This weekend Miss Dirty Dog and I were in Koh Samui looking for potential wedding venues. At the airport I bought a book called ‘Blink’ by Malcolm Gladwell and read it over my trip. This book (which was written by a journalist and hence given rave reviews newspapers) describes how split-second decisions are made. Apparently it is something to do with our body’s natural ability to assimilate a small amount of data subconsciously and extrapolate it to come up with an accurate conclusion which our conscious mind would take a lot more data to achieve. It is about how we develop ‘hunches’, or more scientifically, ‘thin-splice’ events. Think of the mother who always knows when his son or daughter is telling a fib, extremely skilled businessmen who always seem to do the right thing, detectives who can follow their noses correctly, art historians who can spot fakes despite being presented with near perfect replicas just because it ’seemed’ like the right decision at the time. Now think of a good trader. A good trader always seems to make the right trades. Their brains and bodies have been tuned to such a degree that they somehow pick out the right signs when presented with only limited information. Now think of all the screwups that people make – police shooting the innocent, people who get convicted for crimes they didn’t commit, investments that go wrong etc. etc. This is ‘thin-splicing’ at its worst – when your body leads you the wrong way and you make the wrong decision.
As a trader, wouldn’t it be great to tune your body to such a degree that your subconscious body can nudge you in the right direction of a trade? Hell, you’d be like a Jedi Knight! Well guess what? There are a few things you can do to help get you on your way. The most obvious is just to practice. And I don’t mean doing paper trades, I mean trading with real money. Because there is no other substitute. The more you do it the more you will get a feel for what works and what doesn’t. Take me for example – I’m not a particularly great technical intra-day trader, but I believe that I am fairly good at making strategic long term decisions because I’m a stubborn fella and I like to track and nibble at stocks even if the trade goes against me. I’m also good at spreading my risk around and protecting my capital. So I trade according to that style and over time I will continue to refine it more and more.
So here’s my tip: ask yourself what kind of person you are, get together some money and just start trading. Then when a trade goes against you, ask yourself why you did that trade? Try to understand how your body ‘thin-spliced’ the information you had in order to get you to make the trade. The more you understand it the more you will be able to nurture it.
