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5 Steps to Choosing the Right Tools and Building Intuition for Smart Trading Decisions

Trading is becoming a popular choice for additional or primary income for more people every day. On the one hand, trading is a fairly level playing field, in the sense that anyone is welcome to join the game. And, for those who prefer a less sedentary 21st century lifestyle, it’s a profitable activity that can be managed and performed from anywhere in the world. On the other hand, trading is a complex field and requires plenty of focus, information, and decision-making talent.

Personal finances should not be taken lightly. Most amateur or part-time traders today look for relatively safe deals that will make them some additional income on the side or grant them financial independence in the long-term. While all of this sounds pretty straightforward, it’s a little more complicated and learning the ropes takes years of study and practice, along with following information from markets daily and hourly.

Decision making skills and having the right information are perhaps the most important factors to successful trading. The constant demand to make a decision, and sometimes within a very limited time frame, can be tiring and can lead to bad calls. Although there is no sure-fire formula to make all the rights calls, there are a few things experienced traders recommend for keeping your focus strong and your decisions effective.

business person phone - 5 Steps to Choosing the Right Tools and Building Intuition for Smart Trading Decisions

Use the right tools


Obviously, you’ll need to choose a trading platform that you’re comfortable with, but that’s just the beginning. Unlike professional brokers, most people simply don’t have hours on end to spend on charts, analysis, and strategy every day. Thankfully, in today’s day and age, there are plenty of tools available to cut down that time and give anyone plenty of information to make the best possible decisions at any given time.

There are far too many and varied tools out there today to list on just one page, but understanding concepts like spread indicators and finding the right charts and software to aid you in trading decisions are both a must. Most such tools use the same sources of information and often the same or similar techniques. Finding the ones right for you is more of a matter of trying them out and finding the right fit than finding what’s “right” or “wrong”.

Experience is the best school


Unlike most other financial sector practices, no university degree is necessary or essential when it comes to trading. But experience is a top prerequisite for successful trading. Your experiences may be your most valuable asset when it comes to trading. Most traders keep a meticulous trading journal. Daily information and market stability are certainly helpful, but learning from trial and error and keeping careful records of those plays will quickly show you patterns, allow you to recognize familiar trading scenarios, and help you make good, fast, profitable decisions.

Some people may find trading highly stressful and we’ll discuss how to get rid of that stress a little later. Psychologically speaking, there’s a little something that’s called habituation – in layman terms, habituation are events and situations that we become accustomed, and hence less sensitive, to. This can be one of the finest weapons a day trader or swing trader has, as a lowered sensitivity to the pressure of having to make quick decisions that could mean profit or loss leads to clearer thinking in those situations and better decision making. It’s all about getting used to it and this is one more case in which practice truly does make perfect. Going through the motions enough times, the decision making will almost come as second nature and, although, some people simply seem to be born with better instinct, anyone can train to do this.

Less is more

Another seeming cliche that rings true in the case of trading is the age-old notion that less is more. When it comes to decision-making in trading, this notion is true on more than one level.

First, there’s the fact that too much information can lead to either delayed decisions or even bad decisions. Over-analyzing a trade can stump a trader and even paralyze trading for hours or days. Even professional traders occasionally work themselves into a state of overthinking by swamping themselves in loads of information. In time, most traders learn how much is enough to make a call and this, again, is something everyone learns from experience and practice.

Next, most amateur or swing traders look for the best deals and invest a larger portion of their trading budget into those deals, thinking they’re saving time and making a greater profit from this strategy. This too is most often the wrong way to go, especially in today’s frequently volatile markets. More experienced traders will often go for a larger number of smaller trades and only an occasional large one. Less is more in terms of how much you choose to invest in trades and the diversity of your picks as well.   

Overall, look to declutter your trading techniques and strategies in every way possible. From the tools you use, to the charts you use and indicators and other information you follow. Look to trading communities and tried and true software to help you discover what works best for you.  

Learn to bounce back


Through all of the trial and error you might go through, one of the most typical results is people just losing confidence and giving up due to a series of bad trades. If you follow steps 1 to 3 listed here, that shouldn’t happen or shouldn’t occur in a way that’s so damaging it will make you want to call it a day. But nothing is ever a sure thing in trading so, should you run into a rough trading patch and find yourself wading in pools of self-doubt, take a little time and then bounce right back.   

Refer to your trading journal and take some time to understand what went wrong. Your mistakes or volatile market periods are where you will gain the bulk of the experience we mentioned earlier. In the long run, these rough patches and mistakes will be exactly what makes your trades more successful in the long run.  

And do take a break. Accumulating losses or continuing a streak of bad decisions as you’re trying to understand what went wrong won’t be good for your finances or your state of mind. Everyone has a bad streak. It’s important to understand what happened and why to be able to bounce back at all. But bouncing back, eventually, is always the best decision you can make.

Keep learning and use your intuition


When all of the above is combined and used properly over time, intuition grows and will kick in. Keep following charts, indicators, information, and keep learning. But also learn to trust your intuition, especially in those critical moments when you have a very limited amount of time to make a call.

Given enough time, you might also develop strategic intuition. Learning and experience, after all, leads to expertise. While learning to make good decisions in trading is what leads to profit, there’s nothing more important than learning when to stay away from a trade. Following market trends and information every hour of the day will be both helpful and stressful. Sometimes there just isn’t enough time to look into it all and there will be minutes or even seconds to make that decision. Past experience and a good, old-fashioned gut feeling may be all you have to rely on to prevent profits from turning into losses.

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