piphoe
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lol, oh sht..working my way thru the LOGIC..first several times don't get it thanks for reply get back to ya
lol, oh sht..working my way thru the LOGIC..first several times don't get it thanks for reply get back to ya
I suppose what I am trying to ask (not very well) is: Is it not possible to trade profitably using intuition on entry alone, for a less stressful experience?
Let's say we choose a forex pair, doesn't matter which, so let's say USDJPY. Then we choose one set-up, it doesn't matter which for this experiment.
Let's put psychological-sabotage aside for now and and assume we are zen-like in our execution.
Now we enter a series of trades randomly, with each SL set at 50 pips and each TP set at 100 pips. After 100 trades, we would expect to be break-even (minus commission/spread) with a win rate of about 33.3%.
Now, we use our intuition (which is essentially our sub-conscious which has recorded the nuances of the 1000s of set-ups we have seen/experienced/traded) to PASS on those trades which are less likely to work out and trade the ones which are more likely to work out.
Would it be fair to say that as long as...
1. We have had enough experience of the set-up for our intuition to be trusted in telling us when a trade should be put on, and
2. We can tell the difference between our intuition and one of the other voices ("go on, have a punt") which cannot be trusted
...we could realistically get to a point where over 100 trades we now have a win rate of say 50% with a risk:reward of 1:2?
If so, we are profitable using our well-honed intuition (and bucket-loads of self-awareness due to continued work on mindset) for trade entry but arbitrary (although consistent) exits. Thereby doing away with one of the most stressful parts of trading, knowing when to exit.
That's the thought process and the basis of my current experiment.
I would love to hear the thoughts of you lovely lot. Anyone else doing something similar or am I completely bonkers?
Let's say we choose a forex pair, doesn't matter which, so let's say USDJPY. Then we choose one set-up, it doesn't matter which for this experiment.
Let's put psychological-sabotage aside for now and and assume we are zen-like in our execution.
Now we enter a series of trades randomly, with each SL set at 50 pips and each TP set at 100 pips. After 100 trades, we would expect to be break-even (minus commission/spread) with a win rate of about 33.3%.
Now, we use our intuition (which is essentially our sub-conscious which has recorded the nuances of the 1000s of set-ups we have seen/experienced/traded) to PASS on those trades which are less likely to work out and trade the ones which are more likely to work out.
Would it be fair to say that as long as...
1. We have had enough experience of the set-up for our intuition to be trusted in telling us when a trade should be put on, and
2. We can tell the difference between our intuition and one of the other voices ("go on, have a punt") which cannot be trusted
...we could realistically get to a point where over 100 trades we now have a win rate of say 50% with a risk:reward of 1:2?
If so, we are profitable using our well-honed intuition (and bucket-loads of self-awareness due to continued work on mindset) for trade entry but arbitrary (although consistent) exits. Thereby doing away with one of the most stressful parts of trading, knowing when to exit.
That's the thought process and the basis of my current experiment.
I would love to hear the thoughts of you lovely lot. Anyone else doing something similar or am I completely bonkers?
David Knight
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I have just realised that since just before the start of the session I've been using a 1 min chart. I always use the 5min and have switched back..we do like our comfort zones don't we?
I guess current market conditions suit a 1min chart (the trades are happening a lot quicker), but I have to say the reason I didn't really notice is because I'm only focused on pure price levels and what type of day it is (ie trending/neutral)
Intuition is a difficult subject. There are so many sdes of grey it can get messy in there..very messy.
I allow myself a certain amount of discretion but we probably can't do the subject much justice in a single post- it really needs a whole thread.
I can't recall anyone ever sharing any kind of stats on that. I haven't ever recorded my own for myself. Has anyone here?
When it works it's not a problem.
When you get it wrong, the only thing that matters is how you handle the situation from that point on.
If that part works out OK you're probably likely to continue occasionally using discretion to some degree.
If not, it will probably scare you off for good.
In fact I do recall traders saying that they wont ever use it. So, no stats and the majority view is against it. Is that about right?
Just for balance..
