One fascinating realization I have come across during my years as a trader, private trading coach, author, and now Vice President of Education for Online Trading Academy, is how different female and male traders can approach, analyze and trade the markets. Without offering outrageous generalizations, it has been my experience that women possess a particularly logical mindset that can give them a substantial advantage in market speculating.
Simply, the trading method I developed and use quantifies the supply/demand and human behavior relationship that ultimately determines price in any market. It is based on a very objective and mechanical set of criteria. In other words, the goal is to learn the strategy and then simply follow the rules.
The female mind has a much easier time doing this than the male mind. Here is an example of how this works. I recommended a trading idea to buy a stock at a certain price based on anticipatory analysis with the strategy. One of my female students took the trade and did well with it, while a male saw the trade, but did not enter it.
I had discussions with the two of them and the conversations were truly fascinating – how could two human sets of eyes look at the exact same chart, be told exactly the same thing to do, and yet, treat the trading opportunity so very differently? For privacy purposes, we'll call them Lucy Logic and Eddy Emotion.
So, here's the scenario:
The stock had been declining to an area of support (demand) from where it had recently rallied. Eddy quickly asked me what I thought of the opportunity, and Lucy did not. Eddy then asked if I thought the support (demand) level would hold and produce a reversal, or would prices decline through it?
Lucy would never consider asking that question with any trading opportunity because she knows it's a waste of time. Eddy doesn't feel the same way. But let's face it – no one on earth knows for sure if the demand will hold for certain (just like a bet in Vegas). All we can do is properly assess the odds and risk (just like Vegas does). If the odds are stacked in our favor and the risk is acceptable, we take the trade (this is how Vegas makes a fortune). When the trade was nearing our entry level, Eddy abandoned the strategy rules and gave in to emotions that still control his decision-making process today. Lucy remained logical and objective.
Instead of worrying about what may or may not happen at demand, she explained to me why a high odds/low risk trading opportunity was at hand. She said that sellers were now selling after a multi-day decline and into an area of support (demand), exactly where the consistently profitable trader would be buying, not selling. When her entry price was reached, she took the trade with a low risk stop in place and an objective target identified. She ended up profiting nicely on the trade and Eddy never entered the position!
How can we all benefit from this information? It is clear to me that females, in general, don't worry all that much about things that are not in their control, and this allows them to naturally focus on the objective information (what is real), which is key in successful trading.
In trading, it is the objective and logical mindset that gets paid from the subjective emotional mindset. I have found that the difference between mindsets is most evident at a specific time. When a trading opportunity arises and it is time to take action, the female mindset tends naturally to execute the trade that has been planned out.
At the same precise time, the male mindset tends to drift to subjective and emotional thought, which can lead to trouble. It appears that, again generally, the female mind has the naturally logical mindset needed to understand the material quickly, whereas the male mindset has difficulty keeping things simple, naturally trying to complicate the process.
An example would be to constantly add subjective indicators and oscillators that can lead to trouble for any trader. What validated my thoughts on this topic are what my female students and other successful male traders out there have in common. Each of them share two common traits. First, they realize the power of human emotion and that a trading plan absolutely must be followed. Second, the successful male students I have worked with have the ability to not let subjective information enter into their brains. It is almost as if they have a special filtering process going on when they read trading books, take seminars and courses. In other words, successful male traders succeed with tools a female brain naturally possesses.
From my experience, men tend to be focused on trying to predict the future whereas a woman uses simple logic to consistently make the correct choice. They have the natural ability to keep things objective, simple and logical.
The man tends to have trouble in these areas, which can make trading for him more difficult than it has to be. This is no different than how men and women make choices in other parts of life outside of trading. Though trading is still a career dominated by men, I would expect this to change in the near future for a few reasons. First, the barrier to entry is not what it was years ago. Second, from my experience, the female mindset is likely to last longer in a trading career than a male mindset, as a woman's mindset is much more suited for the challenging task of consistently profitable trading.
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