Praise for Trading from Your Gut


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Curtis Faith Trading from Your G

Whole-Mind Learning
In the human brain, these functions build on each other, with
each half taking its turn and then passing off the results of its func-
tion to the other hemisphere. Let’s now consider how beginning
traders learn about trading patterns. 
Figure 2.1 represents the ideal or model for the double-top pat-
tern. It shows a significant rise in price, then a pullback, and then
another rise in price that reaches the same level as the previous top.
This will be the pattern that traders have in their heads when they
think about the double-top pattern.
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The Double-Top Pattern
FIGURE 2.1
The double-top pattern
Now look at Figure 2.2. Each of the three examples in this fig-
ure is similar to the model for the double-top pattern, but each dif-
fers in an important way. Examples A and B show an initial top
followed by a second, higher top. Examples C and D show an initial
top followed by a second, lower top.
From the Library of Daniel Johnson


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FIGURE 2.2
Potential double-top patterns
For traders who have been supplied with only a description of
the idealized double-top model, it is not easy to determine which of
these examples might be a valid double top. That is because they do
not understand why a double top is important, nor do they under-
stand the implications of the price movement on the psyche of the
market participants. Therefore, it is difficult for such traders to
decide whether a particular price formation that does not exactly fit
the model is indeed a double top.
Much as the neural network must be trained by sample data
with associated category ranking, human intuition must be trained
with examples and an associated valid ranking. The examples and
their rankings that you have in your mind must be sound for the
resulting intuitive analysis to be valid. For example, if you don’t have
a good idea of what represents a double top, you won’t be able to
intuitively assess the presence of a double top in the future. Your
right-brain intuition is only as good as the training it receives. Peo-
ple need to use both the left and right brain to learn. You need the
ranking and analysis of your left brain to make sense of the patterns
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From the Library of Daniel Johnson


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you use to train your right brain. With the correct analysis and men-
tal framework from your left brain in place, your right brain will be
able to do what it does best: recognize patterns and situations.
When master traders use their whole mind to trade, they alter-
nate between analysis and ranking from left-brain and right-brain
intuition in a cyclical fashion. Optimal learning involves a continual
iteration between the two hemispheres. For example, as traders
execute new trades and gain more experience, they will continu-
ously notice patterns in trade performance and market pricing using
their right brains, and these patterns will cause them to have ques-
tions. They will then use their left brains to formulate ways of
answering those questions that will likely include tests, analysis, and
linear thinking that the left brain is very good at. However, during
this process, the right brain will have plenty of opportunities to take
notice; this might bubble up to the surface of consciousness as a
feeling that a particular pattern being presented is important, and
the left brain will then try to rationalize this feeling. If the left brain
is unable to do so, left-brain-dominant people will often discard the
feeling as irrational. However, right-brain-dominant people will pay
more attention to the feeling; they might even act on it without an
explicit rational, linear, left-brain reason.
Traders who use their right brains will be more creative and will
develop more novel ideas because of their willingness to act on feel-
ings without an explicit rational reason. This can be very beneficial
during trading research when the rationale for a particular trading
idea or pattern might not be obvious ahead of time. The feeling that
an idea will pan out gives the right-brain trader sufficient will to per-
form the often tedious work of cold analysis required to validate a
trading idea using the left brain.
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From the Library of Daniel Johnson


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Traders who use their right brains will be more
creative and will develop more novel ideas because
of their willingness to act on feelings without
an explicit rational reason.
At the same time, inexperienced right-brain traders are suscep-
tible to acting on ideas based on feelings drawn from erroneous
principles because they have not sufficiently trained their right
brain in proper trading principles. They have not yet supplied the
right brain with enough of the raw material required to make proper
judgments. For this reason, the gut reaction of the novice trader will
often be wrong. 

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