Trading is an intuition business

Now i have finally come to a conclusion- Trading is an intuition business.

Future is basically and logically unseen and unknowable. Every bet we make in a market is an intuition.

Your 'intuition ability' is directly Dependant on market knowledge and experience. Watching live market trading for few years definitely helps in developing intuiton.

Every one of us equipped with a mini super computer called brain. Brain has 2 sides- Right Side and left side.

We use left side of our brain while doing Analysis, learning, knowledge etc. An analyst use left side of his brain to produce research reports.

The right side of our brain is responsible for intuition, creativity etc. A best trader will use both right side and left side of brain.

This is the reason analyst are not successful traders- They use their left side of the brain going deep in research analysis while trading decision is an intuition and for which we need to use right side of our brain.

A best trader will do some research using left side of his brain but in the end, he will use right side of the brain in making a long or short bet.

I am very sure successful trading is an intuition experience and we need to self train neurons and synapses in our mind to get tune to market volatility, behavior etc.

Please share your agreements and disagreements. Thank you.

PS- I am self training my self every day by watching market live, understanding repeatable human behaviors, familiarizing my mind with market volatility and today before FTSE 100 opened, i predicted it will fall by around 1.30% and it did !

I like to think I use both left and right side of my brain. The creative and logical sides working in harmony, for the common goal. I do believe the major tool in a traders arsenal is memory. I am a bit partial toward the left side of the brain because of memory and recognition.

Part of trading is about identifying with patterns and price action that has occurred over-&-over in the past. Using the left side with memory in conjunction to recognition, recognizing those patterns, analyzing the entry/exit, developing a plan of action. Think about it, all of a traders function is left side of the brain. Recognition, Analytics, Memory, etc = left brain.

http://bit.ly/aB9tsq LEFT & RIGHT SIDE OF THE BRAIN - Right side of the brain controls the left part of body and the Left side of the brain controls the right part of the body. (interesting)

Very Right. I am making notes of each trading day (global indices) since last 2 months.

I am saving charts, OHLC data in an excel sheet and write in a word file what happened on that day.

The patterns are getting repeating again and again. The news is changing bullish or bearish but behaviour is repeated.

Just like a student revises his studies, i firmly believe a trader should revise each trading day and that process should continue life time.

In conjunction with the memory and knowledge, the final decision/final bet i feel is Dependant on intuiton.

Here you go, mate.

I use these. They're great.

http://www.metamodels.com/maps/cwtap...on_series.html

Agreed.

"patterns...(and, despite) news...behaviour" dances around that it's not set patterns, so much as it's a collection of micro-patterns that 'behave' in one way or another to create a temporary pattern.

The patterns idea is in any fast-paced job, it says: " intuition is a developed sense through the honing of experience into recognizable patterns for future use. "
Here's a breakdown of intuition you may find useful.

I disagree. I have few years watching live data in MT4 and a year live trading and the conclusion I come is that I have no intuition, maybe it's cause my right brain, I don't know, but now I trust more in analysis of historical data and how to apply it to actual data than in my own intuition.

Intuition - like watching PA and understanding what it will do next... i notice this with other traders when they are saying watching PA... I still have to learn this! need to develop my right side of the brain!

i never got this whole left side right side of the brain its all incorrect its a scientific fact if you only used the left side of your brain you would be highly autistic if you only used the right side of your brain you would be locked in a mental institution and they would throw away the key. you are constantly using different parts of your brain at once not just one side tell me this. if the little test they give you to see if your right or left brain dominant why am i right handed and my right side of my brain is more dominant shouldnt i be left handed? its all a load of manure

regards damien

If you still do not believe , trading is an intuiton business, then you have not reached that level where you have started self questioning your self.

The partition of brain in left side and right side and uses of both side is a neuroscience field which is quite advanced.

If you say eur/usd will rise 50 pips, from where your decision is coming from? You will say charts, SMA, EMA, MACD etc but in the end your final decision is your intuiton/inner voice.

The quality of intuiton directly depends on how you understand market structure and its movements. Watching market for a couple years help to develop intuiton.

Thanks Mate. I will check out this product.

But the best way i have learned to develop an intutiton is to watch the markets and work on understanding market participants behaviour.

Each market is unique. I have shifted to trading FTSE 100 and i feel if i watch its movement for 1 year (220 sessions), i will develop an intuition to day trade successfully.

Hard work.

Thanks Mate. Thats a great link to study about intuition in detail and its parts.

