A study of traders suggests gut feelings “are more than the mythical entities of financial lore.” Rather, they can provide valuable physiological signals. Before completely trusting your gut, however, be aware of the study’s limitations. The authors conceded that their research “could not establish causation.”

Researchers studied the trading results of 18 high-frequency futures traders. Each of the traders held positions often for a few seconds or a few minutes, and at most for a few hours. Access to information was determined to be equal. Compensation consisted entirely of a share of trading profits. Trading activity was tracked near the end of the European sovereign debt crisis.

Gut feelings were measured as the ability of a trader to generate and sense an interoceptive signal—an awareness of a stimuli originating within the body. Examples include breathlessness, a racing heart and increased body temperature. Previous research has shown that such signals can lead to improved decision-making in laboratory settings. Little research has been done so far in real-world settings.

To test how aware traders were of their body’s physiological reactions, the researchers measured study participants’ (both traders and a control group) awareness of their heart rate. Participants were asked to count their heartbeats over randomized time periods. Each person’s count was then compared against the actual number of heartbeats.

The most successful traders were those who scored highest on the heartbeat detection. The more accurate a trader was at counting heartbeats, the more profitable the trader was. Furthermore, detection scores rose with experience. Beginning traders (those with one to four years of experience) had detection scores that were indistinguishable from the control group. Experienced traders (those with more than eight years of experience) had significantly higher heartbeat detection scores than the control group.

Despite the link between profitability, experience and the ability to accurately count one’s heartbeats, the researchers downplayed a causation element. They did not give a clear reason as to why. Luck was briefly mentioned as a possible “unobserved variable.”

Source: “Interoceptive Ability Predicts Survival on a London Trading Floor,” Narayanan Kandasamy, Sarah Garfinkel, Lionel Page, Ben Hardy, Hugo Critchley, Mark Gurnell & John Coates, Scientific Reports, Nature.com, September 19, 2016.