Definition
Participants overrate their ability to steer outcomes in systems largely driven by noise.
Example
A trader believes they can "manage" intraday volatility through micro-adjustments to position size. They treat normal market noise as something they can stabilise, assuming their actions have more influence than they actually do.
Cognitive Driver
The mind prefers agency over randomness. When faced with uncertainty, it seeks patterns and personal influence. Actions--no matter how trivial--create a false sense of impact. The trader conflates activity with control, even when outcomes are mostly stochastic.
Market Expression
Frequent resizing or tinkering with positions. Over-reliance on discretionary adjustments to "steer" outcomes. Attribution of favourable price action to personal decisions. Underestimation of volatility, liquidity shifts, and systemic drivers.
Trigger Conditions
- Highly volatile or chaotic market environments
- Tools or dashboards that give fine-grained execution control
- Periods of strong recent performance that feel self-generated
- Markets with complex feedback loops
- Situations where randomness is uncomfortable or identity-threatening
Diagnostic Markers
- Excessively tight control over trade microstructure
- High frequency of small adjustments with no measurable improvement
- Overconfidence in predicting or shaping short-term moves
- Attribution of randomness to personal skill
- Disregard for market-level drivers in trade reviews
Cost Profile
- Overtrading and transaction cost drag
- Poor risk-reward due to excessive micromanagement
- Mistaking volatility for opportunity
- Elevated stress and reactive decision-making
- Weak understanding of the boundary between skill and noise
Differentiation From Adjacent Biases
- Not overconfidence: overconfidence inflates skill globally; illusion of control inflates influence over randomness.
- Not self-attribution bias: self-attribution rewrites causality after outcomes; illusion of control assumes influence before outcomes.
- Not confirmation bias: this is about perceived agency, not evidence filtering.
Corrective Lens
Define which levers are controllable (sizing, entry style, risk limits) and which are not (volatility, liquidity, macro flows). Anchor decisions to expected-value frameworks rather than moment-to-moment fluctuations. Use post-trade analysis to separate genuine skill from noise-driven outcomes.