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Can You Trust Your Intuition?

I am to some extent an intuitive trader. I suppose there are some who are much more intuitive than I am, and some who are less so.

I'm convinced that most people who begin trading think of it in purely mathematical terms. If the ultimate multiple regression equation could be devised, one could simply put in the inputs and get the outputs. And the outputs could be used to forecast the markets. The general assumption seems to be that the markets can be predicted in much the same way that engineers can use equations to construct a bridge. Being able to predict the future seems to have always been a quest of mankind. But the markets are far too inconsistent and too complex to fit any equation.

Experienced traders tend to rely on abstract feelings rather than facts to a much greater extent than what many beginners tend to think. They trade intuitively.

Think for a moment about how you observe the world and gather information about it. Do you just want the facts and the specific details, and none of the sensation or feeling? Or are you more intuitive? To what extent do you not believe in the so-called "facts?" Not believing everything you hear or see implies intuition. You may be a person who thinks reality is subjective and prefers to think in theoretical and abstract terms. It is useful to identify whether you are intuitive or data oriented. If you are data oriented, it may be useful for you to learn to trust your intuition, and it is something that can be learned. It's simply a matter of tuning in.

At Trading Educators, we see mostly traders who prefer cold, hard facts, who see the world as rational, predictable, and orderly. Sometimes we see traders who are intuitive; they see the world as random, theoretical, and conceptual. Lots of traders are balanced between the two, but there is a definite skewing towards traders who want to see the facts.

A trader who wants things to be predictable may want to know the specific price level where support begins. That trader would prefer to follow a specific set of rules and may want to pin down exactly where an abstract value, such as support, begins and ends. An intuitive trader views the "rules" to identify support as merely guidelines which may work at times, but not always. For example, perhaps support will be a round number or a previous peak or trough, perhaps it will not. No one knows for sure; such guidelines are just possibilities, not hard and fast facts.

Mathematical types look at market concepts literally, believing they are true-life entities, rather than just abstract concepts. An intuitive trader looks at the markets in a figurative sense. All signals and indicators are subjective in the end, may be a little inaccurate, and are a mere approximation of reality. There's a good chance they will be wrong, and that's all right.

When it comes to the markets, it's generally advantageous to be an intuitive trader. Reading charts and getting a feel for the markets is subjective in the end. Trading decisions are based on educated guesses. Markets are not linear, matter of fact, and predictable. Because the markets are so complex and chaotic, it takes intuition, hunches, and a kind of creative and artful mastery to win consistently. The logical analysis of facts and figures can go only so far when you are trying to trade the markets, which have inaccurate figures and are largely inexact. So if you are a naturally intuitive type, you've got a head start. And if you are a data-oriented trader, try to nurture your more intuitive side. Become an intuitive trader, and you'll see your profits grow.

How can you tell to which side you lean as a trader? The answer is found in the kinds of questions you ask.

You are not thinking intuitively if you ask questions similar to:

Where do I put my stop?
Which market is good for day trading?
What is the best time frame for trading?
Which parameter settings should I use for my indicator?

All of the above and many more questions we are asked have
answers that are variable. There is no such thing as one-size-fits-all!

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Master Trader Joe Ross wants you to learn trading and he created products to do just that, teach you how to trade. Go to our website to find which ones best fit your trading style. Let's learn the art of trading Joe Ross' way!



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Wednesday, 07 December 2022

Derivative transactions, including futures, are complex and carry a high degree of risk. They are intended for sophisticated investors and are not suitable for everyone. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results, and all of which can adversely affect actual trading results. For more information, see the Risk Disclosure Statement for Futures and Options.