Tell me why a human brain is better to find patterns than a matematical method running in a machine. You can't predict the future even if your intuition is the best in Earth, face it. Human intuition is overrated and the only fact here is that noone can predict the future, even the best analist fail, why do you think that your intuition is gonna save you to not form part of the 97% of losers in long term? Regards.

http://www.forexfactory.com/showthread.php?t=3156

Intuition is not predicting the future. Traders are not trading the market, they are trading their self belief system.

Once you specialize in an instrument and watch the market for at least a year, you will develop an intuition because behaviors are repeated again and again.

Trading From Your Gut, by Curtis Faith

Excerpted with permission from Trading From Your Gut, by Curtis Faith (FT Press; 2010)

CHAPTER 1

The Power of the Gut


“The intuitive mind is a sacred gift and the rational mind is a faithful servant. We have created a society that honors the servant and has forgotten the gift.”
—Albert Einstein


George Soros, one of the greatest traders alive, trades from the gut. He has widely remarked on the correlation between his backaches and trading choices. In the autobiographical Soros on Soros, he wrote:



I rely a great deal on animal instincts. When I was actively running the fund, I suffered from backache. I used the onset of acute pain as a signal that there was something wrong in my portfolio. The backache didn’t tell me what was wrong—you know, lower back for short positions, left shoulder for currencies—but it did prompt me to look for something amiss when I might not have done so otherwise.


Some traders might scoff at the idea of making decisions based on “feelings” or intuition. They see the trader’s role as one who remains calm and collected, rationally choosing the right course while those around them are tossed about by their emotions. They believe that Soros is either lying or fooling himself. They don’t see how gut instinct can help. Yet many successful traders feel otherwise. Who is right? Is one approach better than the other?


If you are one of those traders who doesn’t believe that gut instinct or intuition has any place in trading, I invite you to keep an open mind. I, too, once felt as you did. After all, I was trained to take a very systematic and logical approach to trading as a Turtle. I believed that it was important to keep your emotions in check. I didn’t believe in trading from the gut.

Trading from your gut is a way of tapping into the extra power of the right hemisphere of the brain.


What I didn’t realize at the time, however, is that there is a big difference between trading emotionally and trading from your gut. Trading emotionally means reacting to fear and hope, which can destroy your trading decisions. Trading from your gut is different. It is a way of tapping into the extra power of the right hemisphere of the brain, which can be a powerful, effective, and entirely rational addition to any trader’s repertoire.


Trading comes naturally to some people, as it does to Soros or my trading mentor, Richard Dennis, for example. They seem to have a knack for it that comes from a well-developed sense of intuition. This gut intuition can be developed through training and the right kind of experience. In this book, I teach you how to incorporate expert-level gut instinct in your trading.


Before I go further, it is important to further define exactly what I mean by intuition and gut instinct.


Intuition

In mid-November 2007, when the Dow Jones Industrial Index was above 13,000 and the S&P 500 Index was above 1,450, I attended the Trader’s Expo conference in Las Vegas, Nevada. The Trader’s Expo is the largest trading conference in the country; people come from all over the western United States to attend the conference. I had been invited to speak at the conference in conjunction with the publication of my first trading book, Way of the Turtle.


While I was at the conference, I was asked to do an interview with MoneyShow.com, which had set up a video recording studio in one of the conference rooms. The interviewer asked me what I thought of the markets over the previous several weeks. Normally, my standard response is that I don’t try to predict the markets. I had grown weary of giving advice and had found that specific advice is not generally useful to others when not considered in context.


This time was different. I decided to go out on a limb and advise that viewers be very cautious in their stock investments. I told them that I thought there was a higher than normal chance that the markets would go down a significant amount, that we were coming off a long period of steady gains, and that there was a good chance we had seen the end. The timing was prescient. It turned out to be the beginning of the downturn that would see the market lose more than 50% of its value over the next 16 months.


You may think my instinct had told me that the market would soon decline. This is only partially true. I thought the market was risky at that moment, for some very specific reasons that had nothing to do with my instinct as a trader. Where my intuition came in was in breaking my longstanding rule not to talk about what I thought might or might not happen. I just had a feeling that this time was different, that I should voice my concerns.

If you asked me, I could probably come up with some reasons I felt obliged to share my thoughts on the direction of the market, but these reasons would be somewhat contrived. The truth is, I didn’t really know why I spoke up; I had an intuition, a gut feeling, but one without a logical basis that I could readily articulate. In fact, the rational side of my brain was arguing for me to keep quiet because I knew that predicting market movement was a fool’s game. In retrospect, I hope that sounding this early warning benefited the traders who saw the video.



