Do you believe that intuition only comes with many years of experience? It’s a commonly held belief for sure, but the truth is, intuitive decisions are made every day in the real world, sometimes using only minutes or even hours worth of ‘past experiences’ and memories to draw upon. But could this same power be accessed by a trader (me) who has only been trading for 18 months to make snapshot decisions about whether to open a trade or not?
There is no denying that experience creates wisdom; and wisdom spawns intuition, but sometimes an experience doesn’t take years to complete. For example, when you experience an event, your brain ties the sights, smells, sounds, feelings and predisposed impressions together into a relationship. That relationship itself becomes the memory of the event (thanks Ashish Ranpura).
Of course I didn’t know it at the time but when I made my first trade last year, I was taking the first steps towards formulating my trading ‘wisdom’. Had I made a lot of money rather than placed a lot of poor trades that lost money, the value of that experience would be far less to me now than what it actually is – of course, if I’d been so lucky as to make enough to retire to a beach in Barbados, I probably wouldn’t be writing this.
Or maybe I would…Eventually, the luck would have run out and the losing trade would have arrived. Far better to arrive when I know I’m a poor trader and playing with only small amounts of money than when I think I’m better than I actually am and playing with a few extra zeros (sound familiar, anyone?).
Those memories of losing trades are still here in my brain, and associated with every new trade I make in the form of my ‘predisposed impressions’. When I am experiencing looking at charts and thinking about opening a position, all of my ‘wisdom’ starts to kick in and formulate intuitive leaps of judgement that either warn me to stay away or convince me to jump in.
Now, I’m only 18 months down the line but I know for certain that I am now tapping into trading intuition when I think about opening positions because I never go out of my way to read any news reports, don’t listen to (or watch) any market commentators and pay no attention to fundamentals for any of the trades I make.
All I do is take a quick look at a candlestick chart and from there am able to instantly decide whether or not to enter and for how much. Now, I’m not saying this to sound like I know what I’m doing, because I really don’t and simply don’t believe any trader ever will know enough to be able to say they do, but what I am saying is that my trading intuition is working – and I do have some, despite me being less than 2 years in the game.
So, yes, novice traders (you) can tap into the powerful trading intuition that is so often thought of as the mystical power held only by the oldest and shrewdest of wall street patriarchs.
How do I know this for sure? There’s a few reasons:
- The first and most obvious is the financial return. Since January this year, I have managed to turn £500 into just over £3000 (again, I’m not saying this to ‘show-off’ because let’s face it, Oliver Tomahawk makes that in a day). This is in stark contrast to the first 3 months of last year, where I actually managed to lose £1500 (and then proceeded to lose another £500 a month for a few months after that too!)
- The second noticeable difference is in how I view charts and the thought processes that go along with it (my predisposed impressions). I now make different choices as a result of past experiences. Example in point, I opened a short position in this market last year:
Today, when I look at this chart, I would never open a short based on this. Although the moving average looks like it’s trending down, the price has been unable to fall too much further from its current position for months – which suggests that people have some faith in it somewhere. A conclusion I couldn’t make back then, but jump to now. Here’s what actually happened next:
You could argue that maybe I was right to be short looking at the dip shortly after I entered, but even then, something didn’t look right and what happened next shows it well.I have a whole list of similar trades that I opened last year (the benefits of keeping a record of all your trades) that, when I look at now, I just wouldn’t enter. This has to be ‘intuition’ or trading wisdom…I’m not looking at anything other than charts and I’m not putting a lot of ‘thought energy’ into making these assessments, so either I’ve been very very lucky this year or I actually did passively store these experiences as useful trading wisdom.
- As I mentioned already, I don’t read any news, listen to commentators or study fundamentals. If I could live in a cave with wifi, I probably would! The fact that I have been able to make the kind of return that I have without consciously seeking out these ‘trading edges’ just makes me even more sure that whatever I’m using is either intuition or straight up luck.
But I Don’t Think It’s Quite As Simple As That
Whilst I love the idea of having some mystical ability called intuition, and I absolutely know it exists and you can access it, I think there is actually more to it than that – some missing bits, if you will. Remember, all of these ‘missing bits’ make up your predisposed impressions and will affect your intuitive assessment and how you remember past experiences and how you relate them to the present. Here’s what I think they are:
- Following the macro sentiment. You don’t need to read news to get this. Just go about your daily life, talk to friends, talk to parents at your toddler’s playgroup, talk to your milkman, your kids, anyone and everyone in all parts of your life. Don’t ‘seek out’ information, just learn to listen. In a few days, you’ll have a pretty good idea of sentiment and this can be used subconciously to give you the framework in which to apply your intuitive trades. For example, none of my friends are able to buy houses yet, their food is costing more, their fuel is a little cheaper than last week but they’re still pissed off about it, my friend’s 4 yr old son can use an ipad but can’t pick up a traditional hard-wired landline telephone and his mam still orders pizzas from dominoes, even though they’re really expensive!
- Trade with the macro and market trends. ‘All the stars aligned’ you hear some people say…
- Managing risk. Anything can affect anything else at any given time or place and nothing goes on forever. There is no system in the world that can predict the future and you will lose in some of your positions so just get over it and deal with it.
- Running winners. When you find a winner, don’t be afraid to double down! Trade with conviction.
- And one you can apply to every day life too: Knowing that enough is enough is always enough…..don’t be greedy (4R etc etc.) Profit always looks good.
What do you think? Have you found your trading intuition? Do you believe it? I’d love to hear your thoughts and comments or even your tweets if you can’t be bothered to type more than 140 characters 🙂 Tweet me at @PitVillTrader