06.10.2016

"Gut feelings" determines the fortune of Traders

400Financial traders can be better than machine, according to research published in Scientific Reports "People with greater sensitivity to interoceptive signals … perform better in laboratory studies of risky decision-making" and a sixth sense, or just a gut feeling, is the best friend for a trader.

Researchers from the universities of Cambridge and Sussex in England and Australia’s Queensland University of Technology found that the best traders are aware of their bodies’ signals, even if unconsciously, and use them to make more money.

The team of neuroscientists compared the interoceptive sense, an indicator of their self-awareness, of 18 London hedge fund traders working under high pressure with that of students in a control group.
The volunteers, all male, were engaged in high-frequency trading, buying and selling futures contracts at an unnamed London fund during a particularly volatile time towards the end of the euro-zone crisis. Sensitivity to “gut feelings” is a strong predictor of success in financial trading, according to research.


“Our results suggest that signals from the body, the gut feelings of financial lore, contribute to success in the markets,” the authors concluded. By combining body and brain, the best human traders can outperform computer algorithms, they added. To assess interoception, the researchers measured the subjects’ ability to count their own heartbeats over varying periods, while at rest and without touching their pulse or any other part of their body.

 
Senior author, John Coates, who used to run a Wall Street trading desk and then became a neuroscientist, told the Financial Times “If we focus on conscious mind and model it as a piece of software we will conclude that humans are doomed,” he said. “But if we recognize that body and brain act as a single functioning unit…then we will also recognize how exquisitely we are constructed for rapid pattern recognition. Humans can indeed compete against the machines.”


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