The Role of Intuition in Investment Decision-Making among Traders on the Stock Exchange

Abstract

The stock exchange is a financial platform where traders conclude billions of transactions on buying and selling securities, options, and futures every second. Often, the success of a trade depends not only on the situation at the stock exchange at a specific moment in time but also on the individual characteristics of the trader. The misconception exists that investment decisions on the stock exchange are made solely based on data analysis. Genius investors like Jessie Livermore, Warren Buffet, and George Soros[8] have paid attention not only to ticker data and stock prices, but also to their intuition. Intuition is used when decision-making based on data analysis and facts is insufficient. For example, an intuitive feeling can help a trader notice subtle changes in the market that may be critical for making the right decision. Research shows that experienced traders who combine intuition and data analysis are more successful than those who rely solely on intuition or analysis. Intuition can help a trader notice when the market situation changes, but analysis and data verification can help determine the significance of these changes and how to benefit from them. This scientific article provides a definition for “intuition,” a review of studies dedicated to the influence of intuition on the process of investment decision-making among traders on the stock exchange, and identifies the advantages and disadvantages of decisions made based on intuition. Measures for developing intuition are also proposed.