The Intuitive Trader is More Effective Than the Analytical Trader

Every time you make a decision, you are faced with a choice. Should you take your time to review objective information or should you trust your gut and go with your instinct? Well, according to a recent study by Rice University, you should go with your gut…

But only if you’re an ‘expert’ already. Yeah, right, no good to me that – so let’s explode that myth!

Upon completion of the study, Rice’s Erik Dane, Ph.D., lead author said that “How expert someone is within a particular domain has a positive impact on their ability to make an accurate gut decision.” No disrespect intended Erik but well, duh, who’d have thought? He based his conclusion on the results of two separate tests where researchers took on the task of examining circumstances where intuitive decision-making was effective compared with analytical decision-making.

Although neither test was specifically related to trading, the idea of intuitive decision-making being more effective when carried out by domain experts is not new.

There are psychologists (and traders) that have tried to find a common link between intuitive trading and success (Brett Steenbarger in The Psychology of Trading, Robert Koppel in The Intuitive Trader and Trading in the Zone by Mark Douglas are some of the better picks), and in each case, what seems integral to the success of intuitive decision-making is that it is carried out by an ‘expert’.

You probably think that makes perfect sense. I know I do. Like anything, the more you do it, the better you get at it and the more effectively you are able to make quick leaps in judgement and decision-making. That’s fine, but there is a bitter pill here – atleast for me – in that these experts can tap into this intuition at will, without knowing it, and make trades that are worth 10s of thousands.

You and me are on the other side of that experience curve and I seem a long way off being able to trade entirely with intuition. But how long will it last? When do you become a domain expert? Many authors write that it takes between 2 – 3 years for novice traders to evolve into proper traders, but that’s no good to me. I gave up my full time job to trade and I need quick results.

Become An Expert Trader Even Though You Don’t Know a Thing

But maybe there is another way for people like us?

I will never be an expert at understanding fundamentals or intricate competitive market forces. But maybe I could become an expert in something else. Maybe I could use some original insight and tap into my martial arts and taoist philosophy to learn to ‘read the tape’ like an expert? I definitely consider myself more in tune with wider, everyday human sentiment and life in general than with actual news, fundamentals and results and, afterall, isn’t the market just a “forward-looking” representation of human sentiment anyway (even though it’s prone to immediate emotional reactions)?

If you step back from the granular detail of news and noise, then, with the application of your own, unique perspective on the world, you will be able to see things that other people can’t (or won’t). Learning to trust this insight and focussing on developing it is your key to the intuition (trading edge?) you’re looking for. Everyone has it, the problem is being able to find it, trust it and have the courage to act on it.

In my particular case, this means finding a way to read the tape based on my wider world views, and then having the conviction to place trades based on these ‘feelings’ and then seeing them through to their bitter end. It is only by continuously trusting these decisions and heeding their lessons will I be able to find my intuitive trader.

Since I first wrote this post, I have continued to try and develop my intuitive trader, and you can find out how you can tap into your trading intuition here.

Further Reading:

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