From the August 01, 2010 issue of Futures Magazine • Subscribe!

Trading From Your Gut

Trading From Your Gut: 

How to Use Right Brain Instinct & Left Brain
Smarts to Become a Master Trader


By Curtis Faith

FT Press

$24.99; 202 pages

Curtis Faith was one of the original 23 Turtle Traders trained by Richard Dennis and William Eckhardt, and he earned more than $30 million following this strategy. He wrote about that experience in his prior book "Way of the Turtle." He says that he penned this latest book because of the lack of published information about developing trading intuition. This book offers a glimpse into the human brain that most traders probably ignore out of lack of knowledge.

Faith says that over thinking can harm trading performance. According to Faith, many traders do not perform to their potential because they use only part of their mind -- the analytical and linear conscious mind of the left-brain hemisphere. They use their intellect but not their intuition. A trader’s goal should be to use his/her whole mind while trading.

He explains that the right brain excels at reading patterns and interpreting their meaning. Also, it is good at generating ideas and recognizing opportunities. The left brain, on the other hand, involves thinking consciously and can build models. Faith believes that whole brain thinking is optimal. In trading, avoiding risk will prevent you from being a good trader. Also, traders should not feel that they need a ton of data to make good decisions, as much of it is irrelevant.

Faith warns traders not to treat the market as entertainment since much of the time the market is doing nothing. More importantly, he points out that traders need a good risk-reward ratio to make consistent profits.

The key for traders is to accept many small losses so that they will have the opportunity to have a few large winners. This mindset requires traders to persevere in the face of difficult market conditions. Simultaneous offense and defense is important to preserving principal.

There are some market conditions that call for defensive trading, and some that call for patience, while others call for aggressive persistence -- this is a critical trait that must be mastered. Therefore, each trader must develop his/her own reasons for making specific trades.

Faith points out that the greater the bid/ask spread in a possible trade, the greater the uncertainty -- so caution needs to be observed.

When an athlete has trained hard and has played the game long enough, the right brain already knows what to do. That is why master traders train and study to educate their right brains. Swing trading, not day trading, is the most viable option for traders, as trades typically last only a few days. Faith believes that part of trading is derived from simplicity, not complication, and from seeing the big picture.

Leslie N. Masonson is author of "Buy--Don’t Hold" and "All About Market Timing." Reach him at lesmasonson@yahoo.com

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