It’s not often that I include two quotes of the day in a linkfest as I did yesterday. See the quotes below:
Gatis Roze, “Investors don’t earn the right to use intuition in their trading until they’ve been investing for decades, not years. All others must stick to their methodologies and learn how to execute these consistently and profitably.” (StockCharts)
Joshua Brown, “Many people believe they can be like Soros, and some will point to their process as proof of their seriousness. Unfortunately, merely showing up each day and being diligent in the execution of a process won’t make them the next world-beating macro player.” (The Reformed Broker)
There are number of different takeaways from these two quotes but there the one I want to focus on here is the application of intuition to trading and investing. Roze’s point is that intuition is only earned after years of hard work and the application of a well-earned process in the markets. Brown in talking about Soros notes that the biggest names in investing became so only because they were able to bet big when their intuition told them so. No logical, quantitative process will ever tell you go to all in on any single investment idea.
That all being said how can traders (and investors) be open and available to their own intuition. Michael Covel in a recent podcast with Andy Puddicombe talked about meditation and mindfulness. Some of Puddicombe’s own clients include traders at some of the world’s biggest banks. The idea being that mindfulness allows traders to be less distracted and more focused on the goings on around them.
Brett Steenbarger at TraderFeed has written a number of times about mindfulness and trading. One idea that comes out of this is that mindful traders are more intentional in their actions. He writes:
Good traders, I believe, think about markets before they place their trades. Great traders do that–and they think about their thinking. This makes their trading more intentional, more controlled, and ultimately more rule-governed.
Intuition in the markets in only earned over time. Intuition can be accessed more readily by those that are more mindful, especially of their own emotions when trading. You cannot trade like Soros in his heyday without having firm sense of your own emotions. Most of us will not make our fortunes in the markets. However we can be more mindful in our trading and more open to our intuition. More importantly if we can be more intentional in our trading we can help avoid the pitfalls that wash out so many traders.
Update: See also this piece by Jason Voss at the Enterprising Investor on the importance of intuition in trading.
Items mentioned above:
My 12 takeaways from ChartCon 2014. (StockCharts)
When process meets the real world. (The Reformed Broker)
Michael Covel talks with Andy Puddicome. (Trendfollowing Podcast)
All it takes is 10 minutes. (TED)
Mindfulness in trading: asking the right questions. (TraderFeed)
What proportion of daytraders actually make money? (TraderFeed)