Competence precedes confidence: Winning mind-sets result from mastery, not the reverse.

Trading can be a difficult and emotionally draining activity, and success necessitates a significant amount of mental fortitude. Many traders make the mistake of believing that confidence is the key to success and that mastery will follow naturally. However, this is a common misconception that can harm a trader's success. In reality, competence comes before confidence, and winning mindsets emerge from mastery, not vice versa.

To understand why competence should be prioritized over confidence in trading psychology, consider the relationship between the two concepts. Competence refers to a trader's level of trading skill and expertise, whereas confidence is a sense of self-assurance and belief in one's abilities. While confidence can be useful in some situations, it is not a replacement for competence. Overconfidence, in fact, can be a major impediment to a trader's success, leading them to take unnecessary risks and make poor decisions.

In contrast, a trader who has developed a high level of competence, on the other hand, is better equipped to make informed decisions and effectively manage their emotions. They are well-versed in the markets, their trading strategies, and the risks involved. This in-depth understanding enables them to remain focused and disciplined even in difficult market conditions.

Furthermore, when traders prioritize competence over all else, they naturally develop a more resilient mindset. They become more at ease with uncertainty and ambiguity, and they are better prepared to deal with the market's inevitable ups and downs. They learn from their mistakes and apply what they've learned to improve their trading strategies, which boosts their competence and confidence even more.

Traders who prioritize confidence over competence, on the other hand, are more likely to succumb to cognitive biases such as the overconfidence bias. This bias can cause traders to take on too many risks or to hold on to losing positions for too long, resulting in significant losses.

So, how can traders prioritize competence over confidence? The key is to cultivate a growth mindset(I advise you to read a book "Mindset" by Carol Dweck to find out more about the Growth Mindset). This entails viewing trading as a process rather than a fixed outcome. Rather than focusing on immediate results, traders should focus on developing their skills and knowledge over time. Setting attainable goals, soliciting feedback, and continuously learning from both successes and failures are all part of this process.

A solid trading plan is another important aspect of developing trading competence. A trading plan should include specific criteria for entering and exiting trades, as well as risk management guidelines. Even when emotions are running high, having a clear plan in place can help traders stay focused and disciplined.

Finally, in trading psychology, competence should always come before confidence. Traders who focus on improving their skills and knowledge over time are better able to make informed decisions and manage their emotions. Traders can develop the competence they need to succeed in the markets, as well as the confidence that naturally follows from mastery, by adopting a growth mindset and developing a solid trading plan.