Naming Characters

This post is for the writers that read my blog:

Yesterday I came up with a new idea for a short story that I'm pretty psyched about.  As the idea struck in the middle of the night I spent most of the night thinking about it and trying to name my two main characters.  They are a mother and daughter - yes, that part's important.  Because I realised something as I was trying to find the right name for the daughter.  I could think of quite a few that fit her personality and character perfectly but there was something not quite right about them.  And then I realised.  I was trying to name how she was now, not what she would have been named.  So I started thinking more about the mother character and by getting to know her I knew what she would name her daughter.

I've never heard of this as a way to name characters before - let their own imaginary mothers find the name - and perhaps you're thinking I'm completely insane right now.  But it worked this time and it's a method I will definitely be trying in the future when I get stuck on a name (and that is the main part of characterization I have problems with). 

How do you name your characters or do you just instinctively know their names (this has happened to me once)?