According to one of London’s top traders, encouraging more women into the profession would be good for society. ‘Women have a much higher sense of risk control than men and it can help avoid many of the disasters that risk taking by a male dominated trading environment has caused over the years.’
But he is perhaps best known for his BBC series, Million Dollar Traders in which he gave eight novices $1 million of his own money to trade the stock market over a two month period. With just two weeks of intensive training under his guidance, Lex proved that his novices were able to out perform professional traders during one of the most tumultuous trading periods in financial history – suggesting that, by learning a few fundamentals even those with with no background in banking or knowledge of the financial markets, can be taught to trade successfully. Watch the series on YouTube.
In a Q&A with Lex, I started by asking what exactly is it that makes women better traders than men.
Lex van Dam: There has been research done into this and there is no difference between the analytical ability of male and female traders.
However, women tend to be more patient and trade less frequently than men. That’s why they end up paying much less commission to their broker – which makes a significant difference to performance. And that is why they are often better traders.
MZ: While women may have a natural flair for trading – still though, gender bias is prevalent in the industry. What advice would you give to women wanting to succeed by overcoming that bias?
Lex van Dam: We do know that women tend to be statistically better traders than men. They just need to be true to themselves and not let themselves be bullied. Male traders like to joke around and provoke other men and women alike. Successful traders know when to ignore a bad joke and when to stand their ground.
My advice would be to do the job you like, don’t take a job to prove a point. And don’t be discouraged from following your dreams because of a male dominated culture. In ten years time I really think there will be many more female traders on Wall Street than currently.
And in the mean time, try to benefit from the fact that women will get promoted faster than men.
MZ: How’s that?
Lex van Dam: In Europe they are considering making it mandatory to have a 40% quota of women in the boardroom. There is enormous pressure to ensure that women are being represented in good numbers at all levels. This means that we are currently going through a period of positive discrimination for women – why not take advantage of that?
MZ: You once said that when men marry, they actually get better at trading.
Lex van Dam: Single men can be very overconfident about their ability, which often leads to trading without preparation or risk control. When they get married they become less wild and more stable. They will spend more time at home reading research instead of drinking in the pub with their mates. Of course this is a bit of a stereotype analysis with many exceptions!
MZ: When your show Million Dollar Traders aired, you started to realize that there was a demand for financial education. And so, to help ordinary people learn how to better manage their money and pensions on their own without relying on so-called experts, you set up the Lex van Dam Trading Academy.
Lex van Dam: Yes. Education for traders has been characterized by scam courses, mis-selling and exorbitant prices. I felt I could do better than that.
In a few weeks time, I will also launch a new financial education website. This will focus on financial literacy for an even wider public that desperately needs to be educated on how to survive financially in these times of austerity and broken promises.
MZ: Speaking of which – due to the volatile markets these past few years, some have chosen to just keep their cash in the bank? Is this a good idea?
Lex van Dam: I think it is a good idea in theory because it gives people the option to buy stocks or property at lower prices in the future. The problem though is that interest rates are very low so this money earns nothing and property and stocks are not falling anymore, at least not in the US. So it does require a lot of patience and trust that the Fed will stop printing money at some point. As always diversify your assets, perhaps buy a little gold as well.
MZ: For anyone – whether a complete beginner or an experienced trader: what are your top trading tips?
Lex van Dam: You’ve got to be in it to win it – this means that you have to actually trade if you want to make money, but also that if you lose too much money you will be no longer be able to trade so you have to stay within your risk tolerance.
Don’t follow rumors or do what your neighbors tell you to, instead generate your own original ideas and do proper analysis before you trade.
Once you start telling other people how clever your trades are it is time to unwind your portfolio and take some time off trading, as a large loss is about to follow.
MZ: What do you think is the secret of the most successful traders? Well, it’s probably not a secret, but what do they do that consistently helps them run profits?
Lex van Dam: Nobody can legally make profits month after month, year after year. The secret is the ability to bounce back when things go wrong and not to lose so much money that you get pushed out of the game. You also need to understand your strengths and weaknesses – and learn from past mistakes.
There is no more fascinating a job than trading.
This article originally appeared in Forbes magazine
Find Lex on Twitter @lexvandam
Find Maseena on Twitter @maseenaziegler
image: © Emmanuel Huybrechts