The illusion of control in trading

Imagine that you are investing in stocks that seem like a sure thing. You have a feeling that the market will go up, but suddenly something feels off. You decide to make a quick move, trying to regain control. Within a few hours, you lose 10,000 zł. In another situation: after the company's results are announced, you expect a rise, but the price dramatically drops. In a panic, you sell at an even greater loss – another 5,000 zł. Such situations are a daily occurrence for many traders. These losses do not stem from a lack of knowledge, but from the illusion that one can predict every market move. Every decision based on the illusion of control ends up costing thousands of złoty each month.

Illusion of Control

The illusion of control is the belief that we have influence over situations that are actually beyond our control. In trading, this manifests as the certainty that our analyses or intuitions can predict market movements. When the market goes in the opposite direction, frustration and panic arise. In desperation, we make further decisions that only deepen our losses. It is a vicious cycle that begins in the mind when we ignore the fact that the market operates under its own rules.

From the experience of many traders, it appears that no chart or strategy provides one hundred percent certainty. The market is complex and influenced by many external factors. Predicting all variables is impossible. The illusion of control is a trap that makes us ignore these unpredictable elements. Instead of making decisions based on facts, we are guided by a false sense of security. As a result, instead of profits, we incur losses, plunging ourselves into a spiral of poor decisions.

Here is a principle that will help you avoid the illusion of control: accept uncertainty. At the beginning of each week, make a list of things you can influence – e.g., risk analysis, setting stop loss, choosing a strategy. Then, write down what you cannot influence – political changes, sudden economic events, the emotions of other investors. Focus on what you can control and prepare for the fact that the rest may go differently than you plan. Regularly analyze your decisions and learn from each loss. Treat uncertainty as a part of the game, not an opponent. This approach will allow you to make more informed decisions, minimizing financial and emotional losses.

Every day remind yourself that the market is not controllable. Write down your decisions and analyze the results at the end of the week. Learn from your mistakes and do not let the illusion of control drive your investments.