The Rational Trader

“We are in a far better position to observe instincts in animals or in primitives than in ourselves. This is due to the fact that we have grown accustomed to scrutinizing our own actions and to seeking rational explanations for them.”
— Carl Jung



If you’re like most people, you think profitable trading is about some superior ability that just happens to be innate.


You think that a profitable trader is a rational trader 99.9% of the time.

If either or both of these fit your thinking, you should know that you’re wrong.

Very wrong in fact.


 You can read/download the Journal of Finance article “Exploring the Nature of ‘Trader Intuition'” referenced in the Bloomberg article below.  It’s a detailed look at the notion of Theory of Mind tests and the implications for trading.


The notion of the rational trader is perpetuated by a “fundamental” crowd that can’t fathom the idea that a reactive approach can match or even (gasp) exceed the proactive approach.  What these naysayers miss is that the profitable reactive trader has so internalized a set of rational, well considered trading rules as to become the embodiment of a profitable system… which is a long way of saying he has become a trader.      

So what does all of this mean?

The good news:

It means it IS possible (maybe even preferable) to “read” the market.

It means you can train yourself or be trained to build and exploit this skill.

It means you can be free.

The bad news:

It means that the “rational trader” is not only overrated, but mythical.

It means that the way to true profitability is being a trader…  so that your “gut” is informed by proper trader logic.

It means that there are no shortcuts or “hacks” to becoming a profitable trader.


The Trader