According to Prospect Theory, developed by Kahneman and Tversky, we humans are emotionally affected by losses more than by gains. This leads us to hold on to losing stocks for too long in the hope that they will recover, while selling winning stocks too early to lock in profits. These psychological tendencies can prevent us from making rational, long-term decisions in the market.

To beat the market, that's why crucial not to act like the majority, who are often guided by their emotions. When others sell winners too early due to fear of losing a profit, it may be right to hold on to these stocks longer to maximize returns. Without a strategy and plan, it is very difficult to hold on to a winner.

Here comes the benefits of being systematic and rule-driven. By using a systematic strategy, such as a momentum strategy, we get a clear plan that helps us stick to our original strategy instead of following the market's short-term movements or emotional reactions.

Your strategy is also like a mental anti-clickbait shield: while others are chasing the next big thing, you follow long-term trends and build a stable portfolio without being disturbed. With a plan, you can stay calm and avoid being drawn into clickbait headlines and “get rich quick gurus.”

Being rule-governed means that we can more easily go against our feelings and avoid cognitive distortions that can arise from our own biases, such as the disposition effect (the tendency to sell winners too early and hold on to losers too long). By following a systematic strategy like the momentum strategy, which tells us to hold on to winning stocks longer and sell losing stocks faster, we get a structure that keeps us on track. It gives us a better chance of making rational decisions.

Systematic strategies are designed to eliminate subjective decisions and thereby minimize the effects of cognitive distortions, such as the disposition effect.

To summarize: By working with systematic and rule-based strategies, we have a concrete, emotionally neutral path to follow. This makes it easier to avoid noise and resist the temptation to act on emotions and instead stick to a long-term plan, which in turn increases our chances of beating the market. With a clear strategy, we can go against our emotions and avoid the cognitive pitfalls that lead many investors astray.