When a trader has superior decision-making ability or takes his trading decision based on more pertinent insights, we can say that he has good judgment ability. Let us consider an example of good judgment in the general aspect. Suppose your car stopped in the middle of a highway, and your mobile phone access has gone also. You do not know your location and do not know where the nearest town is. Moreover, no vehicles are available on the highway.
Now, what should you do? Should you wait for someone or go to the nearest town or start your journey alone walking on the road? This is the situation where you need to make a judgment call, where no obvious answer is available to you.
Let’s assume that you decided to start looking for the nearest town and start to find it. But after looking for several hours, you did not find any civilization sign, and you are getting week in lack of food and water.
Now you have the emergency of taking a second decision, should you go back to your car where you can stay safe or have some food? Again, you do not know the obvious answer. Whatever decision one take in this situation, one will find that all the decisions are risky enough. Depending on the problem frame, one conclusion can be better than others.
The above is an example to make you understand the importance of good judgment in an uncertain situation. Similarly, a trader may need to create a trading judgment with no apparent answers available to him. In this writing, we will discuss how a trader can improve his trading judgment.
Most Relevant Factors Optimization
Let us consider the above example and decide the most crucial factor between time or survival. What a trader will choose to do will reflect in his answer. If one feels urgency is most important to him, he will probably start walking by taking the risk. But if he thinks about his safety, he will decide to go back to the car at night. So, he will choose to do that work which is the most crucial factor to him. To improve your optimizations skills, you may visit https://www.home.saxo/en-sg/products/listed-options and enhance your skills.
In other words, a trader will optimize his decision for the most crucial factor according to his judgment. So, the question what should I do? It is not essential; instead, the fundamental question is what important thing is concerning to me? Because once a trader can figure out the important thing, then he can quickly understand what is most apparent at next.
Explore What’s Important and What’s not
Good judgment is all about isolating the most important and relevant factors and solves the problem. In other words, determining the one or two most important factor that fades away the importance of other factors is the basis of sound judgment. So, try to learn about the key factors for currency appreciations as it will give you a better picture of this market.
The Way to Develop Good Trading Judgement
Unfortunately, making a good judgment in trading is not easy at all. The way of developing the excellent trading judgment a trader can’t learn from a book, or theoretically, he can’t reason it out. A trader can develop good judgment only by his experience.
For example, most traders think that the most crucial thing in trading is making money, which is logical. Well, here is the point of discussion. One can’t make a sound judgment if he relies on logic because our current understanding limits our sense.
A computer is perfect in processing logic, but it cannot do good judgment because fixed inputs restrict its ability. We can optimize the computer for any factor, but it cannot tell us about the specific optimizing aspect.
Therefore, the excellent judgment path lies in increasing your understanding through learning, experience, and self-reflection. The most effective way of developing good judgment is learning, testing, and failing, again learning more, cleaning, and repeating. This learning process will build your trading insights about what is essential and what’s not.