Trading your way around the world can be incredibly rewarding. Once you’ve mastered the fundamentals and achieve some sort of success, you can use your skills to travel and enjoy the freedom many won’t ever have. However, if you’ve read any trading blogs, you’ll know that making it isn’t easy. In fact, even when you have “made it”, things don’t necessarily get any easier.
For example, in the Wandering Trader’s guide to trading like a professional, he outlines the basics of fundamental and technical analysis. As an aspiring trader, you may start off using the former but end up moving to the latter if your results take a dive. From there, you may develop a hybrid strategy. Put simply, your tactics have to be as fluid as the financial markets themselves if you want to be a successful trader.
Of course, having the ability to adapt is great but how do you know when to stick and when to switch? Because trading isn’t an exact science, there’s never a set point at which you should go left or right, metaphorically speaking. Therefore, this is where intuition can become a valuable tool. According to currency analyst, Renee Mu, the key to making the right decisions is to use a combination of logic and gut feeling. As she outlines in a video about the various experiences of different day traders, psychology is a major part of investing.
Trading isn’t all about logic
For Mu, it’s not only important to understand behaviours and tendencies in others, but also within yourself. Remaining calm in the face of volatility is a vital skill that all online traders need to master. Only once you’ve done that can you analyse the situation using a combination of intuition and logic.
She said intuition allows her to “quickly capture important information”. In other words, if the market shifts or she feels something is “wrong”, Mu won’t ignore that feeling. Instead, what she does is use those feelings as the basis for further research.
This is where logic comes in. In essence, Mu’s process is not dissimilar to the fundamental vs. technical analysis dynamic. The former is used by Warren Buffett and essentially relies on a feeling about a company based on its revenue and management etc. The latter is based much more on statistics and trends, i.e. logic. As an aspiring trader, you need to master both because it’s this interplay between intuition and logic, feelings and facts that can help you decide when to make certain moves.
Learn to trust your gut
If you feel as though something isn’t right with the market or your strategy, it’s time to dig into the numbers. Evaluate at your own success rates and try to identify the points where things have gone wrong. By doing this, you’ll not only have the opportunity to fix any problems, but you’ll also gain a better understanding of your trading habits in general.
For example, your gut might tell you that going short on tech company stocks isn’t profitable in the current climate. After reviewing your results and performing technical analysis on the market, you see that your suspicions were correct. Of course, you can’t simply do this once and be successful forever more. Utilising feelings and facts is an ongoing process.
However, trading is not only about being flexible but trusting your instincts. Science dictates that intuition is based on an accumulation of attitudes derived from experiences. Therefore, even though it may feel as though you’re making decisions based on some abstract emotion, the reality is they’re probably based on something you’ve experienced before.
If you can learn to trust this process and, as Mu suggests, fuse it with empirical data, you stand a strong chance of not only being a successful trader but knowing when to adjust your strategy in order to counter a downswing.