If you don't stick to your stop. Is that a discretionary decision?
In other words, are you making discretionary decisions about all sorts of things all the time without realising/acknowledging it?
Is it a discretionary decision to be reading this during the trading session?...or not to be?
I guess current market conditions suit a 1min chart (the trades are happening a lot quicker), but I have to say the reason I didn't really notice is because I'm only focused on pure price levels and what type of day it is (ie trending/neutral)
Intuition is a difficult subject. There are so many sdes of grey it can get messy in there..very messy.
I allow myself a certain amount of discretion but we probably can't do the subject much justice in a single post- it really needs a whole thread.
I can't recall anyone ever sharing any kind of stats on that. I haven't ever recorded my own for myself. Has anyone here?
When it works it's not a problem.
When you get it wrong, the only thing that matters is how you handle the situation from that point on.
If that part works out OK you're probably likely to continue occasionally using discretion to some degree.
If not, it will probably scare you off for good.
In fact I do recall traders saying that they wont ever use it. So, no stats and the majority view is against it. Is that about right?
Just for balance..
If you don't stick to your stop. Is that a discretionary decision?
In other words, are you making discretionary decisions about all sorts of things all the time without realising/acknowledging it?
Is it a discretionary decision to be reading this during the trading session?...or not to be?
piphoe
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Is what you're asking this: Is it possible to trade profitably with an intuitive entry but a definite and arbitrary SL & target (50,100)??
I ask this in response: If we trust our entry to intuition, why wouldn't we we trust our exits too??
Hi David
Yes, I think you're right, we all use discretion all the time (even in bending our trading rules sometimes
). I suppose every choice we make all through the day uses some form of discretion.I remember asking various experienced traders years ago questions like "why didn't you take that set-up, it met all the criteria you look for in a trade?" only to be answered with "mmm, well, it just didn't look/feel right to me".
As a beginner, answers like that can be very frustrating as you grapple with trying to formulate a plan, but later on, as experience increases, it makes more sense. This must be because our intuition improves with experience.
Even discretionary traders who hate words like "intuition" and "sub-conscious", must be using using their intuition all the time. So I agree, we are using it without realising it most of the time.
I suppose we do have some control over how much of the trading process we trust to our intuition and how much we stick to hard-and-fast rules, never to be broken, like:
- I never hold a trade over the weekend
- I never trade such-and-such instrument
- I never trade without a stop.
Maybe this whole trading experience is a process of finding a balance between using rules and using intuition, a balance that suits our particular temperament? For some it might be discretion in all decisions, including exit, for others it might be using discretion only for the exit...
Is what you're asking this: Is it possible to trade profitably with an intuitive entry but a definite and arbitrary SL & target (50,100)??
I ask this in response: If we trust our entry to intuition, why wouldn't we we trust our exits too??
I have been thinking about your question since yesterday. Why not indeed?
Mmmm, it got me in a pickle to be honest, but thanks for posting it, this is just the sort of stuff I need to be challenged on to get clearer in my trading (& life!)
Eventually I came up with this answer:
Assuming that trading with rules is less stressful than trading with discretion, but discretionary trading is where my edge (& therefore profit) is. Then, using intuition for the least stressful decision (entry) and rules for the most stressful (exit) creates a balanced trading plan that suits my temperament, that is both profitable and low-stress.
Using intuition for exits too is obviously a lot cooler though and a whole lot less boring!
This is good. I find sometimes a rule makes more sense if the writer's motivation is -
"because other writers write rules and the publisher said I had to as well"
"because other writers have got a rule on this subject and if I don't have one I'll look like a lightweight"
"so that the new rule will differentiate me from other writers' similar rules"
"so as not to look silly with a reckless rule for a high-risk strategy"
"so that I'll be quoted lots"
"because I can say the same thing more snappily"
"so that the new trader reading this will not lose money - not too quickly anyway".
Our profit isn't always their motive.
I will add my 2 cents worth on the subject of "intuition".
