About to Make a Huge Financial Decision? Go With Your Gut.

It works for day traders, according to a new study

By Evan Bleier

 
About to Make a Huge Financial Decision? Go With Your Gut.
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17 November 2016

If new research is right, the next time you need to make a tough financial decision, you may want to ignore the little voice in your head and listen to the lil' Jim Cramer in your gut instead.

In order to learn more about how the ability to perceive signals from the body influences decision making, a research team led by derivatives trader-turned-neuroscientist John Coates examined how adept workers on the London trading floor were at sensing their own heartbeats.

They found that, compared with non-traders, the research subjects who bought and sold futures contracts were much better on average at counting their heartbeat without feeling their pulse. While that may not sound like much of anything, the team was able link that “interoceptive ability” (i.e., adeptness at sensing body signals) with the relative profitability of hedge fund traders. The team was even able to ascertain approximately how long a trader had been playing the financial markets based on his/her readings.

“Traders in the financial world often speak of the importance of gut feelings for choosing profitable trades,” according to the researchers. “Our findings suggest that the gut feelings informing this decision are more than the mythical entities of financial lore —  they are real physiological signals, valuable ones at that.”

This doesn't mean that you should listen to your gut when it tells you to go back for thirds this Thanksgiving, however.

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