The Hindu Business Line : Tech Tools

We discussed the mechanical style of trading in last week's column. This trading style is suitable for novice traders who do not have the experience-bank to delve into during a crisis.

Mechanical trading style uses empirical data and concrete facts to trade. At the other end of the spectrum is, trading with intuition. Needless to add, that the intuitive trading style cannot be learnt out of a textbook. It can be honed only after several years in the stock market and after having gone through the requisite number of loss making trades.

Merriam Webster Dictionary defines intuition as the power or faculty of attaining direct knowledge or cognition without evident rational thought and inference. In other words, there would be no logical explanation for the intuitive thought at the time when it originates. But successive events would prove it right.

Intuition would be the sudden strong and inexplicable feeling that a trader would get about the stock market or any particular stock that would have no rational explanation when it originates. It is linked to the creative part of the brain or the right side. The analogy would be an artist getting a sudden inspiration for creating a masterpiece or a novelist getting the plot for his next novel in a dream.

One cannot hope to use intuition to identify profit-making trades every day. Intuitive ideas would come only once in a while. Traders who have been using intuition successfully in their trades over many years would have the confidence to back their intuition with actual trades. The speed of action would be vital in such circumstances. It is also recommended to start with small positions when executing intuitive trades and then pyramid as the trade moves in to profit.

Many of the intuitive thoughts would be linked to the subconscious mind. For example, you could get the intuition one fine morning that market is going to crack in a big way. The high level of enthusiasm shown by the neighbour who always goes on an overdrive near market peaks could have been the catalyst that triggered the thought.

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