Gut feelings are secret to success as a City trader

FINANCIAL traders are better than the rest of us at reading gut feelings, a study has found. And the better they are at it, the more success they have.

Gut feelings, called interoceptive sensations, give the brain information such as body temperature and a full stomach.

And they can often provide information when it comes to risky decision-making, steering us away from gambles likely to lead to loss, and pushing us towards those more likely to lead to profit.

A group of 18 hedge-fund traders were recruited by scientists from Cambridge and Sussex universities, and Queensland University of Technology in Australia, as investors often talk of the importance of gut feelings for selecting trades.

The team measured the traders’ ability to detect changes in their bodies, asking them to detect their heartbeats. The study, published in the journal Scientific Reports, found traders were significantly better at detecting their heart rates than another group, which was made up of students.

The mean score for traders was 78.2, compared with 66.9. Even within the group of traders, those who were better at the heart-rate detection performed better at trading, with greater profits.

Dr John Coates, a former research fellow in neuroscience and finance at Cambridge University, said: ‘Traders in the financial world often speak of the importance of gut feelings for choosing profitable trades. Our findings suggest they’re right – they manage to read real and valuable physiological trading signals, even if they are unaware they are doing so.’