Introduction: What Is Self-Attribution Bias?

Self-attribution bias is a cognitive distortion where individuals attribute their successes to their own skills and abilities, while blaming external factors for their failures. It’s something we all do from time to time without even realizing it.

For example, imagine you’re driving to work, and you make it on time. You might think, “I’m great at planning my day!” But when you hit unexpected traffic and arrive late, you’re more likely to blame the traffic or road conditions rather than taking responsibility for not leaving earlier.

In the world of stock trading, self-attribution bias can seriously derail progress. Traders often celebrate their winning trades as proof of their skill, but blame bad markets, news, or even their broker when things go wrong. This bias can inflate confidence during bull markets, only to shatter it during inevitable downturns.

How Self-Attribution Bias Impacts Trading Decisions

Stock traders, especially those without a systematic approach, are particularly vulnerable to self-attribution bias. This bias can lead to overconfidence, which may result in risky trading behavior. When traders believe their success is purely due to their skill, they may increase their position sizes or make trades without sufficient analysis.

For example, let’s say a trader experiences a string of successful trades during a bull market. They start to believe their analysis is infallible and increase their trading volume. When the market shifts, they may face significant losses but instead of reevaluating their strategy, they’ll often blame market volatility or external factors beyond their control. This type of thinking is dangerous because it prevents traders from learning and improving, making it harder to achieve long-term success.

The Role of Trading Systems in Mitigating Self-Attribution Bias

Systematic trading is one of the most effective ways to overcome self-attribution bias. A well-designed system doesn’t rely on gut feelings or discretionary decisions. Instead, it provides clear, objective rules for when to enter and exit trades, which removes the emotional rollercoaster that often accompanies manual trading.

With a systematic approach, traders can separate skill from luck. Every trade is executed based on pre-set criteria, ensuring that decisions aren’t clouded by emotions or cognitive distortions. As a result, traders using systems are less likely to fall into the trap of self-attribution bias because the system is the key driver of results—not their personal brilliance.

By trusting in a well-tested system, traders can maintain a level-headed approach even when individual trades don’t go their way. This detachment helps them avoid overconfidence and ensures that each decision is based on solid strategy rather than ego.

Challenges Systematic Traders Face with Self-Attribution Bias

Even systematic traders aren’t entirely immune to self-attribution bias. One common issue is the temptation to override the system after a series of losses or gains. When traders experience a losing streak, they may start questioning the system and attribute failures to market conditions or bad luck, rather than recognizing that every system goes through drawdowns.

Similarly, after a winning streak, a trader might be tempted to take on additional risk outside the system, believing their newfound “skill” is the real reason for the success.

The key challenge here is maintaining discipline. Even the best systems will go through periods of underperformance, but this doesn’t mean they’re broken. Sticking to the system and resisting the urge to intervene is crucial for long-term profitability.

Actionable Tips for Overcoming Self-Attribution Bias in Systematic Trading

  1. Keep a Trading Journal
    Writing down the reasons for every trade—along with the outcome—can help traders identify patterns of self-attribution bias. Are you taking credit for wins while blaming external factors for losses? By documenting your thoughts and results, you can become more self-aware and course-correct when necessary.
  2. Rely on Backtesting
    Consistent backtesting builds confidence in your trading system. When you know that your strategy has worked over decades of market conditions, you’ll be less likely to credit yourself for wins or blame the market for losses. This allows you to stay committed to the system, even when it goes through rough patches.
  3. Accountability Measures
    Joining a community of like-minded traders can keep you accountable. When you share your results and decisions with others, it’s easier to stay objective. The Trader Success System, for example, offers a collaborative environment where traders can openly discuss challenges and avoid the pitfalls of trading in isolation​​.
  4. Evaluate Performance Objectively
    Focus on long-term performance rather than individual trades. Instead of celebrating every win or brooding over losses, track your performance over months or years. This will give you a broader perspective, helping you avoid attributing short-term results to your personal skills.
  5. Trust the Process
    Remember that no system is infallible. Every trading strategy will go through drawdowns and rough patches. It’s critical to trust in the system you’ve built and resist the urge to attribute temporary failures to external forces. Consistency and patience are your greatest assets.

