That's not how normal people think; that's how hedge fund managers think! As the volatility in the markets subsides betting patterns are again returning to more usual levels with the average stake sizes again increasing as the markets stabilise and volatility dies down.
Index markets like the Dow for instance have stopped moving some points per day and the daily trading range has tightened to less than points. Longer term swing trading as opposed to day trading is also becoming more popular once again. I find this very interesting and new spread betting firms are likely to repeat these mistakes while on the hunt for new customers. Some might already have and haven't been taken to account.
What could the reason for this be, as we're frequently told one of the main advantages of spread betting is that you can bet on the direction of the market, regardless of whether it's moving up or down. Some of the popular explanations include:. Speaking with professional traders, some suggested inexperience may result in the high trend to "buy" positions, possibly that novices aren't comfortable selling something they don't own. If we consider the typical demographic of spread betters as "high net worth males with previous investment experience" Capital Spreads , it would seem to be selling spread betters short to suggest they can't grasp the concept of the market going down as well as up.
Although the previous investment experience may have conditioned betters to the notion of buying only. Do inexperienced spread betters feel that buying positions are less risky? Surely our greatest fear is for the market to gap and as recent events with Northern Rock have shown, unexpected news stories are more likely to result in share prices sharply hitting the floor, rather than dramatically rising.
Hence being short a position should have less negative exposure to market gapping - so quashing this theory. I think the reason that most spread bets are "buy" is due to a far more fundamental personality trait. As a quick experiment, answer the following question: "What percentage of spread betters lose money? If you guessed close to this figure, the theory would suggest that you're a pessimist; and the surmise would be that a pessimist can envisage the movement of a market in a negative direction to a greater extent than an optimist; so being more inclined to "sell" positions.
If your estimate differed wildly from the answer; or indeed if you knew the answer but continues to spread bet; it would suggest that you happily predict good news and bullish markets, hence having a tendency to go long. By the very high risk nature of spread betting, I think we can predict the vast majority of traders are optimists to believe we can make money this way, and hence the skew to "buying" positions.
Therefore, perhaps the question we ask ourselves should not be "to buy, or not to buy", but rather "to buy, or to sell? The spread betting and CFDs marketplace may no longer be a man's world according to the Financial Times. Over the last few years the number of women opening derivatives accounts has risen dramatically, and is estimated to be growing at 10 per cent year on year and this is partly driven by the increased media coverage about personal finance and investing.
He continues: 'With online dealing there is no 'old boy's network' to be concerned about and female clients do not need to worry about prejudice. This interest is being reciprocated by the spread betting firms. Angus Campbell, head of sales at Finspreads, says female investors are a sought-after commodity and they actually appear to be outperforming their male counterparts. The FT quotes research from IG Index December which backs the claim that women are better spread betters than men; according to IG Index, on average, female traders win twice as much or lose half as much as their male counterparts.
A risk is most likely to be taken by men, according to a recent study conducted by Barclays Capital and Ledbury Research. However, this doesn't mean that women are incapable of taking the plunge into speculative trading, it just reflects that they are more careful and cautious in avoiding catastrophes. The study indicates that women would make better investors, as opposed to men, who have already partially led us into the credit crunch. The study found that men are over-confident. Although this can pay off, at times, it can also backfire too.
Researcher Chun Xia, a former professor in Hong Kong, claimed that women are prone to stress quickly, more than men. As a result they tend to be more conservative in financial deals in the hope of avoiding anxiety provoking situations. Men, on the other hand, are the ones who need more discipline when it comes to money since they tend to be overly confident in their financial decisions, the study found.
The current study follows a study by Merrill Lynch, a financial management and advisory firm. More recently, in , a study by the mutual fund company Vanguard involving 2. Biology could also be playing its part in how men and women make their decisions. Men's overconfidence could all boil down to hormonal impulses which trigger off these quick decision making moments.
According to Time magazine, there is a growing sector of study called 'neuroeconomics' in which scientists are examining the links between hormonal and neurological impulses. One such recent study by John Coates, a research fellow in neuroscience and finance at Cambridge University tested male trader's hormone responses to workplace decisions.
He found that testosterone drives winning streaks and then risk taking. Men are more inclined to be confident about their decisions, albeit this doesn't mean they are more accurate, in their financial decisions while women tend to value wealth as a basis for security, as opposed to opportunity. The so-called 'winner effect,' which has been seen in athletes during competition, also seems to apply to male traders.
As the UK's Guardian explained:. This happens when two males enter a competition and their testosterone levels rise, increasing their muscle mass and the ability of the blood to carry oxygen. It also enhances their appetite for risk.
