Gut Feelings Strategy
Quote: "Trust your gut. Your gut feelings are usually accurate and correct. If you truly feel there's something, chances are there is." - unknown author
Summary
- You need a system to learn to trust your "gut feelings"
- “gut feelings” is a colloquial synonym for interoception
- Traders with high interoception ability make more money
Technology has taken over most aspects of our day-to-day life. We have reached a point where making a decision without computer-aided data analysis has become a thing of the past. However, there are things in our lives where the human touch will always be required; at least by those who are still experiencing the prime instincts that have enabled the human race to survive for thousands of years . Imagine life a thousand years ago. I am sure you are aware that it was survival of the fittest. Those who were attacked by animals or other human beings survived basically through two ways. You either managed to defend yourself or you ran for dear life. If you froze, you died. Basic fight or flight instincts ruled. So those who were most directly connected to the right physiological feelings survived or, at least, responded correctly.
Some argue that not much has changed in that regard, especially when it comes to stock trading. You stand your ground and fight or run to survive based on your basic instincts, i.e. gut feelings (a colloquial synonym of interoception), only not literally. “Gut feelings” decisions play an important role in a lot of stock traders' decision-making. But research suggests that there is still room for the old-school “gut feelings” trader in the modern day of technology. Here is how physiological signals help seasoned traders to make decisions according to this research “Interoceptive Ability Predicts Survival on a London Trading Floor”
What is the gut feeling strategy?
Gut feelings are not only about the gut. They are sensations that can come from many tissues of the body such as the brain, heart or lungs. The sensations range from breathlessness, body temperature changes, heart rate or fullness of the bladder, etc. So what has this got to do with trading, you ask? Well, these physiological changes provide a lot of valuable information when making high-risk decisions such as trading decisions. Here is how it works....
What does research say about the gut feeling strategy?
Scientists at the University of Cambridge conducted a study to test the hypothesis that traders with a greater ability to sense signals from their bodies make more money. They recruited high-frequency traders who regularly made high-risky split-second decisions. With equal access to information and capital, the traders’ success was only hinged on skill. The researchers monitored the traders during a period of extreme uncertainty where results were not easily predictable. To make sure that findings were not a coincidence, a control group of non-traders was also tested.
The researchers discovered that the financial traders had a significantly higher interoceptive ability than the non-traders. In other words, traders are better at sensing signals from their bodies. Further analysis showed that traders with the best interoception sensing, or so-called “gut feelings”, make more money and survive longer on the financial markets while those who do not get eliminated quickly.
Should you always trust your gut feelings?
It's all good and well that the research showed that traders with high interoception ability make more, but should you trust your gut feelings? Whether to trust your “gut feelings” or not is a question that is not easy to answer. As with most things in life, experience is the best teacher. You need to experiment and test your “gut feelings” decisions over a long period before you can trust them. Of course, the “Gut Feeling Strategy” is not for everyone, but you will not find out if it works for you unless you try.
How to build trust for your gut feelings decisions?
Building trust for your “gut feelings” is like forming a new habit. The only way to succeed is to start small. Conduct small trades and learn until you discover what works for you. Although it is all about gut feelings, the “Gut Feeling Strategy” requires planning ahead. When you do discover your “gut power” then stick to it. Be disciplined and keep emotions out of the equation.
How can Ytrader help you with your gut feeling strategy?
Since research has shown that traders who are most aware of their gut feelings make more money and stay on the market longer while those who are not so aware of their gut feelings fail and get eliminated quickly from the market, we decided to build Ytrader, a tool that helps traders like you to discover their “gut power” and use it systematically. As mentioned before, stock trading requires discipline and long-term planning even if your decisions include gut feelings. Ytrader enables you to complement your usual strategy with results of your gut feeling experiments over time, which leads to structured usage of the so-called “Gut Feeling Strategy”. Here is how it works.
When you make trading decisions you can include your “gut feelings” on a scale available in Ytrader, which ranges from bad, neutral to good or choose not to classify your gut feelings. For best results, gut feelings need to be classified systematically for an extended period of time.
Over this period of time you must observe the overall results of your trading. This will enable you to determine if gut feelings are helping you to make better decisions. We call this the experimentation period.
Based on trading results and information in Ytrader, you reach a point where you are aware of the effect of your gut feelings. At this point you can turn over your “Gut Feeling Strategy” to Ytrader. From then on, Ytrader will automatically trigger your normal trading strategy and complement it with your gut feeling strategy settings. All done for you. If you discover that your “Gut Feeling Strategy” is not working, you can make use of the knowledge in the community. It’s as easy as following those community members who have the best “Gut Feeling Strategy” results.Check out Ytrader and start building and using your “Gut Feeling Strategy” in a professional way.