• Gogi
  • 14.02.2023

There is a lot of debate about intuition in trading. Most agree that intuition is nothing more than an instant interpretation of previous experience at the subconscious level.
However, there are studies that show that the ability to predict further price movement depends on the skills of "social analysis," i.e. analysis of other people 's behavior.
In 2010, The Journal of Finance published a stunning study conducted by researchers at California University of Technology, Brawlier, Quartz and Bossaerts. By conducting experiments on the brain and human behavior, they have demonstrated that it is social cognition rather than mathematical and logical reasoning that underpins the less understandable X-factor in traders. Those legendary portfolio managers and traders who give the impression of people with a special talent for predicting markets are unconscious in relying on cognitive empathy or, in other words, mentality. This style of social thinking seems to be the force behind this exceptional pattern recognition ability that allows great traders to derive values from signals transmitted through price movement dance.
The results of this complex experiment were as follows:
    1. 46-78% of the participants of the study quite successfully predicted the direction of price change.
    2. Correct predictions correlate with the results of two social cognition tests, of which the classic Heider-Zimmel test discussed below and used as a basis for exercise for within The Bloomberg Tradebook Trader Exercise tool was the most convincing.
    3. The results of the mathematics tests showed no correlation with the ability to predict the price.
Expertise, unconscious pattern recognition, and trade intuition
It is also relatively fashionable to devalue the value of unconscious pattern recognition or felt consciousness. Research in behavioral finance has convinced us to question the type of expertise we usually call intuition. However, leading scholars in judgment and decision-making say the opposite: "Intuitive thinking is at the heart of the most advanced thinking" (Reina, 2012).

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