Did you ever watch those old Rambo movies where he was able to think quickly on his feet and perform remarkable feats? It was more cartoon than reality, but we often hold ourselves up to such fanciful ideas. We underestimate the difficulty of thinking on our feet during an emergency and believe that we could do it easily when necessary, but acting intuitively and spontaneously takes experience and practice. It’s not for the novice.
It’s hard to think under pressure. The human-animal isn’t naturally wired to think calmly and rationally. In the end, just as all animals, humans have instinctive survival skills built into their primitive brains. When we see the danger, we instinctively react with a fight or flight response. We either fight the opponent or flee to safety. There isn’t much time for thinking; the mind shuts out all irrelevant experience and blindly devotes all resources to either fighting or running away. If you live in the wild, these instincts may be useful, but they often get in the way in modern life. In the modern world, our survival depends on making thoughtful decisions.
Even when we are mundanely jogging around the block or driving our children to school, we must make careful decisions; when to cross the street, or where to park the car so our kids can unload safely should not be made on gut instinct alone. It may seem as if we make even these commonplace modern-day decisions instinctively, but actually, we honed our instincts over many years. We learned how and when to cross a street safely so that even when we are tired and pumped up while jogging, we still can do it safely.
Our parent’s incessant warnings to look both ways before crossing the street helps us cross streets without thinking today. It’s the same with the decisions we make as a trader, but unfortunately, few of us had parents who were able to warn us of some of the inherent dangers of trading; “I told you time and time again: Don’t trade during a potential rate hike!” For most of us, we needed to gain our own experience with the markets or discover our own list of warning signs that alert us to impending danger.
Developing the astute ability to make fast trading decisions under pressure takes time. Just as learning any new skill, you need to deliberately practice the skill step by step until you can do it automatically. When we try to do a Rambo-like trading feat, we will usually fail. Such feats are much like magic tricks. When you see a magic trick, it’s amazing because you only see things from your perspective. Little did you know, however, the amazing feat was practised over and over, and many times there were failures. In addition, there’s a hidden trick, like a secret door, that you don’t know about, and that’s what makes it “magic.”
It’s the same with trading. Sure, you may see or hear about a trader who saw a particular setup under ideal market conditions make a killing, but what you don’t see is how many times that trader saw these conditions before or how many times it was a loser rather than a winner. Only through experience and practice can you “think on your feet” with unfailing accuracy. Until then, it’s vital that you acknowledge your limitations. It is vital to outline a detailed trading plan. Determine where you will enter and where you will exit. Decide beforehand how you will monitor your trades and what potential adverse events may thwart your plans.
Only through preparation, proper risk management, and practice can you create the illusion of “thinking on your feet.” At some point, all traders reach the point where they can trade instinctively like a seasoned athlete, but it takes time. Until then, don’t trade like you are Rambo. Take it slow, practise, and hone your skills. You’ll find you will trade more profitably if you work at your own pace.