A Quantitative Approach To Intuitive Trading – Part 2/5

Part 1 dealt with ensuring adequate, specific prior experience to develop an unconscious database from which intuitive judgments will be derived. Unfortunately, trading experience isn’t the only data you have stored in your brain and there will always be many feelings, urges, and thoughts vying for your attention. Part 2 briefly covers the housekeeping that needs to be done in your mind before you can hope to consistently identify the intuitions you’ve cultivated during your market experience.

Mental housekeeping

The housekeeping begins with eliminating as many internal conflicts as possible. These can be between goals, values, or attitudes. Every conflict you have creates at least two opposing voices in your head. With more than a few it can quickly become a noisy and confusing place. For example, the time you spend on the markets can take time away from your family. If you don’t take action to resolve that conflict your unconscious will eventually try to do it for you. Each competing part of your mind has your best interest at heart and will do its best to achieve that – whether you like the means or not. With trading often the easiest way to eliminate a conflict is to cause enough losses that you have to stop trading. Make a list of every possible conflict you can imagine in your life. For each come up a solution that satisfies the goals of both sides. Then do it. If you can’t follow through find another solution, and another, until you find one with little resistance in implementation.

Values, attitudes and beliefs are the ultimate source of many conflicts. If your parents told you money is the root of all evil it wouldn’t be surprising if monetary success eludes you. Everyone thinks they know what their values are but when pressed are often unable to write down even a handful. Write down 100 of them. Start with your top 10 and try to add 9 more under each of those main categories. Values should be one word: Love, respect, intimacy, excitement, intelligence, etc. It can be difficult to think of very many but there is a good list of possibilities here. Once you have 100 review them to find the recurring themes and potential conflicts. What do they tell you about yourself? If half of your list is in some way related to safety and security and the other half is related to excitement and adventure, you’re likely to have problems in trading and elsewhere. Similarly, make a list of all of your attitudes and beliefs about yourself, markets and money. If you feel you’re a loser your unconscious is likely to find a way to prove you right (I always think of Victor Neiderhoffer as an example of that). If you’re trading to make a lot of money in order to prove your self-worth you’re likely to be disappointed. Changing your attitudes and beliefs is the subject of a number of books [1]; the important point is to be aware of them and how they might affect your feelings, thoughts, and actions.

The final part of housekeeping is learning to maintain a clear, quiet state of mind; a state of flow [2]. Learn meditation and practice mindfulness. Learn what a quiet state of readiness feels like in minute detail: Posture, breathing, muscle tension, mental contents and activity level, etc. Practice them until you can recreate the state of mind and body on demand. The biggest difficulty in making money isn’t that it’s a battle against the market or other traders, but that it’s too often a battle against yourself: a fiendish, devious, equally matched opponent who knows your every move. You can’t win that battle, so stop fighting it. Acknowledge your feelings. Accept them as well intended and let them go. Your mind should be almost a blank slate, waiting for the next trade to be written upon it. If it happens, it happens. If it doesn’t, it doesn’t. Life goes on.

This may all sound like a bunch of psycho-babble BS but these housekeeping exercises are mandatory to use intuition successfully. You may think you know your values, that your actions reflect them, that you have no real conflicts with yourself or others, and you have your shit well in order, but you don’t. It’s a lifelong process and nobody ever completely succeeds. The conscious mind has achieved incredible things, but like every physiologic intervention it has side effects. The unconscious is no longer the only game in town. Intuitions don’t shout “Hey, listen up!” inside your head and force you into action. As mentioned in Part 1, they reveal themselves in more subtle ways. If your mind is a swarm of squabbling adversaries and competing interests it’s very unlikely a valid intuition will ever make it to the surface and reach conscious awareness without severe distortions along the way. The more you are all on the same page with yourself, the easier it is to get a clear message. It also has benefits throughout life, not just in trading [2] and that in itself makes it well worth the effort.

With the one-with-the-universe mysticism out of the way, the third part of the series will cover learning how to recognize what is sometimes a sapling of valid intuition among the forest of feelings inside you.


The complete series: Part 1, 2, 3, 4, 5

[1] The only one I still use is Sourcebook of Magic: A Comprehensive Guide to NLP Change Patterns The encyclopedia format is quick and convenient to use. Like most NLP stuff it seems completely absurd that it could work but if you make an earnest attempt to do the exercises they will often work despite what you think of them. There has been research in neuroscience over the last 20 years that has hinted at why the mechanistic approach of NLP may work, but I’m not aware of any book that as attempted to make that case.

[2] I think the best book on the subject is Flow: The Psychology of Optimal Experience

[3] In fact it’s possible you may give up trading entirely as a result of becoming more congruent with yourself. There may be more important things to you, or you may find it’s not really what you like to do after all. As I tried to point out in the posts on Temporal Spatial Arbitrage there are many ways to get from point A to point B. Trading is only one. If you want a ton of money so you can retire and lay on a tropical beach, why not just quit work, sell the house, move to the beach, and when you need money, just make some? If you have what it takes to succeed in the market you can almost certainly make money a number of ways, almost anywhere in the world. Do you really think that sounds more difficult than competing against the best minds in the world to make money in the markets? If you think you need money to be happy, why not just be happy now? Take the direct route, there’s no better trade.


7 thoughts on “A Quantitative Approach To Intuitive Trading – Part 2/5

  1. Pingback: Pseudo Random News and Comment | Mortality Sucks

  2. Pingback: Pseudo Random News and Comment | Mortality Sucks

  3. Pingback: A Quantitative Approach To Intuitive Trading – Part 3/5 | Mortality Sucks

  4. Pingback: The Direct Route | Mortality Sucks

  5. Pingback: A Quantitative Approach To Intuitive Trading – Part 4/5 | Mortality Sucks

  6. Pingback: A Quantitative Approach To Intuitive Trading – Part 5/5 | Mortality Sucks

  7. Pingback: Pseudo Random News and Comment | Mortality Sucks

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