“Intuitive” traders are not widely recognized as a particular strategy or category, but many traders do fit into this mold. Intuition makes use of “non-sequential information-processing mode,” or, in other words, intuitive decision-making makes use of information acquired through associated learning and which is then accessed unconsciously. For the intuitive trader, the processes of sensing, feeling, or having a gut reaction are ways that intuition plays out in the investment decision.
While it’s easy to dismiss intuition as ungrounded in the realities of the financial world, in actuality its combination of knowledge, information, and past experience are no without merit. Intuitive traders tend to look at some charts and figures, and especially at company fundamentals, but they trust their gut reaction to determine which stocks to buy and sell and when to complete their trades.
Intuitive trading gets very little respect from the broader world of finance, but it’s likely that most traders make use of intuition in some way or another.
One of the worst things that a trader can do is to rely on intuition without having significant experience. Intuitive trading is the height of trding as an art form. Only those traders with years of successful experience should even consider trusting a gut reaction when making a decision. Those traders without sufficient knowledge are likely to end up in a losing position.
Beginning traders who attempt to trade on intuition tend to lose about 95% of the time, as their emotional responses are based on irrationality. For that reason, beginning traders are much better served by utilizing a solid price-analysis based trading approach, potentially incorporating indicators and technical analysis as well.
Those intuitive traders with substantial experience and expertise, on the other hand, may be able to trust their reactions to make quick and conclusive decisions. Still, they are also liable to be incorrect. The key for the successful intuition trader is to recognize when a reaction is accurate and when it is merely wishful thinking or guessing.Price Action Traders