Firstly I think it is important to differentiate between the notion of intuition and discretion. In my world view there are two types of traders, viz discretionary and non discretionary. Non discretionary are basically mechanical traders leaving discretionary traders as simply non mechanical in approach. I subscribe to the idea of intuition in trading but its application is generally random and exceptional rather than as a norm. I do not look for it but it presents itself randomly. So what is the difference between discretion and intuition since ultimately it is about choices? The starting premise is that even if we are discretionary in our approach, there is a systematic approach in our trading process. We may make choices in the instruments, the time to trade, the trading time frame and the core elements within our trading plan i.e. stops and targets. Intuition comes into play for me at least as it most often do is that all the elements of a set up to a trade presents itself and on that basis a trade would and should be taken and yet I hesitate. In essence, the overall picture doesn't look right somehow even though the individual component adds up. In other words, intuition stops me from taking what on paper appears to be a good trade. There is a caveat to it pertaining to the emotional context which I will explore in a latter point.
The second point in this conversation about intuition is that those defending the predominant use of intuition needs to articulate what their approach represents and importantly how it presents as an edge to them. In other words it needs to deflect invariably a charge that intuition is simply a convenient excuse that they effectively don't know what they are doing.
Thirdly consistency in trading comes from consistency in approach and process. It has to be dominant feature in our trading because if not then we do not have a basis to evaluate and improve on our ongoing trade performance. Constantly moving targets do not in principle lend it self to proper benchmarking.
Fourth and last is that trading can be emotionally stressful. Studies indicate that only 37 % of traders are self aware of their state of emotion when making trade decisions. Having rules and an established process are meant to keep us discipline especially when under stress and emotions can overcome sound judgment. When intuition comes in for me, it is important as a safety check to ensure that intuition is not simply an emotional bias when making trade decisions.
Firstly I think it is important to differentiate between the notion of intuition and discretion. In my world view there are two types of traders, viz discretionary and non discretionary. Non discretionary are basically mechanical traders leaving discretionary traders as simply non mechanical in approach. I subscribe to the idea of intuition in trading but its application is generally random and exceptional rather than as a norm. I do not look for it but it presents itself randomly. So what is the difference between discretion and intuition since ultimately it is about choices? The starting premise is that even if we are discretionary in our approach, there is a systematic approach in our trading process. We may make choices in the instruments, the time to trade, the trading time frame and the core elements within our trading plan i.e. stops and targets. Intuition comes into play for me at least as it most often do is that all the elements of a set up to a trade presents itself and on that basis a trade would and should be taken and yet I hesitate. In essence, the overall picture doesn't look right somehow even though the individual component adds up. In other words, intuition stops me from taking what on paper appears to be a good trade. There is a caveat to it pertaining to the emotional context which I will explore in a latter point.
The second point in this conversation about intuition is that those defending the predominant use of intuition needs to articulate what their approach represents and importantly how it presents as an edge to them. In other words it needs to deflect invariably a charge that intuition is simply a convenient excuse that they effectively don't know what they are doing.
Thirdly consistency in trading comes from consistency in approach and process. It has to be dominant feature in our trading because if not then we do not have a basis to evaluate and improve on our ongoing trade performance. Constantly moving targets do not in principle lend it self to proper benchmarking.
Fourth and last is that trading can be emotionally stressful. Studies indicate that only 37 % of traders are self aware of their state of emotion when making trade decisions. Having rules and an established process are meant to keep us discipline especially when under stress and emotions can overcome sound judgment. When intuition comes in for me, it is important as a safety check to ensure that intuition is not simply an emotional bias when making trade decisions.
new_trader
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My 2¢ on intuition: The intuition of an inexperienced trader is going to be different to that of a trader with years of experience. Intuition by definition is the ability to understand something instinctively, without the need for conscious reasoning. It would be difficult to argue that a trader with years of experience is acting without any reasoning, conscious or subconscious.
What a great post, I wish I was more eloquent like you! I find it very hard to get my thoughts on this subject down on paper (or screen) clearly enough!
Yes, I have been using these two words interchangeably but as you point out, they are not the same thing at all.
