Monday, February 29, 2016

Trading Meditation: How to tell if it's intuition or guessing

Intuition is a swing trader's best friend. When we intuit it seems as though there is no conscious reasoning. To the outsider it seems like guessing.

In reality it is a function of the mind that glimpses greater knowledge through experience and pattern recognition.

Traders often confuse intuition with guessing. Some call a guess that results in a successful trade intuition. This type of results oriented analysis is fatal.

Intuition is not a gamble. It is based on matching patterns that lead to an edge in probability.

So how do you tell if your "gut" feel is intuition or guessing? By definition, there is no objective measure to identify intuition since the process is unknown to the thinker.

I pay attention to my base emotions, which often manifest physically. If I feel my heart rate increase or my stress levels intensify I know I am guessing. I am ready to get my gamble on. I trust my intuition if I feel calm and confident, locked in the "zone".

It comes down to knowing yourself.

Great traders know when to trust their gut.

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2 comments:

Raven said...

Great post Paul! This holds true with many professionals in many different fields who are mastering what they do. It comes with a lot of initial trial and error, understanding what worked and what didn't and improving. Before you know it, you'll have the infamous 10K hours or so of experience. I had winning intuition in my last career. Although I don't have it yet in trading, I know I will. Appreciate your unselfish and meaningful posts for the last decade or so!!

Bob Bayer said...

Article caught my attention & been meaning to read for a few days now, glad I did! Although personally may be in similar situation as Raven, I can see this quality plays a fundamental role when right & identifying/discerning when wrong or when expiration of short-term price-action trend is nigh. Trading seems to be ALL about factorization of probabilities and there are many scenarios to be accounted for; hence, there is no holy grail. This helps me see the need for a proper state of mind, clarity & accumulation of valuable experience while managing risk. Thanks Paul!