Using Gut Instinct: Left Brain Versus Right Brain

Relatively recent advances in psychology and neuroscience show that human intuition can indeed serve as the basis for powerful rapid decision making. Our brains can make decisions using thousands of individual inputs almost instantaneously. This type of rapid parallel processing occurs in our right-brain hemisphere. Because of the speed of the right brain, it can be a powerful tool in the hands of an experienced trader. Unfortunately, too much reliance on an untrained gut can prove disastrous for the inexperienced trader. This makes proper training very important.


Analysis, linear thinking, ordering, and the need to find structure dominate left-brain thinking. We try to make sense of the world with our left brains and bring order to it. We categorize, theorize, rank, and file with our left brains. When you think out loud, you are using your left brain. Put another way, when you think consciously, you are using your left brain.


The right brain, in contrast, is concerned with the whole picture and the spatial relationships between each of its parts. The right brain is quick and intuits instead of reasons. If you’ve ever felt uncomfortable or unsafe but couldn’t pin down the reason, this was your right brain’s sense of intuition generating that feeling. The right brain excels at reading patterns and interpreting their meaning in the context of a larger picture, and it moves much more quickly than its counterpart.



Although the right brain can quickly come
to a conclusion or recognize danger, it cannot generally explain the reasons why it has
arrived at that conclusion.


This speed comes at a price. Although the right brain can quickly come to a conclusion or recognize danger, it cannot generally explain the reasons why it has arrived at that conclusion. This often puts it at odds with the left brain because that analytical part of the brain wants explanations for its decisions.


To better understand how the right brain works, it’s worth looking at the processes embedded in neural networks.




The Artificial Brain: Neural Networks

In the 1970s and 1980s, researchers in computer science attempted to re-create the brain’s function using simulated neurons connected through computer software. They created the first artificial neural networks. As research in neural networks continued, this technology proved to be excellent at recognizing patterns. However, the downside of neural networks was the same as that of the right brain and the speed at which it arrives at conclusions. Neural networks can rapidly reach conclusions, but it is impossible to examine a neural network to understand the assumptions it is drawing from.

The right brain works a lot like a neural network. It draws upon experience to reach suppositions, but we generally don’t know the reasons for those conclusions, except as a feeling. So if the left brain wants to explain and the right brain cannot offer explanations, which side wins in a battle of decision making?


The answer depends on personality.



Thinking Versus Feeling: Can’t We All Just Get Along?

Psychiatrist and pioneering psychologist Carl Jung developed a theory that measured one’s personality in three different areas. In each area, individuals had a personality that fell somewhere on a continuum between one extreme and the other. One of these is a continuum between thinking and feeling; scores on a test of this personality aspect measures the extent to which the right brain or the left brain dominates decisions.
Isabel Briggs-Myers and her mother, Katharine Cook Briggs, subsequently developed Jung’s work. Their work has been popularized as Myers-Briggs personality types. The Thinking and Feeling axis (generally abbreviated as T or F) of the Myers-Briggs test is often equated with rational decision making and emotional decision making. Sometimes those who make decisions using their left brains (the T’s) look at those who make decisions with their right brains (the F’s) and think that the F’s are being unreasonable when they cannot explain exactly why they make particular decisions.


Most schools are geared toward developing and training the left brain. Math, science, reading, writing, and rote memorization are all left-brain activities. This emphasis leaves some would-be traders with a relatively overdeveloped left brain and underdeveloped right brain.



A balance between left-brain analysis and right-brain intuition is critical for optimum trading.

A balance between left-brain analysis and right-brain intuition is critical for optimum trading, so training must overcome any disparity a trader has in his cerebral development. Every trader has a dominant hemisphere, but recognizing the nondominant hemisphere is also important, especially if this is the right brain.




The Two Trading Camps

Consider another way in which the fight between the left and right hemispheres affects trading, in the ideological battle between discretionary (gut) and system (left-brain) approaches. The trading world is divided into two fairly distinct camps. The largest camp consists of traders who consider trading an art, those who are called discretionary traders. A smaller group consists of traders who use a specific set of rules to make their trading decisions. These traders are known as system traders.


