Happy International Women’s Day from KVB PRIME!
It’s time to celebrate International Women’s Day 2020. Financial markets have invariably been male dominated but now gladly times are changing in forex trading society; KVB PRIME want to share the facts with you about the rise of female traders.
The modern world has come a long way in terms of gender equality and opportunity over the past couple of generations; where once even the humble office cubicle was exclusively a male domain, it’s thankfully no longer unusual for women to assume the very top corporate roles and take responsibility for multi-billion pound decisions on a daily basis.
Despite this progress, there’s still a striking lack of female presence in forex and investment in general — and men continue to dominate the trading arena even as women have climbed to the top of many other disciplines and industries.
The discussion as to how and why this is raises a number of complex issues, but the two most salient questions that need answering are fairly obvious: why is it that women are still so disproportionately absent from the trading sector, and can we expect this to change anytime soon?
Where are All the Women?
At the onset of the new decade, it’s thought that women comprise approximately 11% of all forex traders based in the UK — including part-time and hobby traders — while 2012 research by JM Coates found around 5% of professional trading desks were occupied by female staff.
This may seem like a very small proportion, but the number has actually grown quite miraculously over the past decade or so; just think back to the testosterone-filled workplaces in 1980s period films like The Wolf of Wall Street and you’ll find an all-too-realistic portrayal of a time when women were almost completely shut out of investment disciplines altogether, save for token secretarial roles.
It’s generally accepted by academics that this historical disadvantage — coupled with the sense of confidence and entitlement it has afforded men — is a major reason that women are still underrepresented in the trading sphere through to the present day; a 2016 piece by currency exchange commentary site Forex Crunch cites poll data that found only 22% of today’s women rated themselves as ‘very well-prepared’ for financial decision-making, compared to the 37% of men asked during the same survey.
Another potential factor posited for the lack of balance concerns the litany of bonus and remuneration schemes offered by financial corporations, which have been criticised as disproportionately geared towards men; as one University of Leicester paper on the subject noted, “though male traders may underperform female traders and make profits less often, reward schemes in financial firms may still select towards large groups of male traders.”
Further reading: https://www.theglobeandmail.com/globe-investor/women-still-underrepresented-in-finance-sectors-top-jobs/article28884348/
Forex and the Female Psyche
Despite this frustrating discrepancy between the genders and the challenges surrounding attracting female investors to what remains a traditionally male arena, psychologists and market analysts alike have recently begun to note that — as women gradually start to dip their toes in the trading sphere more often — their innate psychological differences to males are actually proving to be beneficial in some areas.
For example, mainstream psychology has long maintained that females tend to be more cautious and risk-averse in their behaviour and thinking patterns than men, which in this context has translated to them typically having greater discipline (in terms of sticking to a set trading plan) and placing a higher degree of emphasis on risk management and minimising losses.
Indeed, stock market research by Lu, Swan and Westerholm highlighted how female traders more regularly chose to purchase securities when the markets where falling, resulting in some near-term losses but more significant gains in the longer term, as instruments were often purchased when prices were low.
Male speculators also trade more frequently on average than those select females who do opt-in to the lifestyle, with data for 2014 indicating that women accounted for just 8% of all trading activity across the forex market that year.
However, this more discerning behaviour has seemingly resulted in a trend of ‘quality over quantity’ — leading some intrepid female speculators to return as much as 43% on individual stocks and 21.4% over a portfolio of 28 stocks — while men were observed to buy and sell stocks at a quicker rate (and in the opposite direction), facilitating greater losses overall.
The Boys’ Club vs The Underdog Effect
Ironically, findings from more general, traditional (and, in some cases, decades-old) gender studies would submit that men’s unfettered collective reign over the trading sector could actually be damaging to their individual successes, if the same knock-on effects witnessed in other professional areas hold equally true for trading.
Namely, there is some evidence to suggest that the abundance of male input may have created a sort of ‘echo chamber’ of unwarranted encouragement, to which women have heretofore avoided exposure.
For instance, a classic behavioural study by Deaux and Farris (1977) found that, over time, men can begin to feel overconfident when competing in male-dominated arenas; this same phenomenon has been implicated as a cause of over-trading to the point of diminishing returns among some men.
A more recent study by Barder and Odean (2001) also ostensibly confirmed links between men’s comparatively aggressive/impulsive trading tendencies and their perceived underperformance when compared with their female competitors, who — as discussed above — are statistically less likely to deviate from their chosen strategy, and who generally take more time to consider their next move before jumping in.
Further reading: https://www.psychological-consultancy.com/blog/women-twice-likely-cautious-risk-men/
Are Women Warming to the Forex Industry?
While the forex gender gap remains an undisputable reality at this moment in time, many industry commentators are optimistic that we’re witnessing a growth in the number of women becoming involved in trading.
What’s more, this figure is expected to compound ever more significantly in the coming years as more user-friendly and accessible online platforms become readily available and brokers elect to tap into the potential for accruing female clients with tailored user recruitment campaigns.
Indeed, an encouraging 2015 study by online broker City Index shows this exponential rise could already be well underway; according to their findings, 46% more women opened trading accounts with the firm during the first quarter of 2015 compared to 2014 — just one year prior — while the number of female traders opening accounts annually had risen by a massive 1,434% overall since 2001.
Curiously, recent research by platform comparison site BrokerNotes also indicated that forex has become the single most popular form of trading discipline among female investors, despite being perceived as more risk-intensive than other categories such as binary options or stock investment.
Fintech, Social Media and Changing Attitudes
In addition to the above, it’s worth documenting that even though an intimidating ‘trading floor culture’ remains a barrier for some women in office settings, the recent birth of mobile forex apps and trading platforms during the smartphone era has brought about a parallel ‘work from anywhere’ ethos for self-motivated traders, allowing women to do their thing away from any unwelcoming atmospheres that may have previously deterred them from getting involved.
You only have to quickly scroll through this vibrant new subculture’s Instagram hashtags (#forexlifestyle, #traderlifestyle, #fxlife and so on) to see how technology has fostered this empowering DIY attitude, where women are now beginning to flaunt their trading prowess — and the lavish lifestyles it can afford them — just as openly and proudly as their male competitors.
Furthermore, analysts have noted that, despite the unique financial obstacles facing their age group, ‘millennials’ — those born between the 1980s through to the mid-1990s — are more likely to hold a portfolio of investments than any previous generation!
This opens the door to the possibility of the gender gap closing even further as a natural result of investment ceasing to be solely the pastime of the old and rich, and instead becoming more widespread among younger people within increasingly progressive and gender -balanced financial, cultural and professional environments.
