Gender inequality in Forex: Where are the women?

Women's Forex is extinct or just gaining momentum

Modern society has come a long way in the last few generations when it comes to gender equality and opportunity; even office cubicles that were once the domain of men are now more accessible to women, and thankfully it's no longer uncommon to see women in senior positions in companies and making multi-billion dollar decisions on a daily basis. Despite these advances, women are still in short supply in the Forex market and investing in general, and although women are rising to the top in many other fields and industries, the world of trading is still dominated by men. Discussing the causes and reasons for this phenomenon raises a number of complex questions, but the two most important ones are fairly clear: why women are still disproportionately underrepresented in the trading industry, and whether we can expect this to change anytime soon.

Where have all the women gone

At the beginning of the new decade, women made up around 11% of all Forex traders in the UK, including part-time and hobby traders, and a 2012 study by JM Coates found that women made up around 5% of professional traders. While this may seem like a very small percentage, it has actually increased significantly over the last decade. Think back to the testosterone-filled workplace in the 1980s movie "The Wolf of Wall Street" and you'll see a realistic picture of a time when women were almost completely excluded from the world of investing, except in token secretarial roles.

Scholars generally agree that this historical shortcoming, along with self-esteem and male empowerment, is the main reason why women are still underrepresented in trading today. According to an article published on Forex Crunch in 2016, only 22% of women today rate themselves as "very well prepared" to make financial decisions, compared to 37% of men in the same survey. Another potential factor in the lack of balance could be the numerous bonus and incentive programs offered by financial companies. As the University of Leicester article notes, "Although male traders are less skilled and less likely to be profitable than female traders, financial companies' incentive programs continue to be criticized for targeting many male traders."

Forex and the psychology of women

Despite this gender imbalance and the difficulty of attracting female investors to a traditionally male-dominated industry, psychologists and market analysts have recently begun to note that as women become more involved in trading, their innate psychological differences from men are proving useful in some areas.

For example, psychologists have long argued that women are more cautious and risk-averse in their behavior and thinking than men, which in this context means that they tend to be more disciplined (in the sense of following a set trading plan) and pay more attention to risk management and loss minimization. Also, a study of stock markets by Lou Swan and Westerholm found that female traders are more likely to buy securities when the market is down and often buy when prices are low, meaning that they lose some money in the short term but gain more in the long term.

Male speculators also trade more often on average than some women who favor this lifestyle. Data from 2014 shows that women accounted for only 8% of all trading activity in the Forex market that year. However, this demanding behavior has led to a tendency to value "quality over quantity": some intrepid female speculators earned 43% on individual stocks and 21.4% on a portfolio of 28 stocks, while men bought and sold stocks more quickly (and in the opposite direction), resulting in greater overall losses.

The boys' club against the outsider effect

Paradoxically, while the effects seen in other professional fields are true in trading, more traditional (and in some cases decades-old) gender studies suggest that unbridled collective male dominance can be detrimental to individual success. In particular, there is some evidence to support the idea that high male contributions can create an "echo chamber" of unwarranted encouragement that women have so far avoided.

By competing in a male-dominated field, men become overconfident over time, a phenomenon that has been blamed for some men getting too involved in business, leading to poor outcomes (Deaux and Farris, 1977). A later study by Barder and Odin (2001) found a link between men's relatively aggressive/impulsive tendency to trade and lower returns compared to female competitors, finding that, as described above, men are statistically less likely to deviate from their chosen strategy and tend to spend more time thinking before entering the game.

More women in the Forex industry

While the gender gap in the Forex market is an undeniable reality, many in the industry are optimistic that the number of women participating in trading is on the rise. And with online platforms becoming more user-friendly and accessible, and brokers choosing to capitalize on the potential to attract female clients by running special campaigns to engage users, this number is expected to grow even further in the coming years.

Indeed, a 2015 study by online broker City Index produced encouraging results: that 46% more women opened trading accounts with the company in the first quarter of 2015 than in 2014, just one year earlier, and that the annual number of female traders opening accounts has increased by 1,434% since 2001. A recent study by platform comparison site BrokerNotes found that Forex has become the most popular type of trading among female investors, despite the perception that it is riskier than other categories such as binary options and stock investing.

Social media and changing attitudes

In addition to the above, it's worth noting that while the "trading room culture" in the office is still a barrier for some women, the recent rise of mobile apps and Forex trading platforms in the smartphone era has created a "work from anywhere" ethic for self-employed Forex traders, allowing them to go about their business away from the hostile atmosphere that used to prevent women from trading.

Scrolling through the hashtags of this vibrant new subculture on Instagram shows how technology is supporting this do-it-yourself approach. Women are beginning to openly and proudly display their trading skills and colorful lifestyles, just like their male competitors.

Analysts also note that "millennials" - people born between the 1980s and mid-1990s - are more likely to own a portfolio than previous generations, despite the unique financial obstacles their age group faces! This opens up the possibility that the gender gap may narrow even further as investing is no longer the domain of the elderly and wealthy, but is becoming more common among young people in an increasingly progressive and gender-equal financial, cultural, and professional environment.


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