Does Success in Forex Depend on Intuition?
By: Albert S. | Posted: 07th June 2009
Quite often you can see the situation when one trader using a trading system makes profit, while other trader using exactly the same system loses money. The main reason for that is intuition.
Success in any area of human life has a lot to do with intuition. Let's define the intuition for Forex trader. Intuition in trading is the decision making ability that goes beyond the rational thinking. Each trader trades with his own risk level. That can be attributed to intuition.
Indeed this choice is based on trial and error or intuition. There is no formula to give the exact answer which risk level will suit you as a trader. Every trader takes certain risk and only inner voice can give him a hint on what will be the right level.
Defining the risk is one example. Choosing the risk level doesn't limit the role of intuition for a trader. He should use it quite often during his trading. Since the market often give out chaotic information, the exact estimation of the market potential is not always possible. No one can be aware of each and every parameter involved in price movement.
When trader makes a decision there is a lot of subjective component in that decision. We can call that subjective component as intuition. In other words any decision based on the information from the environment that is not registered in conscious mind is an intuitive component.
However it is not true that the right decision comes entirely from intuition. It is also based on right analysis, market knowledge and trader's experience. It does not mean you need to acquire all the information available about market and trading. All what you need is persistent focus of attention on the right components of your trading.
It is the intuition that has that power to direct your focus towards the more important information. It is almost like an instinct of perceiving the right information. However it develops with the experience.
Experienced traders have a "feel" of market. They feel the price movement and momentum of that movement. Therefore any small shift in the momentum will lead such trader to take action based on his experience and knowledge. That "feel" of market can be called intuitive.
The losing of such "feel" of market can mean loss of the capital. Therefore for most successful traders that intuitive feel serves continuously. It goes almost subconsciously like breathing. He keeps analyzing the information but conscious mind does not notice it.
All people are familiar with the life situation when action must be based not on rational decision making process. Sometimes it is not possible because of information overload or lack of it. Therefore we take actions based on our "inner voice". Very often those actions are the most successful ones.
Another definition of trader's intuition is his ability to see the market environment as one interrelated organism. Can one develop such ability or is it something one should be born with. In my opinion we are all born with such ability but trial and error and applying consistent effort will develop that ability.
Albert Schmidt has been in the field of Forex Trading for a few years by now. Visit his blog about Forex trading where you can find step by step information on how you can learn Forex trading. This article is free for republishing
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Tags: money, important information, right decision, trial and error, intuition, instinct, inner voice, trades, market knowledge, estimation, risk level, conscious mind, experienced traders, exact answer