Conclusion

Self-attribution bias can be a hidden saboteur in your stock trading journey. By attributing your successes to skill and your failures to bad luck, you miss the opportunity to learn and grow as a trader. Systematic trading offers a powerful solution to this bias by providing clear, objective rules to follow, reducing the emotional and cognitive distortions that often accompany trading decisions.

However, even systematic traders must remain vigilant. It’s crucial to stay disciplined, trust the system, and resist the temptation to intervene based on short-term performance. By keeping a journal, relying on backtesting, and practicing accountability, you can minimize the effects of self-attribution bias and achieve more consistent results.

If you’re ready to overcome your biases and gain 100% confidence in your trading, The Trader Success System can help. Our comprehensive program equips you with proven trading systems, backtesting techniques, and ongoing support to ensure your long-term success. Apply here to join the program today!

Trading Psychology and Psychological Bias Articles

To dive deeper into how other psychological biases affect your trading decisions and discover practical ways to overcome them, explore the links below. For a comprehensive guide on mastering your mindset and building a resilient trading strategy, visit our Trading Psychology page. [This section is under construction so not all articles are live yet]

  • Action Bias in Trading
  • Ambiguity Aversion in Trading
  • Anchoring And Adjustment in Trading
  • Anchoring Bias in Trading
  • Authority Bias in Trading
  • Availability Heuristic in Trading
  • Bandwagon Effect in Trading
  • Bias Blind Spot in Trading
  • Choice-Supportive Bias in Trading
  • Clustering Illusion in Trading
  • Commitment And Consistency Bias in Trading
  • Confirmation Bias in Trading
  • Conservatism Bias in Trading
  • Contrast Effect in Trading
  • Decoy Effect in Trading
  • Disposability Effect in Trading
  • Disposition Effect in Trading
  • Dunning-Kruger Effect in Trading
  • Endowment Effect in Trading
  • Escalation Of Commitment in Trading
  • Familiarity Bias in Trading
  • Framing Effect in Trading
  • Gambler's Fallacy in Trading
  • Halo Effect in Trading
  • Herd Mentality in Trading
  • Hindsight Bias in Trading
  • House Money Effect in Trading
  • Hyperbolic Discounting in Trading
  • Information Bias in Trading
  • Loss Aversion in Trading
  • Money Illusion in Trading
  • Narrative Fallacy in Trading
  • Neglect Of Probability in Trading
  • Normalcy Bias in Trading
  • Optimism Bias in Trading
  • Ostrich Effect in Trading
  • Outcome Bias in Trading
  • Overconfidence Bias in Trading
  • Paralysis By Analysis in Trading
  • Pessimism Bias in Trading
  • Recency Bias in Trading
  • Regret Aversion in Trading
  • Representativeness Heuristic in Trading
  • Salience Bias in Trading
  • Selective Perception in Trading
  • Self-Attribution Bias in Trading
  • Status Quo Bias in Trading
  • Sunk Cost Fallacy in Trading
  • Survivorship Bias in Trading
  • Trading Psychology in Trading
  • Zero-Risk Bias in Trading
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Adrian Reid Founder and CEO
Adrian is a full-time private trader based in Australia and also the Founder and Trading Coach at Enlightened Stock Trading, which focuses on educating and supporting traders on their journey to profitable systems trading. Following his successful adoption of systematic trading which generated him hundreds of thousands of dollars a year using just 30 minutes a day to manage his system trading workflow, Adrian made the easy decision to leave his professional work in the corporate world in 2012. Adrian trades long/short across US, Australian and international stock markets and the cryptocurrency markets. His trading systems are now fully automated and have consistently outperformed international share markets with dramatically reduced risk over the past 20+ years. Adrian focuses on building portfolios of profitable, stable and robust long term trading systems to beat market returns with high risk adjusted returns. Adrian teaches traders from all over the world how to get profitable, confident and consistent by trading systematically and backtesting their own trading systems. He helps profitable traders grow and smooth returns by implementing a portfolio of trading systems to make money from different markets and market conditions.