Often when traders first meet each other, they ask if the other trader is a discretionary or system trader. For most successful traders, the answer is rarely black and white, because trading styles generally fall on a continuum between the purely intuitive discretionary trader and the purely rule-oriented system trader. Individuals who think of themselves as discretionary traders range from shoot-from-the-hip traders who buy and sell when it feels right, to more methodical traders who use combinations of chart patterns and mathematical indicators to trade only when a set of conditions have been met. Investors who think of themselves as system traders range from traders who use such a specific set of rules that they can be programmed into a computer, to those who use a loose set of rules in combination with their own ability to recognize certain patterns and market conditions.

The best discretionary traders tend to be right-brain dominant, using their intuition to decide when to make trades. This tendency is especially prominent among discretionary day traders who look to profit from small intraday price movements. For these traders, the speed of their decision making is often a critical factor if they are to be successful. They might describe their approach as having a “knack” for the market or a “feel” for the direction of the market.

Left-brain traders know exactly why they put on certain trades. They generally have a very specific set of criteria that must be met before they initiate a trade. In contrast, purist right-brained traders, who use their intuition almost exclusively, often don’t understand exactly why they make certain trades; they just know when a trade feels right. This willingness to relinquish decision making to intuition or gut characterizes the hard-core right-brain trader.

System traders are most often left-brain dominant. They use a rational, systematic process to decide when to make trades. They often analyze their approach using computers to perform “what-if” analyses using historical data to determine the hypothetical results their trading methods might have earned in the past, a process known as backtesting. Left-brain traders don’t trade on their gut or intuition; they trade using rules and strategies. These traders often think in terms of signals and triggers, as specific events that determine when to initiate a particular trade. Systems traders will have identified these specific criteria earlier, when they performed their backtesting and historical analyses.



Whole-Brain Trading

After reading my first trading book, Way of the Turtle, which lays out a very rational approach to trading, some readers might think that I believe left-brain trading is better or more valid than intuitive right-brain trading. I don’t. Even though I got my trading education as a Turtle in a tradition that stressed a systematic approach to trading, I see plenty of value in the right brain’s ability to quickly process lots of information to arrive at an intuitive conclusion. In short, both approaches have merit.

Whole-brain trading involves both hemispheres and is a balancing act between the brain’s two primary types of cognitive function: logical reasoning, and intuitive feelings and impressions. The blend of right brain and left brain depends on the type of trading you are involved in. For extremely short-term trades, relying on the right brain is often the only practical approach. Traders simply do not have enough time to perform complicated analysis. Traders who are scalpers must trade mostly using their right brains. For longer-term trading, traders have plenty of time for analysis. Getting historical data for performing this analysis also is relatively easy. Therefore, longer-term trading is very suitable for the left-brain trader. Swing trading, in which trades are kept for a few days or a few weeks, is best addressed with whole-brain trading. Generally sufficient time exists for performing an analysis, but the data and tools available to the typical trader do not generally permit a completely systematic approach such as one might use for long-term trading. For this reason, whole-brain trading is virtually required for effective swing trading.

In this book, I show discretionary traders how to strengthen their intuition and gut instinct and how to incorporate analytical tools that systems traders traditionally use. I also show systems traders how to use many of the tools and techniques that discretionary traders use, to develop more robust trading methods. My approach to trading, and the philosophy that I share with you in this book, is what I refer to as whole-brain or whole-mind trading.



Mastering the Art of the Trade

To become a master trader, to be able to intuitively make good decisions, you must first gain enough of the right kinds of experience. This is why doctors and nurses go through extensive training and supervision when they are new to the profession. It is why firefighters train in fire simulations, and why airline pilots train in flight simulators. Through this constant exposure and consistent practice, experts build up a library of experiences that they can draw upon when making decisions.



To become a master trader, to be able to intuitively make good decisions, you must first gain enough
of the right kinds of experience.

The same holds true for the trader—the most effective training is trading itself. In this way, the experiences you encounter while trading train your intuition so that, in time, you can become an expert. Learning as a trader can be difficult, however, because of the price of mistakes. In trading, mistakes cost money. Fortunately, traders can develop their intuition to a high level of expertise without having to put their money at risk. I discuss several strategies for doing this in upcoming chapters.


Before I lay out these strategies, it is important to understand the pitfalls and dangers of relying on gut feeling and intuition if you have not yet received proper training. In the hands of a novice, gut instinct can be dangerous to your account balance. In the next chapter, “The Purpose of Gut Intuition,” I cover this important topic.

***Excerpted with permission from Trading From Your Gut, by Curtis Faith (FT Press; 2010)Check out http://www.curtisfaith.com/

If trading was so easy as to follow certain rules, mechanical systems (left brain trading), then all these Harvard, MIT, Wharton, LSE students would have been dollar millionaires.

