From testosterone-fueled trading room floors through to smartly-dressed men working at terminals, the financial markets have always been the domain of men. While the traditional trader image is still an ambitious, risk-taking male, the times are rapidly changing. More and more women are choosing to get involved in the financial markets, and Forex is their instrument of choice. The growth of electronic trading and the evolution of flexible working conditions has helping to fuel this movement, with women often succeeding where men fail.
Women traders and Forex market demographics
The Forex market is an extremely large and busy place that brings together central banks, commercial banks, investment funds, brokers, such as AvaTrade and others, and last but not least — retail traders. According to the latest Bank of International Settlement (BIS) figures, Forex market turnover was $5.1 trillion in 2016, making it the biggest financial market in the world. According to Broker Notes, there are 13.9 million online retail traders in 2018, including 2.7 million female traders. While this figure is a small minority at one in seven, it has seen a sharp increase from just one in ten in 2017. Women prefer to trade Forex than other financial instruments. Spread betting, investing, social trading, and binary options trading also popular.
Women have different trading styles
Not only are more females choosing to trade Forex, but women are also finding ways to succeed on their own terms. Multiple studies have analyzed how women and men trade, with female traders taking fewer risks, involved in fewer financial transactions, and recording greater profits. Many of these results can be put down to different trading styles. While male traders tend to trade with a specific target or performance goal in mind, women are more likely to have a specific purpose which encourages them to hold trades for longer and make more conservative choices.
According to a recent study by Lu, Swan and Westerholm, female stock traders were more likely to buy when markets were going down, losing in the short term but gaining more later on. Generally speaking, women traders are more risk averse and less aggressive than male traders, meaning less leverage and fewer overall trades. Women are also more likely to let profitable trades run than men, with this “buy and hold” strategy meaning less turnover and lower transaction costs.
In contrast to men, who indulge almost exclusively in fundamental and technical analysis, some studies have found that women are more likely to trust their intuition and receive tips from friends. Social trading has become a key trend among some women traders, who often replicate the operations of expert traders and talk about trade opportunities in forums and all-female social media groups.
Reasons why women trade differently than men
Trading differences between the sexes can be attributed to both lifestyle and biological factors. Cultural and lifestyle factors mean that women often trade on a part-time basis, with less frantic day trading leading to fewer risks and longer trade times on average. According to research into women and money published last year by Professor Roslyn Russell, women traders are driven by family and lifestyle priorities more than men, which again, makes risky decisions less likely. Biological factors may also contribute to risk aversion, with women less likely to put all of their money on the line when it may be needed to raise their family or put the kids through college.
Women make better traders
According to a comprehensive study by Financial Skills, a trading profiling company founded by a group of ex-traders from Merrill Lynch, women are better at trading than men in almost every way. While this study from 2014 analyzed interns at investment banks rather than retail traders, it highlighted some significant differences between the sexes. Female traders have smaller losses than men, were less likely to cross trading limits than men, traded less often than men, and recorded greater profits than their male counterparts. The study also found that male traders were 2.5 times more likely to break their trading rules than women.
Flexibility and low barriers of entry
The changing nature of Forex trading has enabled more women to enter the arena, as low trade account limits, easily accessible software, and flexible work conditions lower the barriers of entry. Women can easily trade from their dining room table or home office, with Forex often their instrument of choice. Many Forex brokers offer accounts from as little as one or two hundred dollars, meaning almost everyone can get involved.
Powerful online trading platforms such as MT4 and MT5 make it easy to work from home, allowing people to combine Forex trading with existing part-time and full-time jobs. Flexible hours, work-from-home conditions, and low barriers of entry are likely to attract more women traders over the next few years, with intuitive and user-friendly platforms making it easier than ever before to get involved.