Tuesday, March 23, 2010

Gaining Access to Inner Expertise

As I emphasized in this important post, traders know more than they know they know. This is the result of internalizing patterns in markets over time. The resulting "gut feel" for markets provides an intuitive level of recognizing when those patterns are occurring in real time.

A key challenge for traders is that they are often in frames of mind that deny them access to this intuitive, implicit level of knowing. Among the states of mind that interfere with one's gut feel for markets are:

* Fear and anxiety;
* Anger and frustration;
* Boredom;
* Overconfidence;
* Pessimism and depression;
* Excitement and thrill-seeking.

As a rule, the more we are focused on profits, losses, and self-related thoughts, the less focused we are on the patterns playing themselves out in markets. It's that focus, in part, that provides us with access to the gut.

Biofeedback is a useful tool for training ourselves to enter and stay in the state needed to access our implicit knowledge. (See this post for a summary). By sustaining a state of calm focus, we can recognize hunches and insights as they materialize.

This may be one reason why we can trade like pros on certain occasions and like rookies on others: the state we're in may provide or deny us access to the pattern recognition skills underlying most active trading. We cannot access our internal expert if our attention is drawn elsewhere and our thoughts and emotions are drowning out our intuitions.

More on this topic soon to come


My Trading Edge said...

Thank You For defining what GUT FEEL IS!

Too many times I hear people say they will trade with gut feel, because they have read/heard commentary from distinguished traders doing so, not understanding gut feel is skill and experienced gained at the unconscious level (typically over a lengthy period of time)

LawyerTrader said...

Dr. Brett,

Here's a list of 5 non-trading books I put together to help traders cultivate the proper mindset for trading..a key to consistent profitable trading.


E-Mini said...

On the mark! Strings of losses, professional/domestic issues, extreme focus on profits instead of the trade all contribute to non-profitable days. I've found that sometimes the best thing to do is to take some time off to refocus. Thanks for the post!