MICHEL PIREU: Getting to grips with locus of control for successful trading
People with internal locus of control tend to attribute success to their own efforts and abilities while externals are more likely to attribute success to luck or fate
There is a concept in the psychological literature known as locus of control which, once defined, is easily understood. It is an individual’s belief system regarding the causes of his or her experiences and the factors to which that person attributes success or failure. This concept is usually divided into two categories: internal and external. If a person has an internal locus of control, they tend to attribute success to their own efforts and abilities. The “internals” believe it is essentially up to them to succeed. Someone with an external locus of control will be more likely to attribute his or her success to luck or fate – factors beyond their control – rather than the strength and quality of their own efforts. To put it in the context of investing, the internals would most likely agree with Steven Grey in The Myth of the Casually Competent Investor, when he says: “Nothing can substitute for the analytic rigor necessary to consistently outperform. Too many investors entertain ...
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