The Loss of Confidence negative quality reads that you get -2 dice, can't use a specialization, and can't use Edge. (This is terrible for only 10 Karma.)

Does that mean that you can't use the specialization, and thus -2, or does it mean that in addition to the -2 to the base skill, you can't use the specialization either. That would be a -4 dice pool modifier.

Yep,

Loss of confidence has a basic -2 dice for just using the skill. So if you had Pistols 5, you would roll 3 Dice for the skill portion when using pistols in general.

If you had a specialization you don't get to use that either. So if you had Pistols 5 with a specialization in say Hold out Pistol, you are still just rolling the 3 Dice for the skill portion as per above.

So yes you could look at it as a -4 but you have to see the quality is penalizing the baseline skill itself and not allowing any boosts from specialization so you can not just do an end run around the quality by taking on a specialization.

Granted this can only be applied to skills of 4 or higher so you have to be Pistols 4 minimum to take this penalty.

It makes for fun roleplaying as maybe something happened and your trick shot ended up hurting the person you were trying to save or something similar so now your nerves are a little shot when trying to use that skill.

I completely agree with the barring of Edge for it. Edge is when you are pushing yourself with sheer willpower to beat the odds, loss of confidence is that nagging self doubt that ruins this effort.

It's not totally crippling, you have to have a decent base to even take it, so you not just fluff it with a lowballed skill. You are just not as good as you used to be until you overcome it.

Time, roleplaying and karma will let you overcome this down the road, making for good character development.

I like it. And it's nor too much of a burden when you apply to a skill in a group, where you can find use for the others. For example take Firearms Group 4 and Loss of Confidence (Longarms) You're still a valid fighter with pistols and assault rifles..

And you can, of course, just take a lower skill, and no specialty, and not take the Negative Quality (but use the same fluff that you are shaken (loss of confidence in your abilities) and your skill suffers for it). Same result.

And this is why I love GURPS. Disadvantages vs. Quirks.

Disadvantage example:
Lazy (20 points). You will perform no action at all towards anything other than what you absolutely must do for your own personal wellbeing.
(Came up in play, one player is like, "Oh hey I have that skill, I could help out." GM, "No, you're lazy, your character is so lazy they don't even walk on their own, there's no way you'd go foraging in the bushes to help out).

Quirk example:
Lazy (1 point). You find opportunities to avoid doing unnecessary tasks.
I.e. You'd not help scout the woods for food, if you're one of five people doing it. If you're the most qualified of those five though, you'd probably help anyway.

In this situation the OP's version is the actual disadvantage. TJ's suggestion is the quirk version.

Never did develop a liking for Gurps, personally. Not sure why. I LOVED Champions, though.
However, I am a firm believer in that you do not need to benefit from something to play it. I know that often, my characters COULD have additional Negative Qualities, but they are not necessary. Of course, I often have those "quirks" that Draco18s is talking about, and do not see them as a liability, but part of the personality. If I was assigning NQ points to them, I would likely have more than double the allowed starting points (or more) for most of my characters.

That's what Perks and Quirks are: they aren't liabilities, they're personality recorded into the sheet. They have a 1 point cost, just to prevent you from stacking up a bunch of them. 1 "build point" in a 750 point character is insignificant (you're also limited to 5 of each), but have no mechanical benefit/drawback.

On my character sheet, my character has a low tolerance for alcohol (species quality, actually). As a quirk I picked up Compulsive Carousing. If it was a disadvantage I'd pretty much have to drink myself silly at every opportunity. As a quirk it means that despite having a low tolerance for alcohol, I'll still drink anyway, but I as a player get to choose when this happens as part of role playing, rather than as a result of a (failed) compulsion roll.

Mind, this was what I already had in mind for the character. Total playboy: goes to bars, gets a little heady on a glass of wine, and seduces chicks.

Gotcha...
Indeed... Concepts (for me at least) always bring to mind those little quirks that tend to crop up all the time, that all characters seem to have, in one form or another. They are what make the character unique and interesting. And they Shouldn't have a mechanical effect, so costing is irrelevant. I am a bit curious as to why Gurps actually costs them, though.

Honestly I don't know why they cost 1 instead of 0, but I suppose its to differentiate it from an actually-zero point quality (like gender, sexual orientation, and a few others--don't have a reference at the moment).

Yeah, who knows. No worries.