Trading Intuition – Your Key To Becoming A Better Trader?

Do you believe that intuition (or trading intution specifically) only comes with many years of experience?

It’s a commonly held belief for sure. But the truth is you make intuitive decisions every day in your daily life, sometimes using only minutes or even hours’ worth of ‘past experiences’ and memories to call upon. It’s why you’re good at your job, right?

Could you use this same power to make yourself a better trader? Even if you’ve only just started trading?

There is no denying that experience creates wisdom; and wisdom spawns intuition. But what about those experiences that don’t take years to..well…experience?

For example, when you do something for the first time, 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 back in 2012, 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 straight away, I probably wouldn’t be writing this either but hey, ho.

Or maybe I would…

Eventually you see, the luck would have run out and that 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? oh shit, lesson still not learnt).

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’m looking at a chart and thinking about opening a position, all of my ‘wisdom’ kicks in and formulates intuitive leaps of judgement that either warn me to stay away or convince me to jump in.

I’ve been trading the markets now for about 11 years and I know for certain that I’m tapping into trading intuition when I think about opening positions. How do I know for sure? Because for the last 6 or 7 years, I’ve never read any news, analysis or predictions by ‘experts’ and I’ve made money.

(Ok, I could be lucky and spreadbetting is, afterall, gambling, but I’m manifesting this reality myself – so I’m taking the credit.)

I don’t 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. I’m now absolutely certain that aside from black swan type events like the Covid-19 thing, markets are entirely driven by sentiment – not fundamentals (and ergo analysis, accounts and news play a far smaller role in share price movements than you’d think.)

All I do now is take a quick look at a candlestick chart and gauge whether there is strength or weakness in the share – as evidenced by the price action over any given timeframe (usually the last 12-24 months).

From there I’m able to recall my past experiences and intuitively 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 or gloat or profess to have some secret power that only I have – that’s nonsense – but what I am saying is that I am trading with intuition, rather than research.

I compiled all of this intuitive good fortune into a list of tips for financial spread bettors to help you trade more profitably.

Can You Use Intuition to Trade Profitably Even If You’re A Novice?

Yes, you can tap into trading intuition and trade well – but you’re probably going to have to lose some money first. Just like your job or profession, you build experience with every trade and the consequnces of that decision leave lasting wisdom with you that creates your powerful intuitive ‘mind’…although mind is too limited a word to accurately describe what and where your intuition comes from.

Maybe ‘being’ is a better term.

The key point is don’t be afraid to try. It’s only through direct experience that you can manifest the powerful trading intuition that is so often thought of as the exclusive remit of the oldest and shrewdest of wall street patriarchs.

How Do I Know Trading Intuition Exists? (for sure)

1. 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!)
   
2. 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:

1. 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!
2. Trade with the macro and market trends. ‘All the stars aligned’ you hear some people say…
3. 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.
4. Running winners. When you find a winner, don’t be afraid to double down! Trade with conviction.
5. 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