Trading conjures up images of sharply dressed men, shouting at each other on the trading floor and then driving home in their luxury cars to be greeted by bikini-clad wives, sipping Pina Coladas by the pool. However, times have changed. Open outcry and over the phone trading have been swept aside by electronic trading, and the rapid growth of easy to use online trading platforms has paved the way for a new group of traders to enter the market.
People who do not fit the traditional trader stereotype, such as women, young adults and people from countries without major financial centres, are taking to the stage and becoming keen participants.
With reports of lack of gender diversity plaguing the industry, it is evident that men are still dominating the arena. However, our Modern Trader Report has shown not only that women are breaking into Forex trading, but also how they have the potential to outperform their male counterparts in the long run.
Here are five examples of how women are delving into the world of Forex trading.
1. Women Favour Forex over Other Trading Styles
It is interesting to see these at the top of the list of trading styles that women prefer. Studies have concluded that women are more risk-averse than men, and these trading types may be classed as higher risk than binary options and investing, for example.
This could explain why the proportion of women who prefer spread betting, investing, social trading and binary options trading is higher than the proportion of men who prefer these trading styles. Overall, however, the distribution of preferred trading styles is quite similar between men and women, suggesting that women who are entering online trading are not adopting a significantly different approach to men.
2. Women Favour Trading Platforms Designed for Easy Forex Trading
The majority of women preferred UFX, a fully regulated broker based in Cyprus and regulated by the Cyprus Securities Exchange Commission (CySEC). One of the notable features of this and the other platforms in the top five preferred by women is that they are all very intuitive and user-friendly. They all provide access to Forex trading and CFDs and they offer a good degree of support.
3. 42% of Women Classify Themselves as Experienced
It comes as no surprise that a higher proportion of women classify themselves as beginners as compared to men. That said, of the 26,000 traders questioned, a rather high 41.8% of women classed themselves as experienced, which shows that a significant number of women are already participating in trading the markets.
4. Women Could be Better Traders
Whilst women tend to be more risk-averse, there is evidence to suggest that this more cautious approach to trading could deliver better results. According to one recent study by Lu, Swan and Westerholm, female stock traders were more prone to buying when markets were falling, losing out in the short term, but resulting in significant gains in the longer-term, as they purchased stock when prices were low. This resulted in women returning as much as 43% on individual stocks, and 21.4% over a portfolio of 28 stocks. Men had more of a tendency to buy and sell assets quickly, and to trade in the opposite direction to women, resulting in overall losses.
In an observation made by Deaux and Farris in 1977, men were more likely to be overconfident when acting in an arena that is traditionally male-dominated. Numerous trading models predict that overconfidence is linked to excessive trading to the detriment of the trader, and studies have supported this theory. In Barber and Odean’s 2001 study, they concluded that aggressive trading strategies displayed by men led them to underperform in comparison to women.
The same principles apply to Forex trading, and if more women share their positive online trading results, then even more women are likely to sign up.
5. The Rise of Female Traders
Currently women account for just 10% of the UK online trading market. Of course, there is a long way to go before the gender gap is closed, however we don’t have to look too far back in history to recall how women were all but absent from the markets. As brokers see the opportunity available for engaging female traders, they are likely to increasingly target this market, which will lead to continued growth for the sector.
Furthermore, there are signs that the industry is starting to take action against the gender issues. Many leading hedge fund companies are actively seeking to recruit female traders, particularly targeting young women for fellowships and graduate schemes.
Although it is likely to take time for the balance to be redressed between men and women in trading, there are signs that there will be more increases in the female trading population, as they continue to be attracted by accessible online platforms.
If their trading skills do indeed result in them outperforming men, then these hobby traders could start a wave of new female hedge fund managers being recruited to the top positions too.
Appendix A – Preferred Online Trading Style by Gender
* Sample size: 12,807 traders
** Data source: BrokerNotes’ web analytics
Appendix B – The Percentage of Male to Female Visitors by Brokerage Service
|London Capital Group||87.41%||12.59%|
* Data source: BrokerNotes’ web analytics