The overconfidence literature employs activity metrics such as account turnover and trade frequency to link the behavioral bias to excess trading. We argue leverage use is a better indicator of overconfidence because trade frequency is subject to conflicting influences. Using a sample of retail foreign exchange traders, controlling for investor experience and sophistication, we find traders with
... [Show full abstract] greater leverage use make more impaired market timing decisions. The opposite is seen among investors trading more frequently. We also observe more sophisticated and experienced investors use less leverage, consistent with prior findings suggesting these types of investors suffer less from behavioral biases.