconfidence. More information, same accuracy
What it looks like in trading
15 indicators on the chart
reading all the news before the session
putting off a decision “until I know more”
An example from a session
A trader keeps adding indicators because each one “shows something”. The decisions become more confident, but not more accurate. In the Order flow encyclopedia space, #7, I explain why fewer tools often means more.
What the research says
Stuart Oskamp (1965): psychologists assessed a clinical case while receiving successive batches of information. Their confidence rose from about 33% to about 53%, while their accuracy stayed below 30%. Barber and Odean (2002) noted that investors who switched to online trading (more data, faster access) traded more often and performed worse.
The belief that more information always leads to better decisions. In practice, extra information often raises confidence more than accuracy. Also known as information bias.
How does the illusion of knowledge show up in trading?
Typical signs: 15 indicators on the chart; reading all the news before the session; putting off a decision “until I know more”.
Educational content, not psychological advice or an investment recommendation.