Intuition and interoception for performance optimsation in financial markets
A central question for investors and traders looking to optimise performance in the markets is: how can I develop the skills and habits that allow me to develop a view, a strategy, and an implementation process, as efficiently and robustly as possible?
Systems and resources for processing relevant information and executing well are important. So too are pattern recognition, gut feel and instinct, which we can summarise as intuition.
This article examines the processes whereby you quickly notice and evaluate the intangible data that often hold the key to your edge, and the difference between outperforming and remaining with the pack.
Chassy and Gobet (2011) beautifully describe intuition as lying at “the crossroads between perception, knowledge and emotional modulation”. I love this definition because it describes the whole healthy interplay of intuitive processes:
Perception
Awareness of your state through your body’s signals: your breath, for example, or heartbeat, or tingling toes or perspiring palms.Knowledge
What do these signals mean? What emotions are coming up for you? What do you recognise? What do you know? What don’t you know?Emotional modulation
How do you critically engage with your initial thinking and anticipatory emotions? How do you manage your fear of loss or regret, or your excitement at seeing the opportunity, or getting in on the action?The decision: now what will you do?
Interoception is an essential part of intuition. It is the process whereby your brain notices and interprets signals from your body, and is the focus of a growing body of neuroscientific and psychological research. A number of these studies have been conducted on traders in the context of financial markets.
Fenton O’Creevey et al (2011) showed the link between traders’ ability to identify and critically engage with anticipatory emotions and superior trading returns. Kandasamy, Garfinkel et al (2016) connected traders’ ability to detect heartbeat with profitability. Hamelin and Bonelli (2022) investigated traders’ intuition using skin conductance as a measure of anticipatory feelings (physiological signals of anticipated outcomes). They showed that traders whose decision-making process is more data-driven have lower interoceptive skills (lower anticipatory feelings scores) than traders who tend to rely less on newsfeeds. Traders with higher anticipatory feelings scores were significantly more like to report higher profitability.
We care about interoception for investors in markets because a multi-faceted approach to building consistent performance edge is key. Getting attuned to your body’s signals is one very important aspect of developing this Holistic Intelligence (HQ). It allows you to manage and direct your energy and attention as effectively as possible – to intentionally manage your state, your ‘emotional weather’ - for creating optimal results or performance.
So how do we put this into practice? I work 1:1 with traders using a multitude of techniques that are tailored to their individual needs. That said, I find the two following easy, everyday practices to be almost universally applicable.
Breathwork
Life in markets means you are in an activated state – meaning at least mildly stressed, not relaxed – for much of your day. That’s fine. Good even. You need to be a little stimulated to take action quickly and seize opportunities as they present in the markets. Of course, intentional de-activation for proper rest and recovery is important, but that is for another article.
Insofar as we are focusing here on interoception and intuition for trading performance, the ‘right’ activated state is good. What isn’t good is when you are, by default, in a reactive, unintentional state, and on the back foot. In this state your decisions and actions are driven by anxious reflex rather than strategic clarity. So how do we consistently (re)connect to a ‘right’ state?
I encourage clients to find a couple of minutes between chapters in their work day. During those liminal moments between meetings, or trading sessions, or your commute and your desk, check in with your breath. Notice if its tight and shallow (a bad stress signal) or deeper into your belly and steady (a good bodily signal). If you need to reset, inhale into your belly, pause and then take another sip of air in. Exhale all the way out for longer than your inhales. Do this 4 to 5 times. Notice again how you feel. You will find that, while you remain somewhat activated, you will feel like you are more in the driver than the passenger seat.
If you have a little time on your hands you can take 5 mins or so to do a body-focused mindful exercise such as a body scan. But the breath is the quickest, easiest, most efficient way to optimise your state. You can intentionally engage your breath at your desk, while waiting for a lift or walking to the loo. It’s simple and do-able.
One specific type of mindfulness!
The type of mindfulness practice you do matters! You may have noticed that I have not mentioned meditation. That is because I do not recommend you rely upon meditation-based mindfulness for this aspect of performance optimisation in trading and investing. I firmly believe meditation can be extremely useful for restoring balance and fostering calm. But the most effective and easily accessed techniques to fine tune your interoceptive and intuitive awareness are cognitive processes that are not engaged in a meditative state.
For this aspect of performance optimisation, I find Harvard psychologist Ellen Langer’s approach is best. Langer’s mindfulness is a buildable mindset or trait, not a meditation technique. It is a cognitive process of actively noticing new things, creating new categories, and remaining sensitive to context and perspective, focused on engagement, novelty and flexibility.
Key aspects of Langerian mindfulness include:
Active Engagement & Novelty: Actively noticing new details in the environment and in daily tasks, treating everything as in flux.
Context Sensitivity: Understanding that the same information or behavior can have different meanings in different contexts.
Perspective Shifting: Being open to multiple perspectives and avoiding the rigid, "single-perspective" trap of mindlessness.
Creativity and Health: This type of mindfulness is closely linked to enhanced creativity (looking beyond established, often limiting, views of reality), improved performance, flow states, and empirically connected with better physical health outcomes.
Mindfully noticing new things or new aspects of familiar things reduces reliance on rigid, pre-programmed, "mindless" routines – the unthinking shortcuts, heuristics, that blunt our edge in markets.
Set your intention now to notice new things each day. Use interoceptive awareness to notice new things happening inside of you – your body signals that change and flow moment to moment. Deliberately notice also new details in your environment and operating context: the changing leaves on the trees you walk past every day, the colours in the carpets you tread on, the grain in the wood of the doors you pass through.
Building this noticing muscle in life will build your ability to perceive opportunities in markets, from information gaps, to pricing mismatches, or a piece of news over here that has 3rd order consequences over there. The more you can notice new things and the multiplicity of perspectives from which the same ‘thing’ can be viewed, the more prescient your intuition and the more agile your thinking plasticity – an essential psychological strength for traders and investors.
In conclusion, interoception, a key aspect of intuition, is a buildable skillset that responds well to training and targeted interventions that are relatively simple to apply to our everyday lives. Edge is available in what appears to be the most mundane everyday places. The lovely thing about this is that you can start training your brain right now for clearer intuition and agile thinking plasticity - essential skills for sustainable performance and long term profitability in the markets.
If you’re interested to learn more about how the Park Street methodology can help you build your edge, get in touch!
Highly recommended further reading: The Mindful Body by Ellen Langer.