[Soultrader]

How Important is Intuition in Your Trading?

I definitely rely alot on intuition based on global market information, market reaction to earnings/news, and then determining the potential of a trade at a S&R level. As a result my style is shifted heavily towards the discretionary side which lacks any type of systematic approach. I do not have concreate rules at all except risk management. Perhaps my style has transformed this way due to my lack of progamming skills or perhaps by being around and learning from discretionary traders. We often phrase the markets in such ways like, "Market smells funny", "Market feels ready for a bounce", "Markets smell like fear", etc...

The topic here is how much intuition do you use in your trading? What are the factors that you consider part of your intuition? Is there an edge for intuitive traders vs systematic traders? Are intuitive traders more flexible in adjusting with the markets? I often view my trading as "free style trading". Very quick to change my mind, and S&R levels are often dynamic adjusting levels throughout the day and night. If I was told to write a book explaining my methodology, I probably could not at this point in my career.

Lets get this discussion rolling

[brownsfan019]

I learned a long time ago James that my intuition was most definitely not the way for me to trade... In order to eliminate those 'feelings' I must trade w/in a rule set.

For those that have it though, that's a great weapon in your arsenal.

[Soultrader]

Im actually on the exact opposite side of brownsfan. Having strict rules was okay for execution but psychologically it was damaging for me. I was too attached to my trades which resulted in cheating and moving my stops. Also I could not bear the frustration of missing a move when my signals did not fire but felt intuitively the markets may move.

Rule following also seems to be a direct conflict between who I am as a person. As a result intuitive trading works for me as long as strict risk management is in place. I also do not want ppl reading this to misinterpret intuitive with impulsive. Having a plan is vitally important... but I do often ditch the initial plan and create a new plan as the day evolves.

[Kiwi]

Its interesting that I am in the process of completely eliminating intuition from my daily trading.

Having spent 5 years watching the market and trading it in real time (HSI, SPI, STW) I realized that my intuition about the markets, my real time execution, and my attention to operational details were not my fundamental strengths. Said another way, it had become boring and I suspected that I wasn't going to get better at it.

So, in my inimitable style I decided on a radical change.

My strengths are: understanding of the market and setups, solving problems and programming. I like newness and I love problems and the satisfaction I get solving them.

So I am in the process of automating my trading style. My first system, Peewee, was an attempt at it and didn't quite work. I ended up with something that I didn't really like but it had a nice profit factor and even on really ugly markets stayed above 1.5 so I implemented it. I've been live on it for 2 weeks now and I'm getting kinda fond of it. While I work on Popsicle, Peewee trades HSI. Every so often TWS pipes up and says "Trade Entered" and I check to see what happened and whether it looks ok. I no longer jump each time this happens. In the first week I intuitively interfered with it about every second trade but after 3 days I realized it was better off without me so now I let it go.

And the damned thing makes money almost every day. I now reserve my intuition for generating ideas to test and program. Once they're implemented I just let them go.

[Soultrader]

Originally Posted by Kiwi »

Its interesting that I am in the process of completely eliminating intuition from my daily trading.

Having spent 5 years watching the market and trading it in real time (HSI, SPI, STW) I realized that my intuition about the markets, my real time execution, and my attention to operational details were not my fundamental strengths. Said another way, it had become boring and I suspected that I wasn't going to get better at it.

So, in my inimitable style I decided on a radical change.

My strengths are: understanding of the market and setups, solving problems and programming. I like newness and I love problems and the satisfaction I get solving them.

So I am in the process of automating my trading style. My first system, Peewee, was an attempt at it and didn't quite work. I ended up with something that I didn't really like but it had a nice profit factor and even on really ugly markets stayed above 1.5 so I implemented it. I've been live on it for 2 weeks now and I'm getting kinda fond of it. While I work on Popsicle, Peewee trades HSI. Every so often TWS pipes up and says "Trade Entered" and I check to see what happened and whether it looks ok. I no longer jump each time this happens. In the first week I intuitively interfered with it about every second trade but after 3 days I realized it was better off without me so now I let it go.

And the damned thing makes money almost every day. I now reserve my intuition for generating ideas to test and program. Once they're implemented I just let them go.

Hi Kiwi, definitely something I wish I could do as well if I could program. I know in the back of my mind programming will be a requirement for trading and its a matter of me dedicating a few years to learning it.

I did notice you have been discussing your system frequently hence the realization I had that you had probably adjusted your trading. Quick question regarding your current execution... is your system able to place complex order types? Im actually with a buddy of mine as I write who is backtesting a few things related to the Dax and Euro Stoxx 50 but the platform he uses can only do market orders for entry. Do you know of any retail platforms available that could also implement smart order types?

[Kiwi]

How smart?

I currently use limit and stop-limit entries with OCO brackets to protect the order and limit adjustment to exit on trailing profit capture (rather than stops because hsi can be so thin). I think the Sierra Chart team would implement anything that we could make the case would be useful to a reasonable group of customers.

I'm using SC to drive Interactive Broker's TWS but it can be used with other platform. I write my systems as dlls using C++ but you can also design systems using the SC worksheet interface. Worksheets will never be quite as flexible or efficient as a dll though.

The most important element of this change has been that I no longer attend to the market real time and I don't feel any guilt/blame/pain when the system makes a suboptimal decision ... its just statistics in action.

[Soultrader]

Thanks Kiwi, those are actually what we were looking for. OCO bracket orders and stop limits. In addition I would be interested if system trades can be made depending on the offer and bid sizes.

Its unfortunate IB no longer accepts Japanese citizens due to the FSA wanting locals to trade Japanese markets only. Will need to establish an offshore entity and create an account as an institution for IB. That would probably put me under the radar with the tax agency here.

[Kiwi]

Yes. You can create any combination of factors from the data available.

I have found three things:

- I can out trade my systems because my visual perception is better than my ability to code it but I can't trade 2 different strategies on 4 different markets (short time frame) at the same time.

- I am using more indicators simply because some of them generate a good summary that is equivalent to what I am looking for by eye (they simplify programming)

- People talk about systems that are adaptable and frequently mean automatic adaptation (use AR or ATR say) but markets don't change in a nice linear fashion, they move in jumps so my adaptation will consist of periodically reviewing the main variables to see if they should change because the way that market participants are acting has changed.