Much of this testosterone stays in the system of the winner of a competition, while the loser's testosterone melts away fast; in evolutionary terms, the loser retires to the woods to lick his wounds. In the next round of competition, though, the winner already has high levels of testosterone, so he starts with an advantage, and this continues to reinforce itself.
But as the levels rise you get sharper and more focuses until you reach an optimum. The key thing is this, however: 'If you keep winning, your testosterone level goes past that peak and sliding down the other side. You start doing stupid things. When that happens to animals, they go out in the open too much. They pick too many fights. They neglect parenting duties.
And they patrol areas that are too large. According to LouAnn, women investors tend to trade with less frequency than men, are less prone to be overconfident; are more realistic in their goals and expectations; put in more effort in researching their investments; seek to analyse all angles and detail as well as alternative perspectives; are more likely to disregard peer pressure and tend to make decisions the same way irrespective of who's watching; learn from past mistakes and are less open to take extreme risks.
The best client for us is the one that survives for a long time,' Angus of Finspreads says. So what exactly is it that makes women better at spread betting than men? Some say that women are more likely to admit when they're wrong and ask questions and this gives women an advantage over men.
Another reason cited is that women simply possess a more considered spread betting and CFD trading mindset than men. Sandy Jadeja, Chief Technical Analyst of spread betting provider City Index, has noted that female spread bettors tend to be more thorough with their research and approach their spread betting and CFD trading platform with far greater caution than the male trading population.
Women seem to be more likely to get stressed by trading so have a greater desire for discipline or self-control. In particular, women in general are more likely to follow a trading strategy and are more disciplined to execute it than men. Mr Campbell adds that on the whole women tend to be more cautious investors but that this is not necessarily a hindrance.
Christopher Beauchamp, a market analyst at IG Group noted that women tend to be in smaller stakes, testing the waters first as opposed to putting all their funds on a single trade. He notes 'Their longer-term trades often mean they are more successful, holding on to positions for longer, as opposed to jumping in and out of trades.
Over the last decade there has been a marked increase in the number of women trading, says Joshua Raymond, Chief Market Strategist of spread betting and CFD trading provider City Index. Raymond believes it could be a case of female traders being more risk-averse than their male counterparts.
Since then, the number of women traders joining City Index has increased again, now growing at a rate similar to before the global financial crisis hit the markets. As Joshua Raymond points out, 'this could indicate women are more strategic in their planning than men'. Men also tend to learn by 'doing' which could disadvantage them compared to women - women are more open to research, learning about common mistakes and attending courses.
Women have a number of natural characteristics that form part of a good investor; they can multi-task, they give attention to detail in their research and are often ready to take a longer term perspective of the markets. Spread betting companies say that women trade in a more calculating, focused and careful manner than their male counterparts - they also tend to have good levels of compusure - a great attribute to possess if you are to ride out market movements.
This leads into another potential contributor in the form of the old gender stereotype that, whilst men will not stop and ask for directions, women are happy to ask for help. Simon Denham, managing director at Capital Spreads, says the fact his female clients outperform his male ones is down to the fact that men are too aggressive about their trading. Men tend to be more aggressive and try to bully the markets, sometimes opening spread betting and CFD trading positions on instruments that they do not understand - and most men tend to hate to be wrong.
They are much more likely than women to refuse to cut their spread betting losses because they don't like to admit to losing money. It may be because of this that women spread bet or trade CFDs less compulsively than their male counterparts, which in turn makes them less likely to develop an addiction. Women normally open fewer positions and stick to them. They don't tend to assume that they are able to outwit a fast moving market and are more likely to hold on to shares that are under pressure, trusting that their initial call was right.
And their views also tend to be longer-term which gives them more stable returns. Having said that, the profile of male and female spread traders is quite similar - generally speaking, they are of about 42 years of age, with a similar first deposit size and typical trade sizes. In this respect most traders seems to share a particular type of personality and trading style, irrespective of their gender. Philip Brown, CEO of ProSpreads however points out that women may end up being too disciplined, in that in a general sense they are not risk-takers in contrast to men and you have to take risk to make a gain.
In the UK spread betting has led the investment industry in providing investors with the opportunity to trade online. Currently almost all spread betting is internet-based. According to a report by Mintel, the market analyst, spread betting investors are predominantly white, male, affluent and under 45, which roughly tallies with the profile of other online product users - the idea that spread traders are men in their 50s with a City background will soon be just myth.
