(Washington Post) Why gut feelings may really help you make risky decisions
By Ana Swanson November 16
“Gut reactions” — subtle bodily sensations that result from risky behavior — have long been the stuff of financial market lore. Some successful stock market traders, billionaire George Soros included, have claimed they pay attention to bodily pains and other sensations to gain valuable insight into how they should trade on the markets.
A new paper published in Scientific Reports suggests some truth could be lurking behind these stories. These feelings, which result not just from a person’s gut but also their heart, lungs, bladder, bowels, skin and other organs, aren’t just random. They contain signals that tell people about their emotional states, including pain, anxiety and doubt, the researchers say. And some people are better at detecting these signals than others.
The research, which was carried out in part by John Coates, a former derivatives trader who now works as a neuroscientist, looked at “interoception,” meaning the ability to sense these bodily signals. London traders who could more accurately detect their own heartbeat were more likely to survive and thrive in financial markets, according to the study.
The researchers looked at 18 male traders who bought and sold futures contracts throughout the day, and compared that data with a control group of 48 non-trader males. The two groups were asked to count their heartbeat without directly feeling their pulse, and the traders were significantly better on average at counting than non-traders. The researchers also found that traders’ precision on counting their own heartbeats predicted their profit and loss record, and the number of years they had survived in the market.
While the study was small, it supports a larger body of research suggesting that subtle physiological changes can aid people in making tough decisions.
Past research has indicated that people who are better at detecting their heart rates perform better in laboratory studies of risky decision-making. When people were asked to gamble in laboratory settings, rapid and subtle bodily responses appeared to guide them away from unprofitable trades and toward profitable ones.