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Your Head or Your Gut: How to Know Which to Trust and When
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Your Head or Your Gut: How to Know Which to Trust and When

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Your Head or Your Gut: How to Know Which to Trust and When

this is a pretty good read about trusting your head or your gut.. and like most of these articles can be applied to trading and all around life..

Your Head or Your Gut: How to Know Which to Trust and When

Your Head or Your Gut: How to Know Which to Trust and When

BY ADAM DACHIS

I'd bet that most of you have at least one email in your inbox that you could respond to in less than a minute, but that you've been quietly agonizing over for considerably longer. This is normal, but it doesn't mean it's necessary. We have a tendency to think too much or too little about certain problems, and end up making dumb mistakes as a result. Fortunately, a few simple mind hacks can solve the problem.
For the most part, we're smart people. Our brains are filled with knowledge and experiences that come into play every day to help us navigate the world. Nonetheless, we frequently examine our past behavior and find problems that are rooted in some incredibly dumb choices—hence the adage "hindsight is 20/20." In the moment, we waste our time or fool ourselves into believing we're making the right decision when we're not. This often occurs because we're trusting our gut when we should be using our head—or vice-versa. If you want your foresight to be a little closer to 20/20, you need to start examining your decision-making process and compensating for your common mistakes. In this post we're going to take a look at how both your head and your gut can work for you and against you, and how to use both to make better choices.

Prioritize Your Decisions to Stop Overthinking

The Problem: The moment you start wasting brain cycles on unimportant details, such as which red tie you want to wear to work today, your brain has gotten in the way of your gut. For me, this happens most frequently in my inbox. I could often respond to an email quickly, but then I'd spend far more time nitpicking the wording to make sure I got my point across clearly and didn't say anything stupid. In an important email, sometimes a few small edits can matter. This is not the case with all email, but I didn't make the distinction. We all have this sort of problem in many areas of our lives. If you've ever spent more than a minute trying to decide what pasta sauce to buy—and with all the varieties, chances are that you have—you know how easy it is to waste time on a decision that ultimately has little to no impact on your life. It always seems stupid in hindsight, but that doesn't help you in the moment. When you don't prioritize the importance of your decisions when the need arises, you'll always end up wasting time and adding stress to your life in the process.

The Solution: Train your brain to question your thought process. To solve my email problems, I just instituted one simple rule: before I start editing any email I've written, I ask myself, "Do these edits matter?" If I can't immediately answer yes, I push the send button and I'm done with it. After doing this for a week, it became clear that those little, nitpicky decisions were a waste of time, and forgoing them meant I was back on top of my email, with no negative side effects. It made email less stressful because I wasn't overwhelmed by the crazy amount I receive every day and I felt a lot better because I wasn't worrying about something pointless.

If you find yourself wasting time on any regular decisions in your life, just start asking yourself "is this important?" whenever similar circumstances arise. It takes a little practice to get used to, but after a few days you'll remember. You can even put a post-it note on your computer screen to help. Once you start asking that question regularly, and answering it immediately, you'll have trained your brain to stop wasting time on the choices that just don't matter.

Know When to Ignore Your Gut

The Problem: Your gut can be a great aid in the decision-making process. When you go with it, you're leaning on years of experience in an instant. You're also making a decision based on a feeling you have, and trusting in yourself. This feels great, and it's even better when that decision proves to be the right one. On the other hand, always trusting your gut can get you into a lot of trouble. It's the process that leads you to eat poorly, buy things you don't really need (or even want), and sometimes completely ignore the best course of action because you know you're right.

The Solution: You're destined to make bad decisions if you always trust your gut, so you need to learn when to listen and when to ignore it. There are two ways to do this, and both involve developing the habit of asking the right questions—both to yourself and others.

The way my guy tries to lead me astray most often—and I'd guess this is the case with most people—is when it comes to buying things and eating poorly. When a shiny new gadget or chocolate cupcake is right in front of your face, it's hard to trust anything but the sudden desire provided by your gut feeling. This happens because you're defaulting to a bad question: "Do I want this thing?" Of course you do. The trick to getting around these impulses is reframing the question by asking yourself if you want what you're going to lose. When presented with the prospect of a new smartphone, don't ask yourself if you want it. Instead, pretend a stranger is offering you $200 and the freedom to choose any cellular carrier. In the case of food, pretend that same stranger will give you health and even fat loss. When you reframe the question by focusing on what you're going to lose, you're able to have a gut reaction to that loss as well. You'll generally have the answer you want by going with the strongest feeling.

