Gaby Pfeifer, Ph.D.

Mind Growth

Internal Body Signals Are Linked With Financial Success

A study finds that successful trading is predicted by interoception.

Posted Sep 26, 2016

“How does someone become a hedge fund trader?” This question appeared on Quora, the knowledge sharing platform where compelling questions get answered by people with first-hand experience. Former trader Jon Cooper answers as follows: “... Be smart and good under pressure. Be verbally quick, firm in your convictions, but willing to change them when new evidence arrives. ... Enjoy risk viscerally; make clever or stupid bets just to have variance on.”

unknown artist/pixabay
Source: unknown artist/pixabay

Enjoy risk viscerally. While traders will often say that they trust their gut instincts when making risky financial decisions, this seemingly intangible strategy has now been backed up by science. 

Published in Scientific Reports, a recent study by Kandasamy et al. (2016) examined whether the trader’s success was indeed associated with their ability to sense internal bodily signals (also known as interoception). The scientists visited a trading floor in the City of London and asked eighteen hedge-fund traders to tune into their bodily system by silently counting their heartbeat.

The heartbeat counting task is a measure of interoception and goes like this: Participants are asked to silently count their own heartbeat for up to one minute without manually checking. During counting, a pulse oximeter is attached to the person’s index finger and tracks their actual heartbeat. The greater the overlap between the person’s perceived and actual heartbeat, the higher their interoceptive accuracy.  

unknown artist/pixabay
Source: unknown artist/pixabay

Using this task, the study reported three intriguing findings:

First, the traders were significantly more accurate in counting their heartbeats than a group of forty-eight non-traders that were used as a control sample. This suggested that the traders showed above average ability to sense their internal bodily signals, perhaps strengthening their claim of making risky decisions viscerally.

Second, and more importantly, the traders’ interoceptive accuracy scores predicted their trading success: Those with higher interoceptive accuracy were able to demonstrate higher profitability over the past year than those with lower interoceptive accuracy.

Finally, the scientists were able to show that the greater the accuracy on the heartbeat counting task, the greater the years of experience in the financial market. In other words, those with better interoception survived longer in the financial market.

The scientists went on to show that the traders’ variability in heartbeat counting accuracy diminished with years of experience in the trading business. More experienced traders showed a more uniform ability in accurately detecting internal bodily signals, while junior traders showed greater variability in their interoceptive accuracy.    

This leaves the question whether traders of the future should be hired on the basis of their interoceptive skills? For now, it appears that more studies are needed to replicate this effect. Longitudinal studies would be particularly useful in determining whether interoceptive accuracy is honed by working in the trading business, or whether truly successful traders are endowed with refined gut feelings even at the beginning of their career.

TIP: This study was broadcasted on CNN, where you can watch a short summary by one of the contributing scientists Dr Sarah Garfinkel here. Alternatively, you can listen to a radio interview with Dr Garfinkel here (about 12 minutes into the interview).

Reference

Kandasamy N, Garfinkel SN, Page L, Hardy B, Critchley HD, Gurnell M & Coates JM (2016). Interoceptive Ability Predicts Survival on a London Trading Floor. Scientific Reports 6:32986, DOI: 10.1038/srep32986