Praise for Trading from Your Gut

123
From the Library of Daniel Johnson

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ptg
Training the Right Brain
Master traders have learned to be comfortable with the simplic-
ity of trading because they have trained their right brains to see the
big picture—the forest as well as the trees. Master traders know that
when they have prepared well, they can trust their decisions to their
intuition and gut. They are comfortable letting their right brain
dominate in certain types of decisions. 
Master traders also know that many examples exist of simple
phenomena that result in seemingly complex patterns. They are
familiar with the way that markets display emergent behavior, and
they have trained their right brains to recognize the signs of possible
turns in market behavior at the earliest moment. They are able to
respond to the market as it changes because they do not have their
ego tied up in some rational prediction of what the market will do.
They care only about what the market has done and what that means
for their present course of action. The exact form the future will take
is unknowable, and master traders are comfortable with that.
So how does a master trader train his right brain? In a word:
practice.
As in artificial neural networks that need to be trained to pat-
tern-match effectively, real neural networks in the right brain also
need to be trained. This training should come in two different areas:
pattern matching and environmental characterization. You need to
train the right brain to recognize the patterns you seek to find for
your trading, and you need to train the right brain so it can see the
big-picture relationships among all the various market data.
124
T
RADING FROM
Y
OUR
G
UT
From the Library of Daniel Johnson

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ptg
The best practice for trading is trading itself. This is one of the
reasons I recommend swing trading. You get a lot of opportunities to
consider trades. Because you are concerned with market behavior
during a much shorter period of time, you get more practice. Every
time you make a decision to take a trade or pass, you are practicing.
Even when the markets are slow, you can generally find opportuni-
ties to trade several times a month. This provides much more train-
ing than a longer-term trading style in which you might trade only a
few times a year and good trades might last for months.
Fortunately, the typical process for trading is one that offers
excellent practice for the right brain. Most of you already utilize a
process such as the following one, which means you understand that
how you approach each step is more important than the steps them-
selves. The essential steps for this common process are the following: