07 Mar Who are better traders? Men or Women?
When it comes to men and women, there’s no denying that both sexes adopt very different strategies with their trading habits. While the industry has long been associated with a significant number of male traders, recent years have seen a steady growth in the number of female traders – in Australia, this has mostly been in forex, where female traders comprise 9% of the industry but are expected to grow to 14%. So what are the reasons behind this demographic, and who performs better?
From my own experience as a trainer to both male and female traders, I have observed that risk appetite plays a notable difference. With forex traditionally regarded as an extremely volatile and risky type of instrument, it appeals to male traders who are generally willing to take on a greater level of risk and exposure in the hope of making instant money. There is less discipline in their approach, while patience is often shorter if they have a position that is not generating the profits they expect.
Women are generally more controlled in their trades and approach with added caution – choosing forex instruments that are more widely followed and with less volatility. Their conservative, methodical approach affords them greater patience, entering far less trades than their counterparts. One of the preeminent behavioral studies into the matter was conducted in 2001 by economists Brad Barber and Terrence Odean. Not only did they find that men were trading 45% more often that women, but their returns were actually lower – attributed to an overconfidence among male traders.
While a lower degree of confidence could sometimes be cause for concern, the restrained approach displayed by female traders ensures they are less exposed to the effects of the market. In this sense, women traders have superior abilities to set goals and manage capital, while always striving to improve their abilities instead of focusing on quick profits. In turn, this allows for a calm, measured response in the event that a trade fails, and has proven more successful in practice.