Female traders vs male traders, does your gender determine your success in the financial market? Gender roles in society refer to a set of behavioral norms that society considers socially appropriate for individuals of a specific gender within a specific culture. But does gender really matter in the financial market? Does it shape success in any way?
The idea that gender could be influential in trading success, whether in the stock or forex markets, has been debated for a long time. Trading overall requires analytical skills, discipline, risk management, and, most importantly, emotional control. These traits are not exclusive to any gender. However, subtle differences in how men and women handle these traits and how they approach trading could influence their strategies, decision-making processes, and more. Does this mean that one gender is more successful than the other? Let’s explore the psychology behind it in this article.
Is success in trading a specific amount? What Exactly is Success in Trading?
Success in trading is not a specific amount of money or a sudden profit; it’s usually determined by the ability to generate consistent returns over time while managing risk effectively. Factors such as market knowledge, strategies, capital allocation, and more play a crucial role in the outcome of trades. How traders achieve and employ these factors may vary, but researchers suggest that behavioral differences between female traders vs male traders may impact their trading journey and outcomes.
Gendered Psychology of Trading
Let’s take a look at the gendered psychology of trading.
Numerous studies have been conducted that show different psychological traits of men and women that affect their approach to risk, stress, and decision-making. Although these characteristics can shape the way they trade, they do not necessarily determine success or failure.
One of the most well-documented psychological differences between men and women in trading is their risk tolerance. Not only in trading but overall, men tend to be more willing to take risks than women. As we all know, being a trader requires a person willing to take risks maybe way more than a normal person, but when a person is trading, it's crucial to remember that in their trades they should manage their risks carefully and be consistent with it. Many studies across different domains have supported this claim.
A study conducted by Brad Barber and Terrance Odean (initially published in the late 1990s) called “Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment” shows that male traders are more prone to overconfidence than their female counterparts. Simply, it means men tend to trade more frequently, which, paradoxically, often leads to worse performance. The study shows that on average, men traded 45% more often than women, but this overtrading resulted in lower net returns due to transaction costs and the tendency to chase gains.
Conversely, women tend to be more attentive, take fewer trades, and be more cautious in their investment strategies. This lower trading frequency often leads to more thoughtful, measured decisions, which can result in consistent returns.
Overconfidence is a common trait among male traders. Although this trait has helped some succeed through bold decisions, at the same time, it can lead to significant losses. According to a study by Charles Schwab, 74% of men in the survey believed they had better-than-average investment skills compared to just 55% of women. This disparity in confidence shows that male traders can be pushed to take risks that they may not be fully prepared for, like investing in high-leverage instruments in forex or speculative stocks.
In contrast, female traders tend to exhibit more self-doubt, making them more cautious about their investments. This may limit women’s potential to take advantage of high-risk, high-reward opportunities, but it often helps them avoid catastrophic losses. Studies after study show that women, on average, had better trading results than men despite making fewer trades. “Analysis of trading data from a social trading platform (2020)” also shows that women’s higher level of discipline and lower risk tolerance allowed them to make more measured decisions, which leads to better long-term results.
Female Traders vs Male Traders: Emotional Control
Emotional control is another factor that could impact trading success. The fast-paced and stressful nature of financial markets requires traders to manage their emotions effectively.
What is the male vs female stress response? Men often experience a surge in testosterone when they encounter stressful situations. For example, in the trading markets, there could be rapidly fluctuating markets. This hormonal reaction can push them to make impulsive decisions, chase short-term gains, or try to double down after losses, hoping to recover quickly. This behavior is referred to as “revenge trading,” where emotions override logic and result in substantial losses.
“Endogenous steroids and financial risk taking on a London trading floor” (2008), a study by J.M. Coates and J. Herbert in the UK, explains that those with higher levels of testosterone were more likely to take riskier bets, especially after winning streaks. On the other hand, the study shows that female traders were better at controlling their emotions and less likely to engage in reckless trading behaviors. Women tend to be less influenced by short-term emotional fluctuations. This may be because, biologically, women’s hormonal responses to stress differ from men’s. As a result, female traders tend to stick to their pre-determined strategies, and they try to preserve their capital during market downturns.
Why are Most Traders Male?
In the past, financial markets were male-dominated, but the dynamic has drastically changed and is continuously changing. For example, in the UK, women were excluded from the trading floor of the London Stock Exchange until 1973, the same way in the early days of the New York Stock Exchange, women were not a part of it. But ever since women have included themselves in the financial markets, they have been breaking through glass ceilings, and with technology evolving, the opportunities to succeed in the stock and forex market are limitless, regardless of trader’s gender.
Real-World Examples of Successful Female Traders and Male Traders
Muriel Siebert; she was the first woman to own a seat on the New York Stock Exchange (NYSE) and a pioneer for women in finance. Siebert’s career was marked by a cautious but calculated approach to investing, allowing her to build a successful brokerage and investment career. She founded Siebert Financial in 1967, the first brokerage firm owned by a woman, and then she was the only woman to own a seat in the NYSE amongst hundreds of members. Her legacy lives on and has inspired thousands of women to pursue careers in the industry. Her company continues to evolve and has over 15 retail locations.
Another notable name among successful female traders is Linda Raschke. She is a professional trader and market analyst with an extensive career in futures and commodities trading. Her disciplined, strategic approach to trading has earned her consistent success, and she is well-known for her ability to manage risk.
On the other hand, George Soros is an iconic figure renowned for his high-risk, high-reward trading style, particularly his famous trade against the British pound in 1992, which earned him over a billion dollars in one night. Soros ties his success to his willingness to take risks that others wouldn’t. He is also very famous for his philanthropy activities alongside his presence in the financial market.
At the same time, male traders such as Warren Buffett have proven that success can also come from a more calculated and long-term strategy. Buffett is famous for his disciplined investing approach. His growth in the trading market is an excellent example of how emotional control and a clear strategy can lead to massive success. Buffett, the CEO of Berkshire Hathaway, made a significant investment in Coca-Cola ($1.02 billion, 7% of the company shares, equivalent to approximately 21% of His own company, Berkshire Hathaway, at the time). Now, the same stocks are worth more than $26 billion. His investment resulted from several reasons: brand recognition, consistent and increasing dividends, global reach, and more.
