The Role of Intuition In Trading

[thetradingdoctor 10]

I am interested in learning how you feel about the importance of intuition in your trading? I am aware that certain studies have been done in FOREX traders that indicate that emotions or feelings played a very large role in determining what positions traders would take. If you ask these traders why they took this position in the dollar or the euro or some currency, they will tell you that they "had a gut feeling" about it, or "had a dream" about it, or it just "felt right."

 

I realize that the subject of intuition does not get a lot of respect. One reason is that is difficult to quantify. It is highly personal. Many traders keep it a secret because it is almost a kind of taboo.

 

What do you think about your own trading, particuarly in the FX markets?

 

What role, if any, does intuition play in your decisions?

 

 

Thanks!

 

Doctor Janice

[walterw 10]

Nice one Janice...

 

On my experience this intuition DID work in terms of being inspired to a certain idea of research... did happen ALWAYS, 90 minutes before really waking up from night sleep... in a sense of semi-sleep... then showering, I always start my day with a very long shower... 40 mins sometimes, my ideas from semi-sleep start to get drawed on my shower wall... from there on Janice all my aproach in my ofice its pure technical... no instincts... thats my input on my experience... cheers The Chimp.

[AbeSmith 10]

This is a facinating subject doctor Janice. To me intuition is a factor in my trading decisions. I don't know the science behind it, and I don't solely rely on it. But I respect it. I heard there are cases of people whose photographic memories are so accurate that they have trouble recognizing the same people because of the minor changes in their appearance. Perhaps a task of the subconscious mind is to processes various quantitative signals, but in order to protect us from being overwhelmed by them like the example above, it gives us the results in a qualitative intuitive feeling. Perhaps another need for intution is the high amount of energy which is consumbed by quantitative task as opposed to qualitative tasks, energy which was not always so abundant in our species' evolution. Or perhaps humans are linked to other humans, animals, or to the universe in a collective subconscious and our intuition is a result of information gathered from this connection.

[thetradingdoctor 10]

I will reply to Walter first and then to Abe sometime tomorrow. The reason for my quick reply to Walter is this: From a physiological standpoint, humans go into what is called Rapid Eye Movement ( REM) sleep. This occurs approximately every ninety minutes and is characterized by specific bodily activity, including but not limited to: rapid respiration, elevated heart rate, relaxation of the antigravity muscles, back and forth ( sacaddic) movements of the eyes , characteristic changes in the EEG brain waves and---dreaming. If you wake a person from this state of sleep, the person will tell you a dream. Also, most deaths from cardiac collapse occur in the early hours of the morning during a period of REM sleep ( this is because of the intense demands on the heart during this time). Walter, it is most likely that you were in REM sleep, i.e. dreaming, at the time you experienced these intuitions. Another, less possible explanation is that you were in a state of what is known as hypnopompic hallucination ( a semi-sleep that occurs shortly before awakening). I think the more likely situation is that you actually were dreaming, thus your intuitions ( that were then transferred onto the shower wall) came to you in a dream.

 

What do you think about this, Walter?

 

PLease let me hear from others about the source of your intuitions and how they have impacted your trading?

 

Thanks!

 

Doctor Janice

[walterw 10]

I think the more likely situation is that you actually were dreaming, thus your intuitions ( that were then transferred onto the shower wall) came to you in a dream.

 

What do you think about this, Walter?

 

PLease let me hear from others about the source of your intuitions and how they have impacted your trading?

 

Thanks!

 

Doctor Janice

 

 

I will have to agree Janice I was sleeping, I actually wasnt awake... after that I did awake...

 

Could all the great info loaded on my mind lately (during work time) could be organized into some good ideas during sleep ?... I believe this is just amazing... I am each time more impressed with human body and mind ¡¡...

 

My question now is, why would our mind choose that state of sleep to organize ideas ? whats the edge for the brain there ?... thanks Janice for this interaction, I just Love it ¡¡¡ cheers Walter.

[brownsfan019 17]

What role, if any, does intuition play in your decisions?

Thanks!

Doctor Janice

 

Doc - I personally never found much use of following your intuition since the majority of the time the crowd mentality is wrong. Unless you are able to discern the difference between when the crowd is wrong and right, it's a losing proposition in my opinion.

 

Here's what I mean - give a trader access to a dom and that's it. Tell them to trade their gut and I think more often than not you'll find the account down substantially at some point. I"m sure there are some that can trade from their gut and do well, but I would think that more often than not it's a losing proposition.

 

For anyone interested in testing this out, open up your simulation dom and have at it. Of course once you are learned in different tech analysis, you will always 'see' certain things even if you try not to. Once your eyes and brain have been trained to find certain patterns or formations, you will search them out even if you try to fight it.

[thetradingdoctor 10]

I will have to agree Janice I was sleeping, I actually wasnt awake... after that I did awake...

 

Could all the great info loaded on my mind lately (during work time) could be organized into some good ideas during sleep ?... I believe this is just amazing... I am each time more impressed with human body and mind ¡¡...

