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Limbic Ranking and Preferences
The kind of signal you get from a properly trained right brain
often comes that way—as a feeling. The limbic system is responsible
for these feelings, which are part of its evaluation and preference
mechanism. What course or option do you prefer? What kind of
food do you want to eat? What color pleases you? What smells bring
good thoughts? This same preference and ranking system is often
used to rank your preferences based on right-brain thinking that
takes place outside of conscious thought.
Sometimes you are inexplicably drawn to something or some-
one. Or you might find that you have a strong aversion to some
object, smell, or person without any conscious explanation. You
might say that you got “bad vibes” or “good vibes” from someone or
a particular place. Other times, the work of the right brain connects
directly to your conscious thought. It generally does this by bringing
your attention to some thought or item that your senses have just
seen or heard. The right brain performs this activity very well. It
observes and notices. Bottom-up thinking often produces observa-
tions—fully assembled pieces of thought characterized by causative
or associative connections between various phenomena. 
You might notice that a particular phenomenon tends to pre-
cede another phenomenon. For example, you might notice that
budding of the trees tends to precede the coming of the spring
rains. You might notice that a certain coworker tends to come into
work late on Friday mornings and that the weekly poker game at his
apartment is on Thursday nights. You notice a potential causal con-
nection between the two phenomena.
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When trading, you might observe something and note to your-
self, “That’s odd. It seems like when there is a vertical run-up in a
stock, there is often a gap down right near the top.” These conscious
observations are easy to handle. They interface with our linear left-
brain thinking quite seamlessly.
The feelings you get from intuition outside our consciousness
are more difficult to handle for left-brain-dominant people who
always seek an explanation for their actions and thoughts. They
often need to be able to connect the dots between conscious
thoughts to make a decision.
Contrast this with the way the very best athletes use their intu-
ition and subconscious to move without making conscious decisions.
Sports legends at the top of their game often talk about moments of
“flow” or times when they’re “in the zone.” On these occasions, time
seems to slow down and their play seems effortless. Talented players
who find moments of flow often have practiced for years, so their
motor skills centers and their nervous systems already know how to
do what needs to be done to perform well. 
Invariably, conscious decision making
gets in the way of peak performance.
Invariably, conscious decision making gets in the way of peak
performance. However, the skills gained through years of training
can come out if athletes are willing to release control of their bodies
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to their right brains. When an athlete has trained hard and has
played often enough, the right brain already knows what to do. Con-
scious decision making isn’t necessary; it only slows things down.
Juan Fangio relinquished his driving to his instincts while rac-
ing. Besides the 1950 Monaco Grand Prix, Fabio famously avoided
crashes in three other races. In two of them, he went on to win the
race. He was able to deduce the other drivers’ intent and skill level
through tiny movements of their vehicles. He knew when they were
getting into trouble before they did. This helped him avoid other
accidents because he could anticipate them and react quickly to
them without thinking.
In the 1953 Italian Grand Prix at Monza, Alberto Ascari and
Nino “Dr. Giuseppe” Farina were leading Fangio on the last lap.
They both tried to pass another driver and were forced off their line
during that attempt. They both crashed as a result, and Fangio, fol-
lowing directly behind them, was able to miss them to take the lead
and victory. 
The 1955 Le Mans race was a famous tragedy. Lance Macklin’s
Austin Healy swerved to avoid a Jaguar that was stopping for a pit
stop. The Jaguar—with the new disk brakes—stopped much more
quickly than the Austin Healy, which had only the older drum
brakes. Pierre Levegh crashed his Mercedes from behind into
Macklin’s decelerating Austin Healy. His car disintegrated and flew
into the crowd, killing 80 people. Fangio was following close behind
Levegh and was able to avoid the Jaguar and the crash, to continue
to safety.
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On the second lap of the 1957 Monaco Grand Prix, Stirling
Moss crashed into a barrier while holding the lead. Mike Hawthorn,
Peter Collins, and Fangio were following close behind. Hawthorn
and Collins piled up one after the other, but Fangio managed to
steer clear of all three cars that crashed ahead of him. Once again,
Fangio went on to win the race and, eventually, the overall Formula
One championship for the year.
Some people might think that Fangio’s uncanny ability to avoid
crashes was the result of superior reflexes, but Fangio was much
older than the typical driver. He hadn’t started driving Formula One
until he was 38 years old. He was 45 in the 1957 Monaco Grand
Prix. Fangio didn’t have superior reflexes; he had superior instinct
and intuition.
These same principles apply to world-class trading. Master
traders train and study to educate their right brains so they, too, can
have superior instinct and intuition. Because they have an experi-
enced sense of intuition, they know they can trust their gut. This
gives them a decided edge when danger comes, or when market
opportunities arise that require decisive action.
In upcoming chapters, I show how you can develop your gut
instinct and improve your trading through proper training so that
you, too, can become a master trader.
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From the Library of Daniel Johnson

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CHAPTER 6
Trading Smarts
“Intuition and concepts constitute…the elements of all
our knowledge, so that neither concepts without an
intuition in some way corresponding to them, nor
intuition without concepts, can yield knowledge.”
—Immanuel Kant
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When I started trading, Richard Dennis trained me in methods
he had carefully researched. Then he gave me a $2 million trading
account to manage after only a month of trading a smaller practice
account. I was lucky. 
Most of you reading this book won’t be so lucky. You’ll have to
develop your own techniques.
Don’t leave your left brain behind in this process. If you want to
trade with both your intuition and your intellect, you need to pick
trading strategies that work for your whole mind. Systematic intel-
lectual traders who ignore their intuition are losing out on great
potential benefit. So are discretionary traders who attempt to bypass
or override their intellect—those who neglect to provide a firm
rational basis for their trades.
Every trading method should be grounded
in a firm intellectual framework.
Every trading method should be grounded in a firm intellectual
framework. In this chapter, I show the basis for a specific method
that I use as an example in the next several chapters. I like to start
with the basics, such as the rationale for the method, and build my
strategies from there. The first step in building a rationale is choos-
ing a type of trading method that works for you.