The students from these top universities are numero uno in left brain learning and analysis. Thats why they crack the toughest examinations and enter in the hallowed portals where they learn using rote memorization.(total left brain thinking)

Think about it.

Here is a quote from a successful trader who uses both left (analysis) and right side (intuition) to make a trade-


"I've been watching/observing the charts intently everyday since our meeting (22 sessions straight) the whole entire session from opening bell to close.

The key word here is "intently", observing the "price action/patterns". I am beginning to understand how intuition is developed.

Your mind "absorbs" these "patterns" and stores it in your brain and the key here is that you're not even "trying" to memorize these patterns.

Your mind automatically just does it without you even knowing it, "subconsciously".

So when a pattern shows up, you experience something like "deja vu" it looks "familiar" -- but you don't know why, you just do.

And after these type of experiences repeat themselves time after time, you begin to "trust" your INTUITION. Simply AMAZING!!!

But you can only develop this by watching the charts LIVE in real time price action CONSISTENTLY.

I can now see how veteran traders who've been watching the charts for a long period of time have that "Traders Intuition".

I think it's something very unique and special.

Just "experiencing" it for just a little, now gives me even more motivation/incentive to watch the charts every day and it now doesn't seem as "mundane/boring" anymore!"

I view intuition as the result of subconscious analysis. If our brain hasn't got a clue, out "gut" decisions will be poor, but if our brain is experienced and sharp, it should make good "gut" decisions. I'm sure our brains will often make realisations that we're not consciously aware of.

Intuition is simply unconscious competence as defined by NLP, not James16 or whoever posted that oft linked thread. Therefore, it goes without saying that one must have a lot of experience watching and participating in markets to even have a trading intuition.

The materials I posted are about defining and identifying YOUR intuition. Honestly, beyond the typical "gut feeling" answers, very few can even define intuition, much less know it when they feel it.

One of the problems I had was being able to distinguish between my intuition and my rational consciousness. That is why most of us don't trust our intuition, simply because we really aren't sure which is which most of the time.

Once you clearly know how to distinguish your intuition from the rest of the noises that typically clutter the mind, then it becomes easier to act upon it.

I find it interesting that so many are dismissive of intuition, but not surprising given the typical human make-up.

Key point, one must be able to distinguish when intuition is at work and when it's some other emotional reaction.


Our schooling is heavily left brain focused. Many tests are just regurgitation of names, dates, places. Basically, left brain focused education turns people into encyclopedias that really don't know what to do with the information that is being spit out.

I'll spare everyone the 'conspiracy theory' on why everything is left brain focused (you can study the Prussian model of education for that), but it didn't used to be that way. A proper education at one time was all about developing both hemispheres of the brain.

"Imagination is more important than knowledge."
Albert Einstein

I've had the same problem. As much as six years ago, after and during long experience with stocks, my trading intuition was trained enough (the 10k chart watch/study thing) to recognize how to trade a chart. Something inside me told me to trade here or there, and gave me a gut feeling or whatever to support the call.
Yet much more often than not, I would ignore the call and fail to act or act inappropriately. I didn't know how to deal with it, being able enough and yet unable to act upon it.

So I turned to creating a chart study approach that appeals to the "rational consciousness" you speak of. The approach I chose to make were, on the whole, intuitively blending into how a chart is structured, which seems to me to be a more important and effective way to trade. I only have an intermittent, short-span version of intuition with forex, perhaps because I have only a few years experience and also I can't sit at the screen and watch a forex symbol for 24/5 1/2 in a row, it's too different from a set time for stocks. I tried adding some rational variables to a felt gut instinct about a chart move, with limited success; only, it didn't break the forex boundary. And no, simulator doesn't cover it, I guess because of the lack of a per-tick reaction speed matching demo/real's.
Feeding one's intuition an unfinished trade study while supporting more the 'rational consciousness' that made it, is a chaotic path for decisionmaking and a poor way to then use intuition. I would have saved a lot of time and effort doing the training for effective intuition use you suggest can be done. Instead, I kind of justified within myself that I was giving to others (something they may or may not want ), and am still creating such today.
Unfortunately, I also have to check my empty wallet....

Not doing what you suggest makes for a really lousy trader who responds far more to nontrading stimulai and is prone to kneejerk errors far more than others. I have to admit to being in that category (which has a '95% fail' ring to it), and hope an extra-good edge will counter this.

From here on, though, just doing what could be a trading edge takes a certain amount of training you speak of. So, I'll have to work on this anyway to get my actions in line with profit.