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🤹‍♂️ Illusion of Control

What is the Illusion of Control?

It is our mind's tendency to believe we can control or predict outcomes that are, in reality, purely random. In the financial markets, this translates into thinking we "know" what’s going to happen, that we can "master" the market, or that our "intuition" is infallible.

Have you ever thought: "I’ve studied this stock so much that it has to go up"? Or "If I invest now, I’m guaranteed to hit the bottom"? That’s your mind playing with the idea that you have more power over the future than you actually do.

🎲 When the market reminds you that you don't have a crystal ball

The reality is that the market is full of uncontrollable variables: geopolitics, natural disasters, central bank decisions, "black swan" events... The Illusion of Control hits us in several ways:

  • Overconfidence: It leads us to take on more risk than we should, undervaluing the possibility of things going wrong. "My analysis is bulletproof."

  • Overtrading: If you believe you can predict every minor move, you’ll tend to trade more than necessary, increasing fees and exposure.

  • Ignoring Risk Signals: We dismiss "red flags" because we are convinced our vision is correct and that we can "handle" any setback.

  • Frustration and Anger: When the market doesn't do what we "think" it should, we get frustrated, which clouds our objectivity.

📉 Why is this so dangerous for your portfolio?

The Illusion of Control turns you into a casino player who believes they have a "winning system." The problem is, the house always wins. In the stock market, ignoring randomness leads to:

  • Unexpected Losses: Because you didn't manage the risk for events you considered "impossible."

  • Emotional Decisions: When you feel you're "losing control," you might make impulsive trades to try and regain it.

  • Lack of Humility: Humility is essential. No one is 100% right all the time.

🛠️ How to let go of the reins (and accept uncertainty)

To survive on eToro, you have to understand that you are a surfer, not the ocean. You can learn to surf better, but you cannot control the waves.

  • Plan for the unexpected: Your trading plan must include "worst-case" scenarios and clear stop-losses. Don't just focus on the "green" scenarios.

  • Diversify: This is your insurance against unpredictability. Don’t put all your eggs in one basket just because you think "this one can't fail."

  • Focus on Risk Management: Instead of trying to predict the future, focus on managing what you can control: your risk per trade, position sizing, and your emotions.

"The market does whatever it wants": Internalize this phrase. It will help you keep your feet on the ground and stop taking market movements personally.

"You can't control the waves, but you can learn to surf. In the market, the ultimate skill isn't predicting—it's surviving."

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