Have you ever listened to that gut feeling you had, only for it to lead you astray? Sure, there were those times when you turned out to be right, but there are those other moments when things didn't pan out the way you thought they would.

When should we rely on our instincts, and when should we take a step back and evaluate the possibilities? What factors get mixed up into our gut feelings when we make choices on a whim? Do things change when we go from a beginner to an expert?

One of the most interesting and relevant examples of using your gut has to do with the stock market.

Picking stocks during a financial tsunami

When people trade stocks, they often pick companies they have a good feeling about, or they'll swear by a certain trading methodology. Many others turn towards the professionals for help.

Meredith Whitney is a financial analyst known for her accurate predictions. Her most well-known prediction was her pessimistic forecast on the banks in mid-2008, before the problems of Merrill Lynch and Lehman Brothers became apparent (the latter filed for bankruptcy later that year).

Whitney said in Fortune magazine, "It feels like I'm at the epicenter of the biggest financial crisis in history."  What followed was financial crisis of 2008-2009, which economists consider the worst financial crisis since the Great Depression in the 1930s.

After her accurate prediction on Citigroup, a bank that suffered huge losses, Forbes magazine ranked her as the second-best stock picker in the financial industry. As the financial tsunami unrolled, The New York Post placed her on the list of 50 most powerful women in New York City, while a CNBC viewer survey named her the "Power Player of the Year."

In 2010, she appeared in an interview on the program 60 Minutes, where she once again made a prediction: over 50 cities in the United States would default on their municipal bonds, totaling hundreds of billions of dollars in losses. She stated that this was "something to worry about within the next 12 months."

In 2011, only $760 million of municipal bonds defaulted, a far cry from the hundreds of billions of dollars predicted. Compared to the 6.8 percent return of taxable bonds, municipal bonds had a more favorable 8.1 percent return. Afterward, Whitney described her forecast as a "guesstimate."

Why pressure can worsen our performance

Even though we can train our instincts to become better at a skill, it doesn't mean we'll be right all the time. Financial analysts don't always predict trends correctly, even if they've been doing it for a long time.

Every situation has a number of ever-changing factors at play, making it hard to consistently make the right decisions. According to Sian Beilock, a psychologist at the University of Chicago, the reason why people perform worse under pressure is not because they think too much, but because they consider too many factors at once. While some factors are relevant, others distract them from the main task and keep them from accomplishing what they need to do.

But what separates the experts from the novices is that experts tend to get better results over a long period of time. They can both manage their emotions and the facts at hand. People who frequently face similar situations over and over will have a better idea of what to expect using their past experiences and knowledge.

Exercise your gut

"Listen to your gut" is such simple advice. By now though, we know that it's not that simple. Sometimes we need to rely more on logical thinking, while other times require an instinctive response.

No matter how experienced we get, our gut isn't always going to be right. No situation is exactly the same, which makes predictions difficult at times. But our gut instinct gets a better idea of what to do when we exercise it more often.

If you're still in the early stages of learning a skill, think carefully about your actions so that you can learn how to use your instincts. When you become more experienced in an area, you can (and should) rely more on your gut.