Trusting Your Instincts When Trading

| November 7, 2017

TradingThe best traders are the ones that have developed a gut feeling for trading and are able to follow their instincts, as well as their strategy when they trade.

This is something that comes from experience and continues to develop throughout a trading career. However, developing your instincts for trading is also something that you can work on to develop. For some people, this does not come naturally, but it can still be learned.

Instincts from Experience

Most gut feeling come from experience. If you follow enough trades, you will begin to see repetition and patterns that will trigger memories of past outcomes.

If you see a pattern often enough, you will develop a gut feel for what will happen and this will help you make more successful decisions in the future. Your instincts can begin to develop once you have put your trading strategy into play and you have mastered it.

At this point, you can combine strategy and instinct for the best possible results.

Learning Instinct

Some people come to trading with natural instinct and they quickly master their trading strategy and start putting their instinct to work. For other people, it is a much steeper learning curve and more difficult learning experience.

But, this does not mean that instinct will be lost to you. In fact, even those with natural talent only develop instinct from experience. They may develop that instinct faster, but it still requires work. This means that everyone can learn to trade with instinct if they put in the practice.

Instinct vs Emotions

What divides the mediocre trader from the top trader is the ability to distinguish between instinct and emotion. It is always important to follow your strategy and we hear over again about how you need to develop a strategy and stick to it.

But, what do you do if your strategy says one things, but your instinct says another. For the less experienced trader, they may confuse instinct with emotion – it is not instinct that is contradicting your strategy, but fear, impulsiveness or chasing losses.

It is important to recognize your gut feeling for what it is – instinct or emotion – and only follow that feeling if it is your experience speaking in a calm voice.

Is Your Instinct Good Enough?

Before you go and throw all your trading charts out the window, you need to know if your instinct is good enough to rely on. Firstly start by mastering your strategy and practice, practice, practice.

Then start keeping track of all your hunches and if your gut feel turned out to be correct or not. If you find that your gut is getting it right, begin taking small positions based on your instinct and see how that turns out.

This will help you to build up your confidence in your gut feeling so that you can start making profits when you begin making more trades based on intuition. Just always remember that risk management and stop losses are a must with all trades.


Category: Investing

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