The intuition system

High mathematics downplays intuition as unsystematic, emotional, and unaccountable. However, the more we move into time systems and try to mechanise entries and exits, we realise that we can never eliminate risks. Execution is about intuition.

At the heart of things we are all investors. Whether some of us are overdoing it with housewife calls or calling ourselves knowledge workers who have nothing to do with markets, we are a part of the same chain. Stock market intuition is a high skill for life. We confuse it with speculation and all that herding.

First and foremost, the intuition system is not very fast moving. If you think you have one, it should not give you calls every day intraday. It should be more like a multi month, maybe 18-24 month system or more. Intuition systems are not about trends. They guide us with understanding the minimal risks. What is a minimal risk entry or exit? Intuition systems are also built on patience. You can’t have an intuition system based on stress related to certain expiration.

An intuition system is something which gives you the confidence to buy puts, bleed, but rollover at expirations. If you are bleeding every 18 months, it is a minimal risk, not a high risk. If you are doing puts and calls every month, you have no intuition system. The problem with intuition systems is that they are generally about a crash or scary bubbles. A real intuition system works both ways. It tells you to buy in March 2009 or sell in November. A test of intuition systems can be if it can differentiate between underperformance and outperformance. But then intuition systems can’t do everything.

The performance ranking we have mentioned on a prior occasion is a good decision support for intuition systems. The best of the best are to be avoided, and the worst of the worst are to be selected. This simple idea can give you the courage to listen to your intuition if you think gold, silver and metals are really overstretched. It could avoid a loss, when you short sugar or short cotton, as they continue to rise exponentially. It could be a test of nerves, but intuition systems are built to brave situations like this. The crack on sugar and cotton reinforced the system for all who believed like us that Agro was a best sell. We are still running the long natural gas-short sugar pair. As anticipated our best short on banks, auto and LIC Housing mentioned in the India Pair Grid are still running. Our annual rankings suggest Suzlon, Reliance Industries and Reliance Power are the best holds. And yes, our intuition systems are looking for the best shorts.

The author is a CMT, and Co-Founder, Orpheus CAPITALS, a global alternative research firm