Yes! Intuition can keep us out of a sub-parr trade. Is it because our sub-conscious has recorded a lot more variables in all the trades we have experienced than our conscious mind? Therefore, our intuition adds to the incomplete picture made up of the mechanical components of trade selection?
This is exactly what I was going to ask as I was reading your post. How do we differentiate between intuition and an emotional reason for being hesitant to take a trade? Self-awareness is the only way surely? Recognising our periodic grumpiness/frustration/lack of confidence and all the other emotions that can affect our trading decisions, for what they are.
Working on self-awareness is the single most difficult thing about trading imho. It is also not at all glamorous! :cheesy:
Yes, I have been using these two words interchangeably but as you point out, they are not the same thing at all.
Yes! Intuition can keep us out of a sub-parr trade. Is it because our sub-conscious has recorded a lot more variables in all the trades we have experienced than our conscious mind? Therefore, our intuition adds to the incomplete picture made up of the mechanical components of trade selection?
This is exactly what I was going to ask as I was reading your post. How do we differentiate between intuition and an emotional reason for being hesitant to take a trade? Self-awareness is the only way surely? Recognising our periodic grumpiness/frustration/lack of confidence and all the other emotions that can affect our trading decisions, for what they are.
Working on self-awareness is the single most difficult thing about trading imho. It is also not at all glamorous! :cheesy:
So, it's all down to experience! I don't suppose an experienced, successful trader needs to know which part of his trading is down to conscious decision-making and which is down to subconscious decision-making.
He trades well because of years of experience and therefore a well-developed awareness of what is going on inside his brain. This awareness is going to be much more developed than in the general population.
I wonder if there have been any studies of the brain activity of successful traders... you know like those brain scans they do of meditating monks which show heightened activity in certain part of the brain? It would be interesting to see if there are parallels...
I find my intuition about as reliable as my “mechanical” rules
Ahhhhh Barjon - trade management! Now there is the next HUGE topic!
David Knight
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Dr Valeriani said the same technique could be used to spot the flicker of brain activity of a subconscious "gut-feeling".
Intuition is often filtered out by more conscious logical thought, yet can be a powerful aid to decision making.
https://news.sky.com/story/mind-rea...elp-police-surgeons-and-city-traders-11238096
Good question. The same question I had in mind when attempting to ensure that any intuitively driven hesitation of a trade is not simply an aversion bias resulting from any emotionally induced trade events. I think developing self awareness is a very important pathway necessary in enhancing trading performance.
In my view the overall question of intuition and what it may represent in trading is not important. Having said that, I believe what is important is to have an understanding on how our trading mind works and more importantly how trade decisions are made.
The premise of my understanding is based on the work of Steve Ward who is a trade performance coach. Essentially our mind has two different pathways in which decisions are made. They are either :
The deliberative path. It is logical, rational, reasoned, slower, greater mental effort and explicit. The alternate pathway is :
The intuitive path. It is fast, automatic, effortless, implicit and emotional.
This is not some abstract concept but is actually based on neuroscience.
The obvious question is how does the mind choose its pathway when attempting to make decisions? In trading, we deliberately go through an evaluation process when confronted by choices. However when we are stressed or under some perceived threat we tend to lean to the intuitive side because such a pathway short circuits the thinking process and allows us to react to situations quicker. This is the proverbial fight or flight situation. As such, we have to be mindful that when our beliefs are under threat or when we are emotionally challenged we may be making trade decisions that are intuitive rather than deliberate. In other words, there is a tendency to take short cuts especially when under stress.
