It doesn’t make sense to neglect the amazing processing power of half your brain just because it may not be easy to understand how it arrives at its “decisions.” Our intuitive brain can be a very effective tool for trading.

Ideal for Forex

This is especially relevant to the retail forex trader who is trying to build a small account into a large one. For this type of trading, a swing-trading approach can offer the best risk-reward ratio. The wins are large enough to compensate for the relatively high cost of trades due to the spreads in the retail forex market. It can be too hard to overcome the losses due to spreads using very short-term strategies.

Long-term strategies involve too much risk and can make it very likely that the smaller forex trader will end up losing too much trading capital because of the required distances between entry prices and stop prices.

A swing trading approach is better because it offers enough profit to overcome the cost of the trade due to spreads while allowing a reasonable risk level for each trader. This will keep the risk that you lose too much of your account on each trade lower.

One of the problems with a swing-trading approach as compared with a longer-term approach is that it is more difficult to build and test an automated trading strategy. It’s harder to get the data in a reliable format; it is also harder to execute an automated strategy because of limitations with the typical retail forex-trading platform. Likewise, there are many trading ideas that are difficult or impossible for the typical trader to implement as a concrete set of rules using today’s software trading tools.

Fortunately, when you use a whole-mind trading approach, you can supplement the rules of your strategy with decisions that rely on intuition and the right-brain’s big-picture approach to information processing. For example, you might decide to buy a particular pair, say the USD/SGD pair, if the SGD is displaying greater strength against the USD than the other major currencies, the GBP, EUR and JPY. The rationale for this approach is that you want to filter out moves that are due mainly to fluctuations in the USD rather than the SGP.

While it might be possible to build a specific set of rules to determine the relative market strength using left-brain analysis, this is a task that is better suited to the pattern recognition and big-picture capabilities. A quick look at four charts will help you determine which of the pairs is the strongest. A visual approach is both the quickest and the easiest to implement.

Visual Psychology

A visual approach has other benefits.

Price is determined by the psychology of the market participants; i.e. the other traders. If everyone believes that a particular price is low, this will cause prospective sellers to hold out for a higher price. In turn, prospective buyers will be willing to pay this higher price. So the price will go up.

A visual chart-based impression can be a valuable addition to your trading strategies for this reason. Most traders use charts in their decision-making. This means that charts represent information in the same form that the other market participants use as the basis for their psychological impressions of the market. A chart is a very compact description of the state of the aggregate psychology of the other traders in a given market.

Whole-Brain Trading

Both discretionary traders and systems traders can benefit from whole-brain trading. The two brain hemispheres working in concert are more powerful than one hemisphere alone.

The best systems traders have learned how to draw upon the intuition and pattern recognition abilities of their right brains in the development of new trading ideas and to build strategies that are impossible without the use of human intuition. And the best discretionary traders have learned how to use left-brain analysis and logic to build a better framework for their mainly right-brained trading methods.

We have two brain hemispheres. Use them both for better trading.

Curtis Faith