Ev here. Been trading crypto since 2017 and later got into stocks. I have 3 board exams on financial markets and studied economics from a top tier university for a year. Daytime job - Math Teacher. 👩🏫
In today's analysis, we're taking a look at the Dunning Kruger Effect. Dunning-Kruger effect, in psychology, is a cognitive bias whereby people with limited knowledge or competence (in a given intellectual or social domain) greatly overestimate their own knowledge or competence in that domain relative to objective criteria or to the performance of their peers or of people in general. This happens in trading all the time. In fact, we probably all started there if we're being honest.
So - What causes the Dunning-Kruger effect? Confidence is so highly prized that many people would rather pretend to be smart or skilled than risk looking inadequate and losing face. Even smart people can be affected by the Dunning-Kruger effect because having intelligence isn’t the same thing as learning and developing a specific skill. Many individuals mistakenly believe that their experience and skills in one particular area are transferable to another. Many people would describe themselves as above average in intelligence, humor, and a variety of skills. They can’t accurately judge their own competence, because they lack metacognition, or the ability to step back and examine oneself objectively. In fact, those who are the least skilled are also the most likely to overestimate their abilities. This also relates to their ability to judge how well they are doing their work, hobbies, etc.
The Dunning-Kruger effect results in what’s known as a double curse : Not only do people perform poorly, but they are not self-aware enough to judge themselves accurately—and are thus unlikely to learn and grow. So how can we prevent ourselves from falling into this trap? Here's a few things to keep in mind: To avoid falling prey to the Dunning-Kruger effect, you should honestly and routinely question your knowledge base and the conclusions you draw, rather than blindly accepting them. As David Dunning proposes, people can be their own devil’s advocates, by challenging themselves to probe how they might possibly be wrong. Individuals could also escape the trap by seeking others whose expertise can help cover their own blind spots, such as turning to a colleague or friend for advice or constructive criticism. Continuing to study a specific subject will also bring one’s capacity into a clearer focus.
Practice these habits to ultimately escape the double curse:
- Continuous learning.This will keep your mindset open to new possibilities, whilst increasing your knowledge over time. - Pay attention to who's talking about what.Is the accountant talking about bodybuilding? - Don't be overconfident.This is self explanatory.
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Cheers, this has been my journey, my first alt I bought in 2017 off of the back of a data dash video, I bought 80 euros of ICX in the ICO, just to learn the process really, and it went i think to around 12 dollars a coin in a few months, I was paralyzed at the top, - literally couldn't sell it, a friend was screaming at me to sell, I was having none of it - this can not possibly end . .. it did of course and I did get out with some decent profit, then in the following months when everything was on the floor, I realized 2 things, 1) I got lucky. pure and simple, yeh sure I set my alarm so I didn't miss the pre sale, and had a bit of intuition that ICX might run, but really it was just blind luck, and 2) it was gonna come around again. Looking back I was in the elation trap, I'm always on the look out for internal elation now, its normally a pretty good sign that it's time to get out, but having that realization, that I was basically crap at ta, was a hard thing to swallow at the time, but it gave me the drive to tear the charts apart over the next few years. thanks for sharing
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@Spocks-Beard great to hear about your journey! Thanks for sharing this friend!