George Soros’s Unconventional Trading Strategy

George Soros is a name synonymous with trading success. His record in the financial markets is nothing short of impressive, and he has built a reputation for being one of the most astute traders of our time. However, what sets him apart from other traders is his unconventional approach to trading, which he has dubbed ‘animal instincts.’

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In his 1995 book ‘Soros on Soros: Staying Ahead of the Curve,’ Soros revealed that he relies heavily on his intuition and instinct when making trading decisions. He has often stated that he uses his body as a barometer to gauge market sentiment. Specifically, he claims to use acute pain as a signal that there is something wrong in his portfolio.

Source: cdn2.psychologytoday.com

Is it Physiologically Plausible?

While it may seem far-fetched, the evidence suggests that Soros’s approach may be rooted in physiology. When we experience stress or anxiety, our body’s ‘fight or flight’ response is triggered, causing our psoas muscle to contract. This muscle runs from the lower spine to the thigh and is often associated with lower back pain.

A study published in 1985 found that patients with chronic back pain experienced a significant tensing of their back muscles when under stress. This suggests that the body’s physical response to stress may be a more accurate indicator of market sentiment than traditional trading metrics.

The Role of the Amygdala

When we move against the herd and take a contrarian view, our brain’s threat-detection center, the amygdala, is activated. This can lead to chronic cortisol dysregulation, which can lower our pain threshold and increase inflammation and pain. Soros’s experience of backaches as a signal to act may be a manifestation of this physiological response.

The somatic marker hypothesis, developed by Antonio Damasio, suggests that gut-and-body signals can bias our decisions before conscious reasoning has caught up. This is particularly relevant when the stakes are high and the picture is unclear. Soros’s approach to trading may be a prime example of this hypothesis in action.

The Implications for Traders

While it may not be possible to replicate Soros’s exact approach, his use of animal instincts as a trading signal is a valuable lesson for traders. By paying attention to their body’s physical response to stress, traders may be able to gain a more accurate insight into market sentiment.

Moreover, Soros’s approach highlights the importance of considering the physiological and psychological factors that influence our trading decisions. By acknowledging the role of these factors, traders can develop a more nuanced and effective approach to trading.