Though it's important to use logic when setting up a trade, it may surprise some that creativity also has its place in trading. Creativity is generally considered to be the ability to combine novelty and usefulness, hopefully to obtain an innovative result.

It is also considered to be the ability for a person to restructure their understanding of a situation in a manner that may not be obvious to all.

Am I creative?

Apart from simple (possibly subjective) observation, it is difficult to determine whether a person is creative or not.

There isn't a generally accepted method for testing creativity. Different studies have employed various tests, such as the "divergent thinking" test where a subject is asked to come up with new and useful purposes for an everyday object (such as a pencil).

Others have maintained that possessing a good sense of humour is an important aspect of creativity. You might watch a funny film or TV show and wonder, "how did the writers even come up with that idea?" because it's not a concept that crops up in everyday thinking.

Testing conducted by Dr. Rex Jung, a research scientist at the Mind Research Network in the US, has shown that whilst the brain works like a straight road to get you from point A to point B when it comes to intelligence, the regions of the brain associated with creativity looks like a collection of side roads with interesting detours.

Another interesting fact about creativity is that, contrary to popular opinion, creativity doesn't just spontaneously show up as inspiration just because someone happens to be "creative".

A recent study suggests that creativity takes a slower path than that of intelligence, so the concept of a quick-thinking "creative genius" is more of a myth.

Using creativity

Anyone can employ creativity by letting go of their habitual response to a situation. Try to shut down what would be your automatic logical reaction to a situation, and "think outside the box".

It doesn't matter how long it takes you to think of a creative idea - once you've searched for a unique idea once, you will find it easier to come up with creative solutions the second, third, fourth (and so on) time.

Creativity can be important when you're trading because it forces you to think about the market in new ways - and you might find a whole new trading style that could bring you greater success.

It should be good news to most traders out there that most of you probably are naturally creative. Risk-taking is associated with creativity, and most traders by nature are able to embrace risk.

Creative connections crop up when most people are relaxed. And what's a great way to relax? To laugh. And the driver for laughter? Humour. Go rent out your favourite funny film, or take a look at that new show your friend swears is hilarious. (First make sure you friend has good taste.)

Then go have a glance over your recent trades. Are any new ideas for future trades cropping up?

Carl Capolingua
Head of Education
Australian Stock Report
Follow Carl on Twitter @CarlCapolingua