Men and women are different and no I’m not just talking about the fun body parts. Men’s brains are 10% larger and men’s and women’s brains are wired differently . We react differently to the same stimuli. Sometimes it feels like we’re a completely different species.
Few things before we go with the article. Not all women (or men) are the same. We are just talking about averages here, the average woman compared to the average men. There can be huge differences between individuals of both sexes. Today, there are women that are high powered CEO and men that are stay at home dads. With that out of the way, let’s start! Since most of us traders are men, I will focus on the guys in this article. Here are the 3 main reasons why thinking like a woman will help your trading!
1. Women Are More Risk Averse
Study after study has shown that women are more risk averse then men. Women shun investment vehicles that are perceived as risky (like stocks or forex) and go for government bonds or bank deposits. Risk aversion has its plusses and minuses. On the plus side, increased risk aversion can help guard against unexpected losses. On the minus side, the unwillingness of women to take risks probably explains why there are so few female Warren Buffets. According to a 2013 Catalyst Census of Fortune 500 Women Executive Officers and Top Earners, women comprise only 17.6% of executive officers in the finance and insurance industries. The numbers are similar for CFOs or female board directors. Risk aversion is not the only reason for the discrepancy between the sexes at the top, but more on this later in the article.
How does this relate to forex?
Trading is a male dominated environment, with estimates ranging around
90% of traders being male (although things may be slowing starting to
change). Forex trading in particular can be very risky, especially for
the inexperienced. While data is hard to come by, anecdotal reports
suggest that after 6 months, around 50% of newcomers to the Forex market
will stop trading. After another six months, the number will halve
again. So after year one, only 25% of forex newbies will stick around.
Most of these traders will blow up in a spectacular fashion, losing few
good sized trading accounts before giving up.
Guys tone down the risk. The average man takes way too much risk. While this may lead to more Warren Buffets or George Soroses, it also leads to twice as many men ending up homeless compared to women. Girls, take a chance once in a while, it won’t kill you. Well that’s not true, it might kill you or you may end up homeless. But as they say, no pain no gain!
2. Emotional Stability
They call women creatures of emotion but did you know that men are three times more likely to commit suicide? This lethal gender gap is consistent across countries and cultures. The World Health Organization statistics from 2005 say that in the USA, out of every 1000 people, 17 men will die from suicide compared to only 4 women. In Japan, the numbers are 28 to 10. In Russia, the ratio is almost 6 to 1. Out of a population of 1000 people, 41 Russian men will end their lives compared to only 7 women.
Women are emotional? What do rogue traders Jerome Kerviel (lost $6.9 Billion), Yasuo Hamanaka ($2.6 Billion) and Nick Leeson ($1.3 Billion) have in common, besides losing billions of dollars? If you answered trouser snake, you would be correct!
The weakness of men is the facade of strength
Part of reason for the high male suicide rate is that men don’t know how
to deal with their emotions. In addition, men are less likely then
women to ask for help out of fear that they will be ostracized. We are
expected to ‘’tough it out’’ on our own. In the States, 72-89% of
females who committed suicide had contact with a mental health
professional at some point in their life, while only 41-58% of males who
committed suicide had made use of this resource. Men’s inability to
deal with emotions leads to suicide, premature death due to coronary
heart disease, violence, accidents, drug or alcohol abuse. And yes, to
blown trading accounts.
The first step to controlling your emotions is to learn how they affect your daily life. I used to make fun of my sister for keeping a journal. At age 27, almost 15 years after my sister started hers, I started my own journal. I recorded trades taken during the day, the reasons for taking them and my emotional state. Did I trade sick? Was I angry? Did I follow my trading strategy or was I just revenge trading?
Keeping a trading journal is just one of the things that can help you get a handle on your emotions. Having friends you can openly talk to without being made fun of is another. A good therapist can also help.
3. Women Lead More Balanced Lives
In his book ‘’Why Men Earn More’’ Dr. Warren Farrell outlines 25 different workplace choices men make that ultimately lead to them earning more money. These include taking up hazardous jobs, working longer hours or willingness to travel (only 16% of frequent flyers are women, for example). Dr. Farrell goes on to say that:
‘’Women’s choices appear more likely to involve a balance between
work and the rest of life. Women are more likely to balance income with a
desire for safety, fulfillment, potential for personal growth,
flexibility and proximity-to-home.’’
It’s not all about the money. I don’t know about you but the main reason I got into trading wasn’t for the money. It was the potential for personal freedom. When you trade for a living you don’t have to answer to anybody but yourself. You can stay at home with the kids or take off to Rome for a working holiday (going on August 20th woo-hoo!). It seems women figured out long time ago that the secret to a happy life is a healthy balance. This is something most of us men are just beginning to find out.
