Trading requires balancing emotion and reason, not eliminating feelings. The speaker draws on David Hume and neuroscience to argue that thinking itself depends on emotion, and that intuition works as unconscious pattern recognition when markets move too fast to deliberate. Emotional regulation and mindfulness let instinct and reason work together.
Have you ever just known something, you just had this gut instinct that said, this is the time, this is the place. But then you're all taught never, never, never to act on intuition, on gut instinct, it's all reason. Yet when you look back, you go, you know, if I'd only listen to that gut instinct, that quiet little voice, it would have been a heck of a lot better. Yet we are taught to take emotion out of it, instinct out of it, and use only reason.
And ultimately what you discover, that's not possible, it's not possible at all. David Hume, 18th century Scottish philosopher, said, reason.
Is the folly of your emotions.
Today in neuroscience, what we know is that all thinking is emotional state dependent. The difference is emotion is enormously instinctual compared to reason. And if what you really notice is that reason sits up here, instinct sits here, and what we're told to do is to use only reason, as if trading was reasonable and we assume that we can be a rational human being, the truth is we are not rational human beings trying to control our emotions. What we are is emotional beings trying to become rational. Now, if you take it from that standpoint, you say, well, what I really need to be doing is managing the reason, but I need to be able to manage the emotional instinct also.
This is where it becomes powerful, because ultimately you discover is that in being able to say it's both reason and instinct, it's both reason and emotion that I need to pull together, to work together. That's when you discover, like what an Einstein said is that the intuitive mind is the gift.
The rational mind is the fateful serpent. In today's world, we've got it backwards. We've made the servant master. What we need to do is we need to say, the truth is, there's different types of learning, there's different types of knowledge. Reason is one kind of knowledge, very necessary, absolutely necessary. However, emotion also, through instinct, is going to know stuff sooner, faster than thinking. When you're being reasonable, what you're really doing is you're putting a debate up in your head and you're measuring this, you're measuring that, you're doing an analysis. And yet in trading, what you discover very quickly is a lot of things happen so fast that you can't reason through them. You end up having to access instinct, emotion. And if you understand instinct, if you understand intuition.
As simply unconscious pattern recognition, you begin to understand that it can be used. The very first thing that has to happen though, is you have to be able to manage emotion. You can't manage Reason from fear. Otherwise, you hesitate or you jump into things that you shouldn't be in. However, if you were able to regulate the fear and then to have a disciplined sense of impartiality where you've quieted the mind down. Okay, quieted the mind down. Suddenly this gut instinct, you start hearing this small voice that's giving you suggestions. You don't act on them. You check them out, though. That's how the great traders work. What they're doing is that, yeah, they know how to trade. But a lot of times you'll see great traders and they've taught their students, and all the students know these rigid, rational rules. And then they're in the trading room watching the great trader, and then all of a sudden, he takes a trade, and they say, why did you do that? It's not in your rules. He'll say, yeah, it is.
And the students are baffled. But when you go back, you can see and put it together and see that, yes, it was within the rules, but in that moment, in that time, it didn't appear that way. Yet there it was. There was a gut instinct that says, this is the one. And he acted on it. And the truth is, it's faster than the deliberation. It's already got pattern recognition. It already sees it. Boom. But it's unconscious.
But when you learn how to use intuition, learn how to use instinct, it's an enormous gift to the reason that you're using to make sense out of the game theory that trading is. It's emotional regulation. You have to learn the mindfulness to be able to call it forward. But suddenly you start realizing instinct and reason are partners with one another. That's what makes a consistently profitable trader a great trader. That's the part that has to be developed. Reason and instinct together.
