People act as if a 2 percent chance were closer to 10 percent, and as if a 95 percent chance were closer to 85 percent. That distortion is measurable and stable.
It funds two opposite bad habits. Buying far out-of-the-money options at terrible prices because the jackpot is vivid, and selling cheap tail risk because a 98 percent win rate feels like certainty. Both traders are mispricing the same curve from different ends.
The corrective is arithmetic rather than willpower. Multiply payoff by probability and compare with the cost, every time. If you cannot state the probability you are assuming, you are not estimating it, you are feeling it.
Related: prospect-theory, tail-risk