In discussing how the trading mind works, it is helpful to introduce a framework to illustrate the process itself. The purpose is to highlight how bias and emotions can significantly influence the decision making process and consequently why mindfulness aka self awareness is so important. We will adopt the concept of OODA which was developed by John Boyd for military pilots in developing situational awareness and decision making in high stress environment. Basically OODA stands for observe, orient, decide and act. It has the same application as in any trading process as we go through the same stages such as market observation, orientation, making trade decisions and executing the trades. The target of our conversation is what goes on in the orientation stage. In order to put this item in perspective it is helpful to recall a quote by Van Tarp. He said "You do not trade the markets, you trade your beliefs about the markets". in other words, when we look at a chart and the accompanying price action, that same information are viewed by all market participants but somehow we all make different trade decisions based on the same information. It is because we don't share common beliefs at any given time. When we process market information at the orientation stage, there are many influencing factors at work such as beliefs, emotions, bias, past experience, skills, knowledge, strategy et al. A common problem in trading is an aversion to loss especially when still having to deal with a string of recent losses and losses do generate negative emotions whether we acknowledge it or not. The output in the decision stage is very much affected by the type of junk (if any) that gets into the orientation phase. Studies show that only 37 % of traders are self aware of their emotions when making trade decisions. in other words, the majority of traders are operating with blind spots and not being aware of it when making trade decisions.
I agree. How it can be done I will leave it for another time.
I've been around the trading block (and back again) and this is where I am at.
The only trading information I will consider looking at nowadays is self improvement.
Particularly self awareness and self discipline. (Retail traders do not have the benefit of a manager to tap on our shoulders and enforce we lighten up our exposure.)
I believe my self improvement efforts have helped me just as much (if not more) in my personal life as in trading.
I have gone down many routes from Daniel Kahneman to the American motivational speakers.
The OP has mentioned self improvement a couple of times and I would love to hear about his self improvement journey his study of topics and his resources used. Books, courses, training whatever has helped him.
Agree! It is definitely a lifestyle choice!
It's hard to explain to those who don't understand (well, I don't even try to be honest) that even when I'm not actively trading, I'm probably thinking about it. Not necessarily the mechanics of a trade, but loads of other stuff, money management, psychology, what it means to be a trader... As an example last week I only traded 2 set-ups and was in the market for less than a couple of hours in total but I was "working" all week. I don't mean looking at charts but being focussed on the profession, if that makes sense?
So here's a question to you all:
What makes you a trader? By some definitions, trading twice in a week means that time-wise I would be classed as a part-time trader. But, for me it is a full-time occupation.
As a trader, are you working even when you are doing things that support your trading? Is the trader who swims for an hour every day to keep tip-top physically and mentally, working during that hour? (If so, can a trader off-set their gym membership against tax?
What about meditative walks along the beach? An essential tool in my trading plan but not considered work by most definitions!
Maybe all the non-trading stuff that supports our trading should feature much more heavily in our trading plans... Does anyone actually list non-trading stuff in their trading plans e.g. exercise routine, diet, mindset exercises?
Yes I do actually.
Written into my plan, (that needs to be ticked off before a trade) which includes...
The amount of sleep I get.
The amount of alcohol I have drunk.
Any abnormal emotions (trade and personal related, negative and positive).
The amount of exercise I do.
And My weight.
Edit: PS I think this thread title is dangerous, as I think to be very very humble in the markets is an absolute must!!
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It warrants comprehensive discussion but I would narrow it initially to stay focus on some key elements. The basic conversation is about market events or the trade environment, the information flow arising and its interaction with our trading mind and the consequent decision making arising from it. Self awareness is simply about the broad phases of awareness, acceptance, and actioning.
When we interact with the market, we are constantly consuming and digesting the information arising form key events. Market information by themselves are benign in nature. However a familiar theme we all understand is that the moment we have a position in the market, any information arising thereafter seems to take on a different meaning. It is important to understand why is there a sudden transformation in how information is perceived if we are to understand the nature of self awareness.
As I alluded in an earlier post we trade our beliefs of the market. Therefore how we perceive information is critical in influencing our behaviour. Let's illustrate with an example. Recently the Dow made some major moves including dropping 1000 points in one trading session. What was your reaction to such a market event? Say if you :
(i) Had been shorting the Dow for the past few weeks and finally closed your short and giving up just before the big move; or
(ii)Had been building up a series of long positions and was profitable but now is in a loss situation because you had only a mental stop; or
(iii)Are an observer waiting for an opportunity to go long; or
(iv)Are the public reading the headline news.