 

My question now is, why would our mind choose that state of sleep to organize ideas ? whats the edge for the brain there ?... thanks Janice for this interaction, I just Love it ¡¡¡ cheers Walter.

 

 

One idea about this is that the brain is freed from all sensory input during sleep. This allows time for the brain to process all the information that has come in during the day and the brain did not have the time or the ability to process. Freud was a pioneer in the study of sleep, but he did not know about the various stages and the EEG and REM sleep. Here is a short history of theories about dreams:

 

I: Sigmund Freud theorized that dreams were vital keys to unlocking the mysteries of an individual's personality, motivations, and the overall psyche.

He first used the term "interpretation" to refer to the unscrambling of dream content.

 

II: In 1977, Alan Hobson and Robert McCarley published research which argued that dreams were random, meaningless activities carried out by the nerve cells in the sleeping brain. They called this theory Activation Synthesis Theory. However, a few years later Alan Hobson changed his mind and reported that it seems that dreams have important personal significance to the dreamer.

 

Today, some psychologists believe that dreams are an Extension of Waking Life and that in our dreams we express our emotional concerns and most private thoughts.

 

III: Dr. Stephen La Berge conducted extensive research on Lucid Dreaming and wrote popular books on the topic. Lucid Dreaming occurs only 1 to 2 percent of time during REM sleep. It is the type of dreaming in which an individual is aware that he or she is dreaming. Dr. LaBerge concluded that the purpose of this type of a dream is to make the dreamer aware of something important. With practice we can direct our lucid dreams and improve our ability to navigate through them.

 

 

 

I do not know where you are in your spiritual practice, Walter, but have a look at this and let me know if it gives any insight. If it does not, I will take you in another direction. http://pune.sancharnet.in/nariphaltan/dreams.pdf

 

Thanks!

 

Doctor Janice

[thetradingdoctor 10]

This is a facinating subject doctor Janice. To me intuition is a factor in my trading decisions. I don't know the science behind it, and I don't solely rely on it. But I respect it. I heard there are cases of people whose photographic memories are so accurate that they have trouble recognizing the same people because of the minor changes in their appearance. Perhaps a task of the subconscious mind is to processes various quantitative signals, but in order to protect us from being overwhelmed by them like the example above, it gives us the results in a qualitative intuitive feeling. Perhaps another need for intution is the high amount of energy which is consumbed by quantitative task as opposed to qualitative tasks, energy which was not always so abundant in our species' evolution. Or perhaps humans are linked to other humans, animals, or to the universe in a collective subconscious and our intuition is a result of information gathered from this connection.

 

 

This is a very powerful and thoughtful post, Abe. The way the brain is constructed, there are two main pathways for processing decisions. One is rapid and emotional and is the limbic or rat brain. It is largely subsconscious and intuitive or instinctive. The other is the new brain--the cerebral cortex.

This is analytic, non-emotional, logical and linear. The rat brain is a very fast processor and can completely take over the new brain-- especially in situations where one is bombarded with large amounts of conflicting information ( eg, during the trading day). Under these circumstances, the new brain "defaults" into the rat brain and the decision is made based on emotion. It is only later, perhaps in quiet, down time or in sleep when the new brain is has time to think about what the old brain has done without thinking.

 

What do you think?

 

Thanks!

 

Doctor Janice

[thetradingdoctor 10]

Doc - I personally never found much use of following your intuition since the majority of the time the crowd mentality is wrong. Unless you are able to discern the difference between when the crowd is wrong and right, it's a losing proposition in my opinion.

 

Here's what I mean - give a trader access to a dom and that's it. Tell them to trade their gut and I think more often than not you'll find the account down substantially at some point. I"m sure there are some that can trade from their gut and do well, but I would think that more often than not it's a losing proposition.

 

For anyone interested in testing this out, open up your simulation dom and have at it. Of course once you are learned in different tech analysis, you will always 'see' certain things even if you try not to. Once your eyes and brain have been trained to find certain patterns or formations, you will search them out even if you try to fight it.

 

This is a good point, brownsfan and it gets back to what we know about the stages of trading competence. If a trader is unconsciously competent, the trader "knows" what to look for and what to do. I heard a story once about a guy that used to come down to the exchange in the 1940's. He looked like a bum--unshaven, dirty, smelly. He walked into the exchange, put an empty coke bottle against his ear and placed a trade. He said he got the message from the coke bottle. His trades were amazing-- very profitable and the others sitting around the exchange tried to figure out how he did it. They never could.

 

You are right about the masses, but it is important to understand that you are unique and your intuition might not be the same as that of someone else.

 

Then...there is that famous dart board. What about that? Statistically speaking, stocks are not serially correlated. That means there is an equal chance for the stock to go down as there is for it to go up. Where is the real skill in trading? What is the real skill in trading? Is it the implicit knowledge that comes from seeing patterns over and over again and acting on them? Are there trading savants? Why do some people just seem to "get it?" while others struggle for years and years?

