In my experience working with aspiring traders there are two components that need to be considered to answer this potentially provocative question…
First is general attributes of successful traders and second is which of these attributes women are typically stronger in than men.
Four of the attributes that make great investors and traders are:
1. Understand their own goals and personality
2. Select a strategy that matches their objectives and has a positive edge
3. Have rules in the form of a trading system which they follow to execute this strategy
4. Have a documented trading plan
In my experience some women have a distinct advantage over men because they tend to be more clear and specific on what they want, they tend to make less ego driven decisions and they think through scenarios more broadly.
Women are generally more clear and specific on what they do and don’t want. Understanding exactly what your objectives and lifestyle preferences gives a big advantage to the investor.
The more specifically the trader knows what they want to achieve the better able they are to design the right strategy to get there.
While the majority of men may have some monetary or career goals, in my experience men are less likely to have whole of life goals. If you ask an average woman “what do you want your life to be like?” you will probably get a holistic answer, but if you ask the average man, you are more likely to hear about career and money.
For investing and trading to be successful in the long run it must deliver to the whole of life needs of the investor…simply saying “I want to make 20% per year” is not enough.
The investor must be able to instead say something along the lines of:
“I have 5 hours per week that I can devote to my investments, I can do this after the kids are in bed on Wednesday and Thursday evenings. I would like to make 20% per year but do not want to lose any more than 15% of my equity. I will monitor investments each morning between 10 and 10:30am and make decisions based on my written rules”
Once investors or traders have selected a strategy and designed a system or rules to follow, much of success is driven by their ability to follow these rules. When ego comes into the decision making problems arise. Any time a trader looks to break or change their own rules (because they think they know better), it is typically an ego problem – the ego is trying to prove that they are better than the rules. I hate to over generalize against my own kind, but ego is typically more of a challenge for men than for women.
I am sure most women would agree!
Following the rules of successful investing and trading is critical to long term success. Breaking or bending them may help occasionally, but eventually it will get you into trouble.
One attribute of a fantastic trading plan is thinking through all possible scenarios before investing. When faced with the choice between assuming it will be alright or thinking through all the different things that can happen, most men would certainly choose the former, while women would more typically choose the later (Obviously this is a massive stereotype and I am sorry for that, but my experience coaching and working with traders confirms this generalisation).
Bullish and confident in their own ability and superior judgement, the ego driven trader would ‘back themselves’ and make the trade.
Typically women’s considerations are far broader than men’s considerations. Making connections between different events and situations is a skill far stronger in women. In investing this seems to translate into working through far more “what if?” style questions… And these are very powerful for developing a strong trading plan.
In addition to this, women tend to be far more self aware about what they can fit in and actually do well… this means they have a distinct advantage in creating trading systems that fit their personal situation.
Whereas male traders are much more likely to “just give it a go” or assume it will be fine. The result of this can often be quite devastating.
One of the most important drivers of long term trading success is having a solid plan that covers a range of different scenarios so that the investor knows what they will do in advance. The ability to think through all the possible scenarios and plan for them is a great advantage in the investing world…and one that women are typically much better at than men.
In times of stress our bodies have high levels of adrenalin which directs blood to the muscles and gets us ready for action. This was a very useful evolutionary characteristic in the stone age when stressors such as wild animals could kill you.
Unfortunately it is not so useful in the modern world because our stressors now (like sudden and unexpected moves in our investment portfolio) are not likely to kill us.
Despite this, we still suffer from the adrenaline burst when the event happens…and this reduces our ability to make good decisions. This is because the body is ready for physical action – not mental action due to the adrenaline in our blood.
This is why having a good written plan and a backtested trading system that fits your personality / objectives / lifestyle is so important for investing and trading successfully.
When these stressful events happen, if we have planned for the events then we do not have to make decisions in times of stress (when we are less able to make intelligent decisions) because the decision has already been made in the planning stage.
Thus if women are more able to plan ahead and think through multiple scenarios, they are also therefore likely to achieve better investing and trading results and more likely to achieve their objectives than men.
Does this mean that all women make good traders – No
(But ladies you absolutely have an advantage over the guys)
Does this mean that men make bad traders – No
ANYONE can learn to trade profitably if you possess the commitment and discipline and you have a solid trading system that fits your Personality, Objectives and Lifestyle!
Are you ready to take control of your trading with your own backtested system? Click here to learn how System Trader Launchpad can help you Learn Stock Trading!