This is why high-frequency traders need to trust their gut instincts

Francesca Washtell
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His gut is probably saying: "Oh, that's not good" (Source: Getty)

It's always reassuring when research is published that proves what we all already knew, and the latest on traders is no exception.

High-frequency traders that rely on their gut feelings do in fact have the ability to compete with the best machines, according to a new paper, as those who follow their hunches make more money and last longer in finance.

The study of 18 male City of London traders, published in Scientific Reports, found those who scored significantly higher in a test of "interperceptive ability" scored better in their trading performance.

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Interperceptive ability, for us non-scientific folk, is the ability to recognise signals that originate inside the body – our so-called gut feelings. Traders in this instance were tested by detecting their own heartbeat.

Also (sofa slouchers take note), the fitter the trader, the better their interpective detection.

The study’s author John Coates has long had a hunch that traders’ decisions are influenced by biology, which was the primary subject of his 2012 book The Hour Between Dog and Wolf.

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The Capitalist has never met a trader who didn’t call his or her profession an art and, despite the underlying physical science underpinning this latest research, the idea that our future robot overlords are the only solution to efficient trading has been knocked squarely upside the head.

Most Cityfolk won’t have needed a study to back up the trust and power some of their group command without any seeming recourse to logic. Let’s break it gently to the quants, though.