Back in 2015, when I was raising funds for my FinTech start-up CityFALCON, I mentioned that our most active user on the platform is a woman trader who trades from home while her family is out. I would never have thought of the reaction that I got then – “this clearly can’t be one of your target audiences”, “you need to focus on professional traders and investors”.
Investors and traders hail from all sorts of backgrounds. Some are professionals, working as full-time traders in gleaming skyscrapers, spending most of their time analysing stocks and news. Others are professionals but work from home. Yet others are quite passive, only checking their stocks once a quarter, and they spend most of their time working other jobs. Some are old, some are young. Some are interested in making a profit as fast as possible, not caring about the companies, while others are there for the dividends and to share profits with companies they believe in.
One demographic that is often overlooked in trading is the difference between the sexes. On Wall Street and in Canary Wharf, it is common to see men in business suits that trade and make deals. That is certainly the stereotype, at least. The numbers agree as eFinancialCareers pegged women traders to be 15% of all traders at investment banks. Among the world’s greatest investors, there is simply no female representation at all. So why is that and how is it changing?
The Reason There Aren’t So Many Women Traders and Investors
The first and most obvious answer is that, in the past, women had a particular role to play, and it wasn’t in the workplace. So that explains the lack in the 20th Century. In the 21st Century, though, most jobs that are open to men are open to women, and expectations are changing. If a man can do the job, so can a woman. Since finance tends to fall under “STEM”, especially for quantitative roles like trading and investing, we notice there is a trend of women not being well-represented in an even broader sense.
Whether they are pushed out of or are not interested in STEM is a pedagogical issue that we won’t discuss here. But it does lend credence to the stereotype, and in the past, aggressive behaviour was awarded in finance. Today, with computers trading with each other, it seems there is greater opportunity for anyone, fueled by or lacking testosterone, to be a trader. Computers don’t care how aggressive you are with them, they are impartial. And so are the numbers.
Why Women Might Make Better Traders and Investors
Some of the main reasons women may make better traders are also stereotypical. Of course, that doesn’t mean all women are better than all men, but there is some truth to the idea that women may make more stable traders – which means they will probably make more consistent profits.
The first reason is the lack of testosterone-fueled trading. Men tend to take more risks, but it hasn’t seemed to lead to any more profits. In fact, according to some simulations run by Financial Skills, men lost more money than women. And according to the same study, men were more likely to exceed trading limits. Limits are there for a reason, and exceeding them is a good way to amplify your losses. And breaking the trading limits wasn’t the only thing men broke.
The same study restricted junior traders from trading or making data requests (for prices) during certain times of the day. While most traders broke the restrictions, men were 2.5 times more likely to do it, which certainly indicates greater risk and more constant (possibly emotional) involvement. It seems men cannot tear themselves away from the market, while women were able to separate themselves. That means they can be more calculating, which is certainly advantageous when trading.
And one reason men take more risks than women is confidence. Men tend to be more confident than women. However, this can be a bad thing, especially when a trade goes wrong. Since men are more confident, they really dislike being wrong, which means they stay in the trade longer than they should. They may also be more confident in contrarian views, even if the trends suggest otherwise
Furthermore, because men tend to be more frequent traders (perhaps because of their constant attachment to market movements?), they were more likely to burn up some of their profits in commissions. Not only were men more likely to hold on to bad trades longer, they moved in and out of trades more often.
The same discriminatory problems that women face in the workforce are similarly acted out in the financial world. Fortunately for women, the internet allows them to be anonymous, so they can publish their advice and no one would know the gender difference. When interacting directly, though, many companies may be less interested in hiring women, especially around the usual child-bearing age in the county. Paul Tudor Jones, a hedge fund manager, exemplified this ingrained discrimination in 2013 when he implied women are not as good traders once they have children. They tend to leave to focus on their children, and even if they don’t, their main concern may be their child and not their work.
Some High-Profile Female Traders and Investors
As stated early, most well-known traders and investors are men. It wouldn’t be difficult to imagine that only men are the most well-known traders and investors, especially when surveying those not involved in finance. Household names associated with investing are Buffett and maybe Graham. For finance, with the exception of Janet Yellen, there are not many well-known women economists or financiers. However, if you ask around in the financial world, you can find a few.
The shining example from Germany is Ingeborg Mootz. Not even two decades ago, she was not known at all. Then she made 500k euros by trading, and she is one of the most well-known people in Germany. Not only did she do it as a woman, she also did it as an elderly person, because she didn’t start trading until her early 80s.
Involved in finance much earlier than Mootz, Geraldine Weiss was the first woman to break into the financial advice arena. In the 1940s, Weiss studied finance and business, and eventually, she became a financial advice writer. However, due to gender discrimination, she signed her columns “G Weiss” and only revealed her full name after she had established a name for herself. Today she is Publisher Emeritus of Quality Trends Inc, a company she founded in 1966.
This isn’t a person exactly but a group of people. In Japan during the 1990s, there was a substantial number of women forex traders. With the relatively patriarchal history of Japan, most women were married and stayed at home, so they tended to make extra money by trading. In the 2010s, up to 25% of the retail forex traders in Japan are women, though now they are younger, more aggressive, and more interested in maintaining independence from a male counterpart (hence the new Ms. honorific). Compare that to the 5% of retail forex traders that are women in the UK and 10% in Australia.
Internet Trading and its Effects
One of the biggest drivers of more women in investing and trading, especially in the retail area, is online trading. If women can trade from home, they can still play the role of housewife and make money – that was a common theme with the Mrs. Watanabes in Japan. Of course, they might also prefer to work at home without a husband, child, boyfriend, or anyone.
Many younger people are opting to work from home because it is more convenient and affordable. People can live far out in the suburbs or rural areas, but they are not cut off from the financial market action powered by New York and London. They can work other jobs and trade on their break on their smartphones, too.
This is doubly beneficial to women, though, because it masks their identity. Some people are blatantly sexist, though most try to be fair. However, as much as we like to think there is no discrimination, it is there, even if it is unconscious. Online trading can eliminate this bias because no one knows who is on the other end.
Previously, women were unable to secure jobs in the traditional financial world. They faced discrimination and often had to defend against gender bias. Now, with an anonymizing internet and trading platform, the bias disappears. If the P&L statement is favourable, then the trader is favourable – man or woman.
Assuming the reasons stated above are true (women are better traders for…), then we can expect to see many more women traders in the future. We just won’t know they’re women unless they talk about it publicly – which does happen to an extent, with Twitter and other social media networks providing a platform for them to boast about their accomplishments.
31/10/2017 at 1:49 am
Very good article. This is definitely next big thing. Keep up the good work.