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Using Your Intuition
Skillful
traders know how to use their intuition to make quick,
conclusive decisions. There are times when going with
your "gut" instinct can be shrewdly accurate. There are
also times, though, where your intuition can be dead
wrong, and nothing more than wishful thinking. A
seasoned, profitable trader knows the difference, and so
should you.
The human mind is
capable of making decisions without full, conscious
awareness. An experienced driver, for example, doesn't
need to pay close attention to every action. It's quite
easy to automatically shift gears, hit the brakes, and
avoid hitting an obstacle quickly and decisively without
thinking. It takes practice, however. When we first
learned how to drive, or when we bought a new car, it
took a little time to process a vast array of
information and act on it skillfully. It's the same with
trading. When you first start trading, it is wise to
look carefully and consciously at a variety of
indicators and sources of information before taking
action.
Ed Sekota warns,
"It is very, very easy to confuse intuition with
into-wishing." An intuitive idea is unconscious, and may
arise from unconscious wishes. For example, novice
traders are often uncertain of their decisions. In the
back of their minds, they wonder if they can trade the
markets profitably. To relieve the uncertainty, they may
dream of making brilliant, winning trades. In the midst
of monitoring a trade, it is quite tempting to be
overconfident, and want to believe you're about to make
a huge win. If you aren't careful, your intuitive mind
confirms your expectations. It's hard not to listen to
it. You feel good. You feel omnipotent and in control,
for a while at least. At some point, you are likely to
find that your gut instinct wasn't based on accurate
information and you end up losing. Your seemingly
intuitive hunch was merely wishful thinking.
Decision-making
requires that we look at both sides of an issue and
arrive at a prudent decision. When we aren't sure which
side is obviously right, we feel uneasy. A sense of
psychological tension creates a strong disparity within
your mind. Your unconscious mind has difficulty handling
such ambiguity. It seeks out a quick resolution. If you
aren't careful, an intuitive hunch creeps up that does
nothing more than alleviate psychological tension. It's
not based on a quick, decisive evaluation of facts, but
on a psychological need for resolution between two
opposing ideas. At other times, our unconscious mind
seeks thrills and excitement. An intuition may reflect
an urge to alleviate boredom. You must always question
the validity of a gut level hunch.
Seasoned traders
frequently report trading in the zone, a time when
intuition allows the skilled trader to quickly seize
rare market opportunities, act decisively, and make a
financial killing. It is important to remember, however,
that beginning traders have only rudimentary intuitive
skills. These skills are not yet fully developed. It
takes time, experience, and practice to develop them.
Intuitions may not reflect facts. Any intuitive thought
should be grounded in facts. In other words, if a
seasoned trader were to think backward after making an
intuitive decision, he or she should be able to map out
the information and signals that went into making the
decision. Like driving a car, it's possible to
deliberately and thoughtfully act, if necessary.
Similarly, all intuitive thoughts and hunches should
reflect the processing of specific pieces of
information. If you're a novice trader, it's unlikely
that an intuitive decision is based on such information,
so rather than act on an intuition decisively, it is
vital that you stop, and think backward. Write down and
map out the information on which your intuitive thought
is based. If you can then determine that the hunch is
based on valid information, act on it. If it's
unfounded, ignore it. Although seasoned traders know how
to act on their hunches, novice traders are better off
if they stay close to the facts. Over time, and with
vast experience and practice, however, you'll be able to
trade intuitively, decisively, and profitably.
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