A look at whether gut-feel or intuition should be used in trading. How and when to use it, and when to avoid it. We’ll also look at how to supercharge performance using intuition.

I view intuition as cumulative experience pulled from the subconscious, not the conscious.

In an experiment, subjects were asked to pull cards from multiple “rigged” stacks. Neurological scans revealed that the mind was picking up on a winning strategy after 10 draws, and the subjects had a “hunch” of the pattern after 50 draws. They could state the pattern after 80 draws.

Intuition is what the mind picks up on, but can’t be clearly stated with the conscious mind…yet. Intuition picked up on the pattern long before the conscious mind was willing to admit it.

Humans, and especially traders, are taught to ignore intuition, but it can be an ally (based on several factors we will discuss).

Does Intuition Belong in Trading?

It depends on experience level and trading style.

What is your experience level?

Intuition requires experience. 

Traders who have seen many market moves/trades/conditions are more likely to be able to use intuition than a novice. 

When a way of trading has been found useful, based on conscious observation, using intuition can result in super performance.

What is your trading style?

Automated traders have little use for intuition, except in coming up with ideas for a system. 

Discretionary and rule-based discretionary* traders can utilize intuition to supercharge performance once they have achieved success with “consciously” trading.

*Discretionary traders have loose rules but take each trade as it comes, analyzing it independently based on its own merits and their research. Rule-based discretionary traders follow a system, looking for trades that match certain criteria, yet they understand each situation is unique so they have discretion in how they manage a trade or their position size (which could also be based on rules, but from an outside perspective, this may appear discretionary).

How to Move Toward Trading With Intuition

The mind needs quality factors to consider. Otherwise, it will bounce around. 

A strategy starts with an idea. We consider different entry, exit, and position sizing rules. Over time, we improve on those as we see more examples.

“Commentating” is talking through elements related to our strategy on a given trade. Making sure it aligns with the method (at the time).

Over time, all these factors become accounted for by our system. Our mind knows what to look for. We can then stop commentating and enter a “in the zone” state where we let the subconscious take the reins. We will be able to react quicker and potentially make better judgment calls than the slower logical mind can. Shifting conditions are sensed and adapted to. It’s not magic, it’s experience.

Once this state can generally be accessed while trading, we don’t need to mentally “grind” our way through a trading session. It is a more relaxed, let it happen, let it flow, type of state.

That said, it is still important to prime our body and mind with a pre-trade routine. The pre-trade routine allows us to more readily be in that flow state when the trading session begins. The work becomes more about maintaining a good mindframe to execute or stay out when required, as opposed to consciously focusing on the mechanics of the strategy and following the system (because this has already been mastered).

I lay out my Day Trading strategies for trading stocks in the Price Action Stock Day Trading Course. 

Intuition is a Good Idea for Skilled Traders…Bad for the Novice

When novice traders watch skilled traders, it can look like they are making on-the-fly decisions. Skilled traders may seem to have exceptions to their rules.

They are in a flow. Many great traders don’t even know how they make money. They can’t explain every tiny thing they are looking for, they just do it.

This is fine for people who have honed their craft. They are at stage 4. But using intuition is a trading disaster before stage 4.

1. Unconscious incompetence (don’t know what you don’t know)
2. Conscious incompetence (know what you don’t know)
3. Conscious competence (know what you know)
4. Unconscious competence (mastery of what you know)

Is Intuition Required? No. Useful? Yes.

Acting on intuition requires letting go. The conscious mind may freeze if it doesn’t know exactly what to do. The experienced subconscious mind can find ways to capitalize or avoid danger.

This is difficult for many people. The logical mind wants to make the decisions, or the ego wants to be involved.

Using intuition in trading is not a requirement. You can trade systematically, automated, or just continue to enhance your discretionary trading system and trade it via conscious protocols such as commentating.

Most of us could be intuitive if we learn a great deal about a subject matter or have a lot of accumulated experience. We may be intuitive already in certain areas without really noticing it.

I lay out my Swing Trading rules and strategies for trading the stocks in the Complete Method Stock Swing Trading Course.

Your Trading Experience With Intuition

Leave comments on how intuition has positively or negatively affected your trading (along with what style you are, and whether success was achieved before or after using it).

Take what you like, and leave the rest. Trading is YOUR journey.

You may also enjoy this article and video: How to Become a Profitable Trader as Quickly as Possible.

Cory Mitchell, CMT

Disclaimer: Nothing in this article is personal investment advice, or advice to buy or sell anything. Trading is risky and can result in substantial losses, even more than deposited if using leverage. The author is not a psychologist, and the article should not be considered mental or health advice.