Are women better traders than men? Get the data

Fresh research from Capital.com has found that female retail traders are consistently better at stock picking than their male counterparts, even though women make up just 13% of the platform’s trading community.

So, what makes women better at picking winning shares and mitigating investment risk?

Key trading differences

Capital.com’s Pulse study, which analysed emerging trading trends since the start of 2021, found that women think differently to men when it comes to investing. This has proved to be an advantage.

Women tend to prefer short-term trading while men opt for intraday trading. Short term trading involves making fewer trades and holding onto shares for longer, while intraday trading (also known as day trading) often involves buying and selling shares by taking advantage of minute-by-minute or hourly changes in asset prices.

Women also prefer equities and multi-asset trading, while men tend to trade in crypto and currencies. Despite not taking advantage of micro-opportunities, women generally fare better because they tend to invest in sectors and companies that they understand.

Women take fewer risks and have smaller portfolios, which are typically 34% less in size than men’s portfolios. New female traders start with smaller average deposits than new male traders: $226 (£173) vs. $287 (£219). None of this holds female traders back from performing better than men. 

Managing losses

Female traders are more inclined to use short selling strategies. Short selling involves investors borrowing a security and selling it on in the hope that they can buy it back later for less. This is a particularly good strategy to adopt in bear markets (when stock prices are falling).

Women are also tactically better at managing the risk of losses, which shows they are more aware of the potential for things to go wrong.

This was demonstrated by Capital.com’s finding that female traders are more likely to put on a bigger stop-loss order and close them manually before the order is traded. However, men set up narrower stop loss orders and are more inclined to move or cancel them, which shows they’re less likely to ‘stick to their guns’.

History of success

Capital.com’s research echo similar findings to other studies that investigated the differences between male and female traders over the years.

A 2021 Fidelity Investments study found that women earned higher returns than men when investing (typically 40 basis points more). Data from Vanguard covering the first quarter of 2020 showed that even though women traded less frequently than men they still got better results.

Overall, female traders outperform men because they are more patient, cautious and disciplined. Their success has also been attributed to their higher financial literacy and education, particularly in Asia. Capital.com found that only 37% of male traders have bachelor or master’s degrees versus 50% of women.

Despite this success, women still lack confidence in their stock picking talents and only a small percentage told Capital.com that they thought they were better investors than men.