Overconfidence rises after wins and is highest right before the biggest losses. It makes a trader estimate a 70% chance on a setup that historically wins 45%, and size accordingly.
Calibration comes from the trading-journal: compare your confidence at entry with the actual hit rate over a real sample-size.
Example: after a 12-trade winning streak, a trader triples his usual size on a setup that is only slightly better than average. The loss equals the previous eight wins.
Related: recency-bias, confirmation-bias, position-sizing, trading-journal