Trading: A Woman's World? How to Join the Successful 5%

Guest post by Zaheer Anwari, part of The NextWomen Finance Theme.

With the current economic climate in the dire situation that it is in, women are increasingly looking into other avenues to generate an income. This may be to supplement a salary that they are earning, or, for the more inventive and entrepreneurial amongst you, to find a way to earn an income which fits in with your lifestyle.

Forex trading is one such avenue that people are turning to but, as is a well-known fact in the trading world, only 5% ever make a success from it.

What is Forex Trading?

Forex stands for Foreign Exchange, or in other words the Currency market. It works in a similar way to the Stock Market, where instead of predicting whether the value of a particular company such as Apple or Google is going to go up or down, traders predict whether the value of a particular currency such as the Great British Pound, is going to go up or down in value against another currency such as the US Dollar. The Forex Market was established in the 1970s and introduced the current ‘floating’ exchange rate (rather than the old fixed rates which hindered trading).

How much money is in the Forex Market?

The Forex Market is now the largest market in the world with $4 trillion being traded on a daily basis. In comparison, the US Stock market, which is the second largest market in the world, has a value of only $400 billion.

How is the money traded?

Human emotions are what drive and move the market. The vast majority of traders are men, so this may come as a surprise to you.

Most men would hate to admit that the markets are driven in such a way - they are convinced it is based on rational calculation. Millions, possibly billions, of people trading on a daily basis are all trying to predict whether values of stocks and currencies are going to go up or down. Traders tend to fall into one of two camps – those that take trades based on fundamentals, or in other words news events such as wars and politics, or technicals where they look at a chart and analyses from the price data and patterns in front of them whether price will go up or down. Some traders use a combination of both.

Warren Buffet and George Soros are perfect examples of traders who used fundamentals to make billions, whereas John W. Henry and also the now infamous Turtle Traders showed the world how it was done using technicals. If you have not heard of the Turtle Traders, then I highly recommend reading the book, Way of the Turtle by Curtis Faith. It is a fascinating account of an experiment to discover whether traders are born or made although, interestingly, only 2 women were chosen against 21 men. Perhaps they foolishly felt women were less capable of becoming traders, or maybe it shows the huge imbalance between the number of women to men that applied. 

The movement of a currency is measured in pips. So if the value of the Great British Pound goes up from 1.5634 to 1.5635 it has gone up by 1 pip or from 1.5634 to 1.5633 it has gone down by 1 pip. Depending on the account a trader is using, the value of a pip could be as little as 10p or hundreds to thousands of pounds. A currency can move 100s of pips in a day both up and down. It is the lure of such small movements equalling large values of cash that cause many to turn to trading in hope of making financial freedom but it is exactly this huge volatility and random daily movements that most novices underestimate that cause most to come up disappointed against the market.

So who are the successful 5%?

The successful 5% that end up taking the money off the 95% are made up of the investment banks and hedge funds and top private traders who have learned to take advantage of the flexibility not available to institutional traders. However, you still need to be aware of how institutional traders work to take advantage of the differences. The 5% call themselves The Smart Money.

Trading is a male-dominated industry but are they really that good at it?

Almost 100% of traders are men and only 5% make any money, so I would say that they are not particularly good at it.

Men are attracted to the testosterone-fuelled environment where they can play the alpha male and feed their ego with the adrenalin-rush of making money from money. It is an environment where every man can make his own rules.

Another misconception of trading is that you bet big on small moves and are in-and-out of the market within minutes or seconds, immediately ready to make another trade.  Apart from being extremely stressful, this is not a good way to make money. Trend trading is where the Smart Money is, where trades are carefully thought out and mature over several days, weeks or months.

Can women cut it in trading today? More and more women are not only holding high-powered positions in companies but in recent years there has been a huge increase in successful female entrepreneurialism. Deborah Meaden of Dragon’s Den fame for example. Yet trading has not yet caught the female imagination in any meaningful way.

As a male in the trading world for the last 5 years, I have always been intrigued to know why. Growing up with a loving mother and a determined sister, I know that the desire to succeed is not a gender issue. In addition, my trading success and knowledge has come from being mentored by an amazing and successful woman by the name of Anne Chapman and her equally amazing partner Javid Shaik. I find it hard to believe that there are few Annes in trading and for me to understand this I needed to get into the psyche of a woman and who better to speak to then Anne herself. After an in depth conversation with my mentor, this is what we concluded.

Why are there very few women in the trading world?

Women who are breaking the mould are setting up companies that reflect their values, generally more caring and nurturing environments with an emphasis on fair play. Trading doesn't appear to fall into that category as it’s perceived as a city, male dominated testosterone fuelled industry. But really it's just about one company, or currency, doing better or worse than another and taking advantage of that to make money. And this is how any entrepreneur makes a living, male or female. You spot an opportunity and you take it.

Can women be better traders than men?

Women have the potential to make better traders than men but too many of them lack the confidence to take not only the first step but to persevere.

Trading is different to many female-orientated job roles where they rely on their superior interpersonal skills. Taking on trading is more about mastering one's inner personality. Men tend to stick at something until they've mastered it; women are more likely to only try something if they think they have a good chance of success. And trading isn't something that women generally feel is something they will be good at, partly due to the lack of role models.

What women need to remember is that most men don't make good traders. As mentioned, only 5% of mostly male traders make it. And the skills required are just as likely to be in a woman's arsenal as in a man’s. If a woman has the tenacity to succeed then she is actually more likely to be a successful trader than a man because the other traits required are: a level head, ability to keep things simple, able to follow a few simple rules and great administrative organisational skills.

A possible reason there are no 'famous' female traders is because, unlike men, women don't feel the need to advertise their success. And the perception is that being a trader is about working in the city and boasting about every successful trade. But really, long-term success in trading can be likened to the Tortoise and the Hare - slow and steady wins the day.

How can women make a success of trading?

Whether male or female, the formula is the same. Take the time to learn the intricacies of trading and you will find that it is best to then take a step back and spend only a short time each day on identifying, setting up or managing trades. Less is more.  You will have losing trades, this cannot be helped - no-one can predict the future - and women have the advantage that the ‘need to be right’ is not inbred. Nobody's perfect!

You will need to learn to take advantage of winning trades, and get out of losing ones at a predetermined level and how to identify the trades with the most likelihood of success. It can be a lonely and frustrating road for the self-taught so it is worthwhile to invest in a good course. Look for ones run by actual traders who successfully trade their own money, as this is what you want to achieve.

Finally, when you make it as a trader don’t forget to shout about your success!

Zaheer Anwari is a Forex, Futures and Stocks trader who has been succesfully trading the markets for 5 years. His success he completely attributes to his excellent mentors and understands from experience that the in depth knowledge required to master the markets can only be passed on from person to person. His mission is to pay-it-forward and now empower like-minded individuals with the knowledge and strategies to extract regular profits through long-term trend trading. Check out his site here: http://www.TheTradersCosmos.com