Attack the Week (ATW)

When Intuition Hits

Sunday Thoughts

Not many would admit it, but intuition and instinct play a big role in trading. I admit to using my senses when it comes to decision-making. That’s not always the case, but it has helped me avoid bigger drawdowns regardless of how good my risk management approach was. I know of many peers, especially seasoned risk-takers, for whom that inner voice plays a crucial part. I can’t explain it when I “feel” that something is off. Part of it is obviously my observations in financial markets, which I scan daily. A lot of it, however, is muscle memory from experience.

While instinct may seem like a vague or emotional concept, neuroscience suggests that it is grounded in real cognitive processes. The human brain evolved not only to compute logic but to survive in rapidly changing, high-stakes environments. It processes enormous volumes of information unconsciously and rapidly, especially in areas like pattern recognition and risk assessment. This capacity is largely due to the role of deep brain structures like the basal ganglia, which handle repetitive learning and subconscious decision-making.

The basal ganglia are responsible for detecting patterns and automating responses. For investors who have spent years in the markets, these structures become finely attuned to financial rhythms. They can recognise the subtle cues — momentum shifts, irregular volume surges, or market behaviour that "feels off" —before the conscious mind fully registers what's happening. What appears as “gut instinct” is the rapid-fire product of years of exposure, condensed into an intuitive response.

Source: Dall-E

One of the most compelling pieces of scientific evidence supporting the value of instinct in trading comes from a 2012 University of Cambridge study, led by Dr. John Coates, a former Wall Street trader turned neuroscientist.

Coates and his team studied a group of professional traders to determine whether interoceptive awareness — the ability to perceive internal bodily sensations like heart rate or gut tightness — was linked to trading performance. Traders were asked to count their own heartbeats without physically checking their pulse, a standard test for interoception. The results were interesting.

Those who scored higher on interoceptive accuracy consistently earned more profit and survived longer in volatile markets. Essentially, they were better attuned to their internal signals, which in turn helped them sense market risks and opportunities more effectively. Their "gut feelings" were not just emotional—they were physiological cues deeply intertwined with perception and cognition.

It’s critical to note that intuition in investing isn’t born overnight. It develops over thousands of hours of practice, failure, feedback, and reflection. Seasoned investors don’t simply guess; their instincts are based on deeply embedded experience and nuanced understanding that the brain has learned to access almost automatically.

While data-driven strategies are essential in today’s markets, intuition and instinct remain powerful, especially for seasoned investors. These qualities are not mystical or irrational. They are the result of complex neurological processing, honed through experience and reinforced by emotional intelligence and bodily awareness.

All this means that one can create the best tools, read all the research, but still not see the full picture of a macro environment. That takes something that’s not easily obtainable, namely time, sweat and a healthy dose of pain along the way. What’s my intuition currently saying? I think we are entering a new market phase, driven by possibly the same narratives we have been circling this year, but that are now forming into concrete macro forces. I am preparing for those shifts and will write a post about it in the coming weeks, outlining my updated roadmap.

Let’s now read some additional thoughts from Macro D on the current state of affairs, before we scan the weekly macro calendar, check a few interesting chart setups and update the weekly asset allocation model for its latest change and performance.

Wishing you all a successful week ahead!