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Study: People Who Are in Touch With Their Heart Make Better Traders
Capital Markets, Lifestyle
The fixed image that many people probably have of the typical stock trader is of a young, brash, greedy, heartless and soulless malcontent – basically your Jordan Belforts of the world.
However, a new study has found that people with greater sensitivity to their interoception signals – which means being able to sense physiological changes inside the body such as with the heartbeat – make for more profitable traders who survive longer in the financial markets. In other words, traders with a greater “gut feeling” do better than those without.
The study, which was conducted by a a group of researchers from Britain and Australia and published in the journal Scientific Reports (via DealBook), tracked 18 male high-frequency traders of bond futures at a London-based hedge fund in 2012 through two established heartbeat detection tasks. The purpose of these tasks is to measure how well a person can detect his heartbeat while at rest.
The researchers found that high-frequency traders had greater interoceptive accuracy than a control group of non-traders. And then by collecting each trader’s P&L over the previous year, the study found that those traders with greater heartbeat detection also had greater profitability among their peers.
Furthermore, researchers found that the traders who had been at the hedge fund longer also had better heartbeat detection than their more junior colleagues. However, the researches noted that the results of this study were based on “field work,” which means that they can’t establish a direct causality between heartbeat detection and profitability among traders.
So what does this all add up to? Here’s more from the study:
Traders in the financial world often speak of the importance of gut feelings for choosing profitable trades. By this they mean that subtle physiological changes in their bodies provide cues helping them rapidly select from a range of possible trades the one that just ‘feels right’. 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.
The bottom line: Contrary to popular depictions in movies and literature, high-frequency traders are perhaps sensitive creatures more in tune with their bodies than anyone ever thought.