Intuition in trading. 1. Trade small.


Post comments: 5 Comments This post continues the discussion on finding the Ar t in technical analysis. Read that first, and also this poston bringing intuition in trading intuition into your experience.

How to improve your intuition?

For quantitatively-inclined traders such as myselfdiscretion can be a problem. First, many system rules are slightly counter-intuitive which may be why they workso system traders often find that when they use discretion they are, quite consistently, doing the wrong thing—you will, so often, tend to skip the best trades or get out of winners early. Today, I want to give you some concrete ideas for bring intuition into your trading. Be open to the experience of intuition.

intuition in trading

As I wrote in this post, there are many things you can do to bring intuitive experience into your every day life. This makes sense, because intuition is another way of using our brains; intuition is not rational.

Be willing to be a little crazy, at least for a while. Watch for standout moves on markets you follow.

intuition in trading

We could quantify these, but what you are really doing is looking for something that would stand out to even an inexperienced chart reader.

Think about the uptrending stock that has a large, sudden down day, or a quiet market that breaks out of consolidation with a very strong thrust. First thing is to look for these large, standout moves.

See what happens after these large moves. Here is where some discretionary elements can begin to come more into intuition in trading. If the market has sold off sharply in an hour, a day, two weeks… you can adapt this for your timeframehow does the market bounce?

Does it bounce strongly?

If so, what happens after that bounce—quiet and flat, or does the market nearly immediately turn lower? If so, how does it act around that previous pivot low?

intuition in trading

If it does not bounce strongly, how does it consolidate? Is trading continuous or discontinuous? What are people saying in the media?

Do you have friends or know people on social media who are very consistently wrong? What are they saying?

Does Trading With Intuition Make Your A Better Trader?

No joke. For instance, we know that mean reversion is much strong in equities than in currencies, over some timeframes, so might we evaluate this action differently in currencies and stocks?

These are the types of questions to ask, but it basically comes down to evaluating what happens after a sharp thrust. What is happening on lower timeframes?

Intuition in trading: psychotechnics, miracle or self-deception?

I think a lot of traders get in trouble using multiple timeframes. True, there is power in these techniques, but it can often lead to analysis paralysis, and most traders would probably be better checking in on their positions less frequently.

intuition in trading

However, when we are trying to get a read on a market intuitively, looking at lower timeframes can be very helpful. If I am holding a position based on a weekly pattern, how does the market react to small intraday shocks? Also, this must be put in context.

intuition in trading

Say, for instance, a market has been hit hard, bounces, turns lower, and is now working around that previous pivot low. Chart readers might be looking for a double bottom, for instance. This is reflective of bearish sentiment and conviction, and is probably what we would expect.

A Trader's Intuition

Now, what if I start seeing selloffs absorbed, or even large upward shocks intuition in trading these lower timeframes, and what if this coincides with a failure test on the daily chart?

Watch action in consolidations.

This is a slightly different context, but there are times when we can get intuitive reads intuition in trading the direction of breakouts from consolidations. For you, the answer may be different. I mention this here just to show that there certainly are other aspects of market action where intuition can be useful. This stuff is hard to teach, intuition in trading to write about, and almost impossible to nail down; your own experience will be your guide and teacher, and you must open yourself to that experience.

Should you be an intuitive trader?

If you are going to explore intuitive elements, my advice would be to make sure that this is not all you do. Many developing traders think that intuition is the answer to all their problems, and that simply is not true. Continue to work on discipline. Work on doing hard research and understanding market action.

Question everything.

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For me, it works out well for me to almost have a split personality: the hard-core data scientist on one hand and the slightly-crazy-at-times intuitive. Sometimes they have arguments, and that can be interesting, too.

AdamHGrimes Adam Grimes has over two decades of experience in the industry as a trader, analyst and system developer. The author of a best-selling trading book, he has traded for his own account, for a top prop firm, and spent several years at the New York Mercantile Exchange.

intuition in trading

He focuses on the intersection of quantitative analysis and discretionary trading, and has a talent for teaching and helping traders find their own way in the market. You Might Also Like.