Financial traders have better gut instincts: Study

Financial traders are better at reading their ‘gut feelings’ than the general population — and the better they are at this , the more successful they are as traders, according to new research by Cambridge university.

Financial traders are better at reading their ‘gut feelings’ than the general population — and the better they are at this , the more successful they are as traders, according to new research by Cambridge university.

Financial traders are better at reading their ‘gut feelings’ than the general population — and the better they are at this , the more successful they are as traders, according to new research by Cambridge university. (Reuters)

‘Gut feelings’ — known technically as interoceptive sensations — are sensations that carry information to the brain from many tissues of the body, including the heart and lungs, as well as the gut.

The study by researchers from Cambridge, Sussex and the Queensland University of Technology, Australia, has been published in the journal Scientific Reports.

Traders and investors in financial markets frequently talk of the importance of gut feelings for selecting profitable trades. The study compared the interoceptive abilities of financial traders against those of non-traders.

The researchers recruited male traders from a hedge fund engaged in high frequency trading, which involves buying and selling futures contracts for a short period of time.

The study took place during a particularly volatile period: the eurozone crisis. Each trader was given a score which, essentially, measured the percentage of right answers, and these scores were compared against data from 48 students at the University of Sussex.

The researchers found that traders performed significantly better at the heart rate detection tasks compared to the controls: the mean score for traders was 78.2, compared to 66.9 for the controls. Even within the group of traders, those who were better at the heart rate detection tasks also performed better at trading, generating greater profits.

Strikingly, an individual’s interoceptive ability could be used to predict whether they would survive in the financial markets. The researchers plotted heartbeat detection scores against years of experience in the financial markets, and found that a trader’s heartbeat counting score predicted the number of years he had survived as a trader.