What is confidence?
Confidence is a high degree of certainty in one's actions or beliefs. It is the precise knowledge about what you can and cannot do. Confidence is an acquired attribute and not an incidental one. Most of you are already confident about your ability to drive to the mall or ace your favorite video game, for example. Technically this is positive confidence and your confidence in your inability to do something else, such as not being able to solve a rubik's cube is negative confidence. Both kinds of confidence are very important because actions where you have positive confidence lead to success and avoiding actions with negative confidence avoids failure. When most people say confidence, they mean positive confidence and thats what we focus here.
How does one build confidence?
Building confidence requires repeated results. In particular, repeated success in an action builds confidence in one's ability to successfully perform that action. Ignore slogans such as "fake it till you make it". Confidence requires work and practice. Clearly, you cannot fake confidence any more than faking fitness or chess skills or swimming ability or anything else that requires learning and practice.
Confidence as a sign of excellence
When presented with a challenge or opportunity, the demeanor with which one faces it says a lot about the person. A person facing it with joy rather than dread, calmness rather than anxiety, action rather than indecision, a plan rather than hesitation exudes confidence. Such a person will be the de facto leader of the endeavor. Is it any surprise that confidence is attractive? He gains the respect and often adoration of the group when he can do this repeatedly. More importantly, his internal state reflects the same.
Confidence in the social sphere
Confidence is social interactions is no different. A man who can approach (men or women) with ease, hold conversations and win them over without anxiety commands respect. Confidence in one area of life spreads to others since you would have to interact with others as part of your work (unless your area of excellence is ascetic, such as video games.) The reason you do not have confidence is that you do not have experience and repeated success.
Loss of confidence
Just as repeated success leads to building of confidence, repeated losses erode confidence. This happens even to world-class athletes and millionaire traders, so don't think you are any different. Outcome independence helps ease the sting a bit but in general, not knowing how to avoid failure is a lack of negative confidence.
Confidence with women
One of the issues with approach anxiety is that the man has goals that are way beyond his confidence. When you approaches a girl, your intentions are to 1)talk, 2)win her over, 3)seduce and maybe 4)make her your plate/girl friend. To be realistic, you should probably start with the goal of just having a talk while just being comfortable. Until you are confident about step 1, you should not even have step 2 on your goals. Your measure of success should always be how comfortably you conduct the interaction. Not having any goals beyond having a two minute conversation removes the creepy vibe you normally radiate. Start with your social circle and practice talking to both men and women and chat for two minutes. Learn to leave and not look to prolong the interaction. Once you can do this with confidence and absolute self-assurance, you will do this automatically without effort. Now you can move on to step 2. Eventually, you will master interaction with women and everything will feel practically effortless. Note that there will be failures on the way to mastery and not every interaction will be perfect or successful.
Confidence is an acquired skill and needs learning and practice. Repeated success is required to build confidence. Start with small goals and build your confidence and move to higher goals.