Perception and Trading

Merritt BlackFutures, market structure, Trader Development, Trading Psychology

Laurel or Yanny?

There are a few viral videos going around in which different people perceive different words despite listening to the same audio clip. This one is particularly impressive to me:

You can hear EITHER one, simply by telling yourself that is what you’re about to hear. Kind of bizarre given the cadence and different syllables of the two possibilities.

How does this apply to trading? Have I gone crazy? Maybe, but let’s dive in.

For years I have told my traders, in various situations, “Your brain will lie to you!” The main two situations I talk about this are in seeing real-time opportunity, and gauging your performance at the end of the trading session. It’s pretty obvious that your filters will only allow you to see what you can perceive when it comes to finding opportunity at the hard right edge. In regard to the end of day trade review, your own mental/emotional filters will prevent you from also seeing the truth about your strengths and weaknesses if you’ve not done proper real-time journaling.

In this blog post on Perception and Trading Expertise, Dr. Steenbarger writes,

“Crucial to expertise is perception, because what we perceive dictates what we can process, store, and ultimately draw upon. Something can be in our field of vision, but we may not see it.”

How do we “see it”? One of the challenges of becoming a CPT (consistently profitable trader) is no doubt perception. If you have the wrong filters up, you will be unable to “hear” as in the above video, anything but what your filter allows. Despite myself and my traders operating in a highly discretionary manner, we constantly strive to get more objective about what we’re looking to see to define opportunity. We use checklists in order to drill and create habits around our perception. Eventually, we will learn how to see/hear/perceive and no longer need the physical checklists because they are a part of who we are.

Market Profile is by far the best contextual market filter I have ever come across. Context is king, and allows us to go and apply the proper tactics for the given context. Market Profile represents a current truth of what the market is doing – what state it is currently in. Additionally, and importantly, it shows us where the current state changes which is huge for perceiving being wrong, or new opportunity, or contextual shifts in your market. It does so efficiently and in a rather simple way, that is- once you’ve learned how to perceive it!


Trade well,


*No Relevant Positions

Risk Disclosure