In its recently published white paper on spread betting, the Cass Business School said that this group tends to be the early adopter of all new technology applications. Although women may not be the first to jump on to the bandwagon, they have become enthusiastic users of internet-based technology.
This is particularly the area for online poker, where women now account for around 45 per cent of all players, according to the Cass paper. Statistics like this are prompting the spread betting industry to question how it too can tap into this lucrative market.
Women's preference for online gambling - such as internet poker - over other forms of gambling is partly explained by the differences between conventional and online betting. Online gambling provides all of the complexity and skill requirements of other forms of betting but in a safe and anonymous environment.
A Cass Business School report commissioned by Finspreads notes: 'While adverts for CFDs and spreads focus on the macho, online gaming billboards have even included fluffy bunnies to appeal to the female customer. Fluffy bunnies aside, the point about advertising is a serious one.
If spread betting companies are to increase their female customers then they need to convince more of them that this is a viable investment product. Highlighting the fact that women have a tendency to outperform men in this field is likely to be a far more sensible and effective way to entice them as investors. Mr Denham says finding the right approach to attract female investors is the holy grail of their marketing. We're not sure where to use direct marketing to target women because as a spread betting company there are rules about where we can and can't advertise.
However he expects the number of female clients to rise. As little as three years ago women were around five per cent of his clients. Now, the figure is 40 per cent. The content of this site is copyright Financial Spread Betting Ltd. Please contact us if you wish to reproduce any of it. Oil prices surged then, but soon returned to normality.
I think it is important to try and understand that the demographics from geopolitical issues in making investment decisions seem to have changed radically. These days investors, analysts and economist rarely respond with knee-jerk reactions. If they do it tends to be temporarily. Any reprisals or escalation of military activity in the Middle East is not going to sort this issue out in a week. This troubled arena is likely to pose problems for decades!
The fundamentals for equities look decent. Central banks seem to have little appetite for raising interest rates. In fact, we hear that there could be a further expansion of quantitative easing, certainly in Europe and more infrastructure spending globally to prevent the any likelihood of a recession. There is also the need to let the three cuts in rates in the US last year to filter through to the corporate world for it to feel the real benefit.
Post elections, there seems to be some clarity with regard to BREXIT though the economic road will remain bumpy for some months. There is a bucket load of money waiting to hit exciting UK business opportunities, with tech in the vanguard. This week all the UK supermarkets posts their holiday trading statements. Morrison stepped up this morning with like-for-like sales down 1.
These numbers are slightly less awful than expected. Sainsbury follows tomorrow and I fear their numbers may not turn the world on its axis. CEOS can stay in situ too long. Changes should be considered after 5 years to breathe fresh life into companies. Create Account. Tuesday 7th January
So, I give them the floor…. The reaction by the markets has been remarkably somnolent, if not philosophical, in response to this act of aggression. Equities have all but kept their poise. However, the cream has now been skimmed off the top. Many will recall the bombing of Saudi oilfields, attributed to Iranian terrorism last August. Oil prices surged then, but soon returned to normality. I think it is important to try and understand that the demographics from geopolitical issues in making investment decisions seem to have changed radically.
These days investors, analysts and economist rarely respond with knee-jerk reactions. If they do it tends to be temporarily. Any reprisals or escalation of military activity in the Middle East is not going to sort this issue out in a week. This troubled arena is likely to pose problems for decades! The fundamentals for equities look decent. Central banks seem to have little appetite for raising interest rates.
In fact, we hear that there could be a further expansion of quantitative easing, certainly in Europe and more infrastructure spending globally to prevent the any likelihood of a recession. There is also the need to let the three cuts in rates in the US last year to filter through to the corporate world for it to feel the real benefit. Post elections, there seems to be some clarity with regard to BREXIT though the economic road will remain bumpy for some months.
There is a bucket load of money waiting to hit exciting UK business opportunities, with tech in the vanguard. This week all the UK supermarkets posts their holiday trading statements. Morrison stepped up this morning with like-for-like sales down 1.
These numbers are slightly less awful than expected. Since the Shares Awards have recognised the high quality of service and products from companies in the world of retail investment as voted for by Shares' readers. The Online Personal Wealth Awards were launched in to recognise and reward those companies who offer great service and products in the area of personal wealth. Shares Spotlight Previous Events. Issue: 18 Dec - Page 42 Contents.
Daniel Coatsworth. Issue Contents. Income-backed selections. Property power. Fight For Your Rights. Shape up, says QCA. No end to rouble's ruin. A dynamic approach. Go with the Flow. What we are saying.
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