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Quality, Not Quantity: Here's Why Women Make Better Traders

Paul Modley

To review the original article click here 11th May 2016

In a field where females represent just 15 per cent of the workforce, you can perhaps be forgiven for assuming men are naturally better traders than women.

But recent research by Alexander Mann Solutions and Trading Hub, a global financial information services company, indicates quite the opposite.

The study tested 350 entry-level graduates over four weeks through a simulated trading exercise. At the end, the team of female participants were found to be 34 per cent more effective than their male counterparts.

On analysing the results in detail, we found three core reasons why the women triumphed over the men.

Risk Taking
First, the male traders were 30 per cent more likely to take bigger risks than the females. While some may see this bravado as beneficial in a competitive environment, in the long run, taking such risks is extremely likely to result in losses.

With a more considered approach, the women traders were able to make the best decisions and ensure fewer losses were made.

Rule Breaking
Second, the men in the study were 2.5 times more inclined to break the rules by booking late trades or exceeding limits than the women.

By avoiding reckless tactics, the women operated in a more streamlined and efficient manner which resulted in better decisions.

Quality over Quantity
Third, women had made fewer trades compared to their male counterparts by the end of the study – around 69 on average to the men’s 94.

This shows that not only were the women able to make more money, but they did so using less capital and in less trading time.

Their focus on better quality trades instead of higher numbers arguably proves that the stereotype of trading as a bullish, busy environment is not perhaps the most effective way of working.

Missing a Trick
The insight this analysis provides suggests that the City’s trading floors are missing a trick – and potentially losing out on profitable trades – by continuing to enable and encourage the laddish culture it is often known for.

It is tempting to question whether the global financial crisis of 2008 would have been less severe if there was a more proportional representation of women during events like Lehman Brothers, the Libor scandal and Nick Leeson’s rogue trading at Barings Bank, but hindsight is a wonderful thing.

The simple fact is that female representation on trading floors – or the lack thereof – has been much talked about, but seldom acted on. This suggests that employers and board members still don’t recognise the real value of employing more women.

As this study indicates, trading floors are simply not operating in strategically effective ways if they continue with such an unbalanced gender representation.

In a field which centres on money and securing the best deal or investment, those responsible for hiring and retaining staff should be looking to attract and hold onto the most profitable individuals. And such professionals don’t always possess the characteristics of stereotypical traders.

Perhaps it is time for a new wave of female trading talent to hit the floor.

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