I would safely venture to say that the reactions would be different across the spectrum depending on individual circumstance. The process in developing self awareness is to conduct self examination and to understand our own reaction and understanding on how that reaction is driving the decision process. The idea is to build up a personal profile on how you personally react to different market events as you engage the market.
As the trading mind process market information, it induces certain thoughts and those thoughts influence our decision making. There is a common expession about "buying your thoughts". In essence you are prepared to go along because you are beholden by that thought. In cognitive terms, fusion is when the thoughts over a certain event are perceived in a certain manner and because there is buy-in it will influence how you react. Say if you are investor (ii) the drop of a 1000 points is a threat to your long positions. What happens if it continues to drop? Those are thoughts that will certainly arise. Such thoughts most likely will generate a certain amount of discomfort if not fear. They are emotions arising from a market event based on your perceived thought that maybe "I am going to have a loss". Are you going to close your long positions out of fear of a further drop? If you were investor (iii) would you be buying instead of selling? Self awareness is simply about understanding how we perceive information and how we are emotionally reacting to situations. Why is it a threat in (ii) and an opportunity in (iii)? As I mentioned before information itself is benign but how we perceive it is critical. it also means we can train to reframe information such as a threat can be an opportunity and hence we might end up with a different decision.
We know emotions influence how we behave but we can't trade without emotions. It is scientifically proven that we cannot even make basic decisions without emotions and so I would suggest to drop the notion that you can trade without emotions. Self awareness is about accepting that emotions play a role and more importantly be able to identify it when it arises and to work with our emotions rather than against it. A common approach is to use defusion techniques and will be the next item of conversation.
Thanks for sharing your list. Abnormal emotions is a good one, anything that might upset the "normal" emotions during trading. Alcohol is also an interesting one for me and I have cut it out completely for now, as a sort of experiment.
Yes, the title does come across as arrogant, so not the best choice, but that was not my intention. I meant "get it" as in traders who have come to the understanding that the most important work is all the stuff we are talking about. Like you!
So little of the trading world attempts to deal with this information. I used to find it very frustrating looking for the information/books/traders that/who connected the two fields.
In the end, the things I did completely outside of trading helped the most and once the connection was made that:
1. Any improvement to my life in general improved my trading, and
2. Principles learnt outside of trading could be applied to my trading to improve results.
...I stopped looking for answers within the trading world.
Now, I'm trying to merge the 2 worlds, the "gooey" hippy world and the "prickly" trading world. (The words "gooey" and "prickly" are used by Alan Watts btw, his stuff is amazing, try to find recordings without the distracting backing music though...)
Anyway, in answer to your question, here are things that have helped:
Yoga - If I had to choose one thing, it would be this. Teaches me acceptance, calms the mind, keeps me fit physically, the list is endless. Ideally alone and in silence and if I can, outside.
Mindfulness - Being aware of my thoughts (essential in trading) being present and living the moment, whatever that moment may be. I would recommend the 8-week MBSR/MBCT course as a starting point.
Minimalism - Not for everyone, but helps me enormously. It is important for me to keep a clear space as it helps me have a clear mind. It can be hard living with people who like "stuff" but it's worth me persevering because clutter has a negative effect on my trading mindset. Also, helps re-evaluate financial priorities and think about why I trade in the first place. My trading is also pretty minimalist
Exercise - Especially time in the outdoors, walking in nature alone, essentially another type of meditation, but will all the added physical benefits.
As for books, I found Michael Martin's "The Inner Voice of Trading" helpful when I was trying to link the hippy stuff with trading. It is not very elegantly written but he talks about the link between trading and yoga, so I knew I wasn't completely mad!
You mention alcohol and weight. This is something I am exploring at the moment. The link between mindless eating/drinking and mindless trading is fascinating. In other words the voice that says "go on have another drink" is the exact same voice that says "go on, take the trade, it's not in your plan but have a punt". So, practicing not reacting to that voice outside of trading (e.g. drinking) strengthens the muscle for when it comes up in trading. That's the theory anyway!
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