The Feeling in Trading

Without ceasing, we bring down the same sermons, we must be methodical or even mechanical. But we must admit that from time to time, “we feel that the market will return” while no explicit data provided by the graph would allow us to say. It is this famous feeling of which we speak in this article.

It is good to “feel” the market, but, except explained by an esoteric theory, this intuition necessarily has a reason. Why do we feel that the market will reverse? It does not come from anywhere, it’s information that we have unconsciously but it is difficult for us to formalize. This is the sum of empirical findings, that is to say, that by seeing graphics, you will systematically notice behaviors in certain conditions and you will save them.

Now, you may be confronted with particular configurations, the latter will look like the ones you have previously encountered. Thus, by unconsciously remembering the scenario, you will have the impression of having an intuition. It is rather what we could call “experience”. By dint of seeing graphics we notice recurring relationships, we record them unconsciously and it resurfaces when the graphics remind us.

The question now is whether “trading at the feeling” works. Difficult to answer in an obvious way, which is sure that it makes the decision-making process and the strategy unstable. We find a lot of beginners, opening positions to the feeling, which is a mistake. In my opinion, agreeing this type of action can only be reserved for experienced and seasoned traders.

Some bad ideas conveyed on the web of the type: “one can win sustainably by trading at random” encourages to trade “the feeling” by saying: “at worst, it will always be a little better than chance”. This behavior of the most erratic leads fairly frequently to high losses. Before venturing to make such conjectures, one must begin by being rigorous. One can open positions “feeling” by being rigorous.

What is most important in this type of approach is to be able to dissociate the emotional side of the rational side. In fact, intuition must not be anything but a desire to trade. Nor should this intuition be in opposition to classical analysis. Generally, after a series of losses, the trader will feel frequently hit by a form of “curse”. From there, after an analysis, he will say “I will still be wrong”, so he will have the intuition that the market will return the wrong way, and so may be tempted to do the opposite of this that he should have done. Certainly, this type of behavior is totally inept and seems surely impossible. Indeed, it does not often lead to reverse positions but very often the trader will not take a position while he will have an input signal subject to “felt” that the market would turn around. This clearly limits his earnings.

In conclusion, we will say what it is better to do. First of all, have a basic strategy and stick to it very rigorously. Then, by dint of seeing graphs, when one begins to have subjective indications (intuitions), instead of trading on them, one will rather try to rationalize them. That is, try to identify it solidly, put conditions on it. So we can incorporate it directly into the strategy already in place. This will avoid forms of overflow as well as cognitive risk.