it's the old dilemma theory vs. practice. Of course we need both. A solid mental frame of "what's going on" in your inner, subjective experience during trading could guide you to make smarter decisions.
I opened this thread because much of what we have to do in order to access to our finest thinking is counter intuitive. Practice and common sense won't be enough.
Here some insights:
- our brain is a powerful computational machine. Each of us have, theoretically, a supercomputer at it's service in his head.
- because evolution, our brain "energy saving" policy is always on, at the maximum setting, all the time
- like some modern CPU, we also have 2 thinking circuits: one is fast, dumb, and use little energy and no effort at all. One is slow, smart, but need a conscious effort to be used (how much is 2+2? and 45x97?)
- for best trading results, we must to learn how to systematically rely on our slow thinking, until this become spontaneous
- we CAN'T get rid of the fast thinking, and we will still use, 99% of the time, the fast thinking for everyday little decisions
- so, the best way is to adopt a multiple strategy, including life style changes, deliberate effort, be conscious of what thinking circuit are we using, and specific tricks that can automatically activate our slow thinking
- life style changes: send a steady flow of oxygen and nutrients to your brain. Proper sleep, nutrition, exercise, yoga.
- life style changes2: preserve your energy for your trading session: any effort, choice, act of will, even bad mood, will deplete your mental energy.
- deliberate effort: actively practice mind challenging activities. The best activities are those that can be solved specifically though the use of your slow thinking. Puzzle magazines, enigmas, sudoku, cross words, chinese grammar, you get the idea.
- be conscious: develop the habit to ask yourself, during the day, which mental circuit are you using in that specific moment. In this way it will be easy for you to recognize both of them, and you will not be fooled so easily by rush suggestions coming from your slow circuit
- specific tricks. It feels familiar. It feels good. Path is known. No dangers around. Mental defenses can be deactivated. Fast thinking will probably be enough in this situation. This is, roughly, the one of the mental path your brain follow in every situation that is mentally challenging. The other sounds more like this: something unknown here. Potential danger. Looks bad. Stay alert. Rely on slow thinking for a while, instead the autopilot. It's upon you how to configure your office, desk, trading software, charts and computer desktop in order to find the right balance between efficiency, completeness of analysis, and some odd elements around in order to help keep you mildly discomfort and so more naturally alert.
- specific tricks2: be emotionless. Emotions turn on your fear, that activate the fast thinking areas and bias you to rely more on rush decisions. Lower your leverage until you feel perfectly comfortable with the amount at stakes, remember yourself that one single trade is meaningless in the big scheme of things (we are searching for statistical profitability), practice with penny's accounts (or virtual accounts) and grow ONLY when you feel the emotion is not affecting your thinking flow. Review your trading journal from time to time to see if there's still signs of emotional bias in your trading decisions, and take the appropriate measures in order to eliminate that bias.
I hope this will help you find some extra mental-horse-power that we all need on our quest for the Holy Grail of consistent profitability.