Your gut doesn't stop there. It's capable of screwing you over by causing you to believe you're right when pretty much everyone else can see that you're wrong. This is due to a phenomenon called illusory superiority, which a fancy term to describe how you think you're a lot better than you actually are. Because we all think we're pretty great, and that can't be true 100% of the time, it's better to just assume you're below average. (Derek Sivers, the founder of CD Baby, found this worked great for him.) Doing so will cause you to ask more questions, question yourself when you need to, and listen better to others. This way you can avoid the negative effects of illusory superiority and the problems your gut can cause when it leads you to believe you're right at the wrong time.

dont believe anything you hear and only half of what you see

¯\_(ツ)_/¯

(╯°□°)╯︵ ┻━┻
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heuristics and biases


There is a good deal of scholarly work around intuition and when and when not to trust it when making decisions under uncertainty (pretty much the definition of trading!)

I suggest reading Thinking Fast And Slow by Daniel Kahneman. This summarises 20 years of work with his collaborator Amos Tversky. This is mainly experimental psychology which exposes the mental short cuts we all tend to use.

Their best known work is prospect theory which challenges the rational model in individual decison making.

Read this and you will never trust yourself again!

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mokodo View Post
There is a good deal of scholarly work around intuition and when and when not to trust it when making decisions under uncertainty (pretty much the definition of trading!)

I suggest reading Thinking Fast And Slow by Daniel Kahneman. This summarises 20 years of work with his collaborator Amos Tversky. This is mainly experimental psychology which exposes the mental short cuts we all tend to use.

Their best known work is prospect theory which challenges the rational model in individual decison making.

Read this and you will never trust yourself again!

I found it interesting in "Thinking Fast and Slow" that according to their extensive data the majority of time people listening to their gut is wrong. That rubs against the grain of most our perceptions and was eye opening for me.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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Yes many of the findings are counter-intuitive. But that supports the notion that the majority of traders fail. To win you have to train yourself not to be like them.

I think there is an edge in developing a 'counter' perspective, whereby you question everything in your trading (and by extension your life). I use a mantra to jolt me into this way of thinking (it's so easy to slip back into being a human!) "believe nothing, trust no one". After reading this and other related material I also include myself in the 'trust no one'

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mokodo View Post
Yes many of the findings are counter-intuitive. But that supports the notion that the majority of traders fail. To win you have to train yourself not to be like them.

I think there is an edge in developing a 'counter' perspective, whereby you question everything in your trading (and by extension your life). I use a mantra to jolt me into this way of thinking (it's so easy to slip back into being a human!) "believe nothing, trust no one". After reading this and other related material I also include myself in the 'trust no one'

Very true. From my past experience when it comes to trading or investing my "gut" has gotten me into nothing but trouble.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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mokodo View Post
"believe nothing, trust no one"

this reminds me of a quote in our family: 'dont believe anything you hear, and only half of what you see..'

dont believe anything you hear and only half of what you see

¯\_(ツ)_/¯

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Fwiw

I have found trusting

Price
My eyes
My ability to act in my own best interest

Most beneficial


I don’t know crap – so my head is worthless… and my stomach’s primary purpose is to alert me when it’s time to eat

=================================================================

Of course trusting price flies in the face of what most believe…., after all isn’t the mkt out to get little ole me….


It darn sure targets my stops and hits em….
It head fakes me into exiting and entering repeatedly, and usually for a loss
And it sure as heck is solely responsible for me panicking and exiting a winner way before it reaches my target, consequently causing me to miss out on all that profit

Trust price you say RN…. HA you’re full of it - say I
===================================================================

My only retort

Price can be your trusted friend – one that helps you achieve all that you desire

OR

Price can be a distrusted enemy – one who undoubtedly, and unwaveringly assists in your demise


Tis a choice after all


RN

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