 

Thanks!

 

Doctor Janice

[walterw 10]

III: Dr. Stephen La Berge conducted extensive research on Lucid Dreaming and wrote popular books on the topic. Lucid Dreaming occurs only 1 to 2 percent of time during REM sleep. It is the type of dreaming in which an individual is aware that he or she is dreaming. Dr. LaBerge concluded that the purpose of this type of a dream is to make the dreamer aware of something important. With practice we can direct our lucid dreams and improve our ability to navigate through them.

 

 

 

 

 

Thanks!

 

Doctor Janice

 

Well thats interesting Janice... you see most of my dreams, and I dream a lot, Beautifull Dreams ¡¡¡ great places ¡¡ great circumstances.. I just have a really delightfull dreaming life... in ALL of them I am somehow aware that I am dreaming...

 

About my spiritual life I am in a more conservative non-esoteric relation with God... and thats the God from the Holy Bible... and Jesus his Son... knowing him has made my life completly diferent... thats where all the true Joy and blessings come to me... if this Spiritual condition in my relationship with God interferes with the quality of my dreams, I believe it does, as I live on a permanent state of peace... not that I dont have problems as any other person, just that I am in a great inner peace...

 

Thanks Janice for this great thread... love to interact ¡¡ cheers Walter.

[AbeSmith 10]

This is a very powerful and thoughtful post, Abe. The way the brain is constructed, there are two main pathways for processing decisions. One is rapid and emotional and is the limbic or rat brain. It is largely subsconscious and intuitive or instinctive. The other is the new brain--the cerebral cortex.

This is analytic, non-emotional, logical and linear. The rat brain is a very fast processor and can completely take over the new brain-- especially in situations where one is bombarded with large amounts of conflicting information ( eg, during the trading day). Under these circumstances, the new brain "defaults" into the rat brain and the decision is made based on emotion. It is only later, perhaps in quiet, down time or in sleep when the new brain is has time to think about what the old brain has done without thinking.

 

What do you think?

 

Thanks!

 

Doctor Janice

 

It's very interesting Dr. Janice. Thanks for your expertise.

[brownsfan019 17]

Then...there is that famous dart board. What about that? Statistically speaking, stocks are not serially correlated. That means there is an equal chance for the stock to go down as there is for it to go up. Where is the real skill in trading? What is the real skill in trading? Is it the implicit knowledge that comes from seeing patterns over and over again and acting on them? Are there trading savants? Why do some people just seem to "get it?" while others struggle for years and years?

 

Thanks!

Doctor Janice

 

Doc - in a theoretical sense, I agree that there really isn't anything to trading as the position has a 50/50 chance of working when you take the trade. The problem arises when that human emotion kicks in and/or if you let intuition take over in my opinion.

 

I'm sure there are some trading savants out there that we will never know of, but since this is such a rarity is why the rest of us look for those reliable, repeatable patterns that you mentioned. I think most traders do this simply b/c we know our intuition in and of itself is just not enough. From there, it's simply a matter of finding that 'edge' and exploiting it.

[thetradingdoctor 10]

Doc - in a theoretical sense, I agree that there really isn't anything to trading as the position has a 50/50 chance of working when you take the trade. The problem arises when that human emotion kicks in and/or if you let intuition take over in my opinion.

 

I'm sure there are some trading savants out there that we will never know of, but since this is such a rarity is why the rest of us look for those reliable, repeatable patterns that you mentioned. I think most traders do this simply b/c we know our intuition in and of itself is just not enough. From there, it's simply a matter of finding that 'edge' and exploiting it.

 

 

Good points, here brownsfan. What do we do when we trade? We look for patterns that repeat. Our edge is in pattern recognition and the disciplined execution of the trade. I am coming to believe that a large part of what is called "trading intuition" is built into the brain syanptic strategy that underlies the fourth of five stages of mastery. That stage is called "unconscious competence." I will send an article to James that describes the stages of competence ( in case anyone needs a refresher or reminder). Thanks for this post brownsfan and please let me hear from others?

Thanks!

 

Doctor Janice

[walterw 10]

I am interested on that article... "unconcious competence"... certainly Janice if we did not had that, trading would be devastatingly stressfull... I like the autopilot concept and for shure it does not mean that we previously didnt need an "entrainment" founded on good solid technical arguments... thats why that instinct does not necesarily denies technical preparation, all of the contrary, I believe that instinct comes from your technical background... hope you understand me :crap: cheers The chimp...

[thetradingdoctor 10]

Ask and ye shall receive, Walter! Article: So You Think You Can Trade?

has been posted, thanks to James.

 

Doctor Janice

[walterw 10]

Ask and ye shall receive, Walter! Article: So You Think You Can Trade?

has been posted, thanks to James.

 

Doctor Janice

 

Once again, you are spoiling me Doc ¡¡

 

for your amusement some chimp stuff , enjoy

 

 

 

 

 

 

 

 

cheers The chimp.