Why Women Should Become FX Traders

Why Women Should Become FX Traders

You are likely to have the innate characteristics that will help you succeed in trading—and they are better than what men have. In many studies, women are proven to be better traders than men.

Men really hate this observation. To make a point about accepting losses, which entails admitting you were wrong about a trade, I once made this point in a presentation at the Paris Technical Analysis Expo. The audience was about 200 people, about 95% men. The stop-loss section of the talk was perhaps four Power Point slides out of 50 slides and the women-better-than-men was one entry on one slide.

I was loudly booed. I had never been booed before so it was a surprise. I was also never invited back to be a speaker at the Paris Technical Analysis Expo.

The study I was talking about then was a 2001 update to the 1997 study titled “Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment” ” in the Quarterly Journal of Economics by Terrance Odean and Brad Barber. (http://www.gsm.ucdavis.edu/~odean/papers/gender/gender.html).

These authors have done numerous studies on why individual investors underperform the indices, as in https://faculty.haas.berkeley.edu/odean/papers/returns/Individual_Investor_Performance_Final.pdf. In other words, they did not set out to distinguish between women and men—it was a by-product of bigger studies.

The answer to individual underperformance: overconfidence and overtrading.

Odean and Berber found men overtrade far more often than women, about 45% more. And single men trade 67% more than single women. The women make 1.4% more money than the men generally and single women make 2.3% more than single men.

This and other studies look at tens of thousands of brokerages accounts. Odean and Barber looked at 35,000 brokerage accounts. Stewart look at 3800.  The results are statistically significant.

If you are able to visit a trading floor at a financial institution, you will find a good cross-section of persons represented—women, minorities, the handicapped. Markets are truly equal-opportunity employers, color and gender-blind and indifferent to handicaps if the performance is there.

Google “women better traders than men” and you will get 32.3 million hits.

Most of those site just regurgitate the same material like https://www.dumbbitchtrades.com/trading-women/women-better-traders-than-men/, a site title we find unnecessarily aggressive. It’s enough to know that some insecure men think women are dumb bitches without women accepting the term, let alone elevating it in a website name. After all, brainpower is distributed in the same normal distribution curve of all humans as (say) height. Of course the world contains some dumb bitches at the far end of the distribution curve. It also contains some blindingly dumb dicks (tosser or wanker if you are British). Derogatory terms are not useful.

More updated studies are reported every couple of years. Reuters has “Why women are better investors – study” published 07/06/17 https://www.reuters.com/article/us-money-investing-women/why-women-are-better-investors-study-idUSKBN18Y2D7.

Neil Stewart at the Warwick Business School—who has an impressive list of fascinating papers in cognitive sciences—has an update. His study looked at 2800 traders and found men got a return 0.14% over the FTSE stock index but women got 1.94% over it. That amount of 1.8% more might seem on the small side, but consider the compounding effect of keeping that extra 1.8% in the market over a decade. Besides, fewer trades means lower brokerage commissions and fees.

Stewart found, like Odean and Barber, that women trade fewer times than men. They also avoid what Stewart names “lottery style” trading, targeting cheap, speculative names that might fly and let them “get rich quick.” The men are also far less willing to dump a loser, which is the point of letting your ego get in the way of financial rationality. Like a Big Cat, women have the patience to wait for a high probability trade, and to sit quietly in the grass and let the low probability trades go by.

Another site is https://www.thebusinesswomanmedia.com/women-better-financial-traders-men/

This site says men are more emotional than women in the context of trading. The word “emotional” is semantically loaded and not really necessary. Stewart himself says women are investing to meet long-term goals while more men are thrill-seeking. Other studies find that men are more willing to break other rules and not just stop-loss rules.

The key point is that women have a natural advantage in trading because for the sake of survival and to thrive, women have reality-checked goals, follow rules, admit when they are wrong and need to take a loss, and are able to avoid getting sucked into obsessive trading. If you stop and think about it, more men than women treat securities trading like obsessive gaming. You never hear about the overweight drop-out living in her parent’s basement and obsessively gaming. It’s always his parent’s basement.

Okay, that’s probably a cheap shot and possibly not entirely accurate. All the same, never forget the market doesn’t know you are female. It doesn’t know—or care—if you are fat or thin, tall or short, white or black or purple, college-educated or self-taught. The market is gender-blind. This is a huge advantage that appears very seldom in life.

Grab it.

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