This is a Guest Post by AK of Fallible
AK has been an analyst at long/short equity investment firms, global macro funds, and corporate economics departments. He co-founded Macro Ops and is the host of Fallible.
 

Today we’re going to answer the question, should you trust your instinct when trading? And we’re going to use Wendy Rhoades and Taylor Mason from the show Billions to do it. By the end of this video you’ll learn how your instinct can either take your trading to the next level or cost you a ton of money.

Intuition is developed from the patterns you unconsciously notice. Over time you start automatically seeing that certain combinations of inputs, produce certain outputs. But this all happens in your subconscious mind. These patterns aren’t overt enough for you to understand and explain. And because of this mushy, indescribable nature of intuition, people usually question whether it’s real and if they should trust it. But intuition is exactly what you need when you’re dealing with a complex system like the market.

Think about what the market really is. It’s made up of billions of transactions happening every second of every day. The complexity that comes from this is pretty much infinite. It’s impossible to fully analyze and define every aspect of the market like a computer would try to do.

Okay, now think of about your brain for a minute, another infinitely complex system. Is it possible to logically list and analyze every conscious and subconscious process that leads to the feelings and intuitions we have?  Of course not.

But it does makes sense to use this complex system that we have — our brain — to analyze this other complex system — the market. There’s a ton of stuff going on in our heads behind the scenes that we don’t know about. So really it would just be dumb to completely ignore the results of the complex analysis our brains can do. And that’s why it’s very important to use your intuition and instinct in the market.

BUT… there’s a huge caveat to all of this. Like I said, your intuition can either make you really rich or cost you a ton of money. So make sure you watch the video above so you don’t use your intuition the wrong way and go broke!

And as always, stay Fallible investors!