Visually Compelling TA

Garry Kasparov discusses Intuition in chapter fourteen of How Life Imitates Chess. Intuition is a powerful force of recollected knowledge. You cannot ignore it and cannot fully explain it. It is the indispensable product of our experience, our knowledge, and our will to know and do more. The power of intuition and the ability to harness it and to use it like a master is at the heart of success. A well-developed intuition is used to distinguishing between an anomaly and a movement. Kasparov even uses an investing illustration. "Stock analysts search for visual patterns in stock charts ... the way chess players look for checkmating patterns. Intuition tells us not just what and how, but also when."

Many market observers speak often of fear and greed moving markets. Fear and greed are emotions that cause traders to step out of logical behavior and into irrational behavior. When we are trading on emotions such as fear and greed, we find we are suppressing not only our objective measures of the market, but also are suppressing our intuition.

Let's say we have our favorite overbought/oversold technical indicator and commence trading on its signals. We are trading objectively. But there are times when we will hesitate on these triggers. Once we pause and check our emotions to consider if fear or greed has led to the hesitation we look further. Is this the expected price movement the indicator was devised to capture? Is this an anomaly giving rise to a false signal? The answer lies in our experience, our knowledge and our drive to know more. Skillful use of this indispensable force of recollected knowledge is a key of successful investing.

Comments: View Comments |  Saturday September 6, 2008