“There is no one set of skills that makes a good trader – some of the best are literature majors, while others are mathematics geniuses,” says Irene Tse, co-head of US rate trading at Goldman Sachs. “If they have one thing in common, it’s a willingness to be a student of the market.”
Even so, not all those willing to learn, she adds, make great traders.
Mr Rosen says he looks for “conviction” in traders. They must be comfortable taking risk, he says, especially if they hold a contrarian point of view. At the same time they must have the discipline, ability and willingess to recognise when to get out. “What that means is believing in your position, but not falling in love with it,” he says. “You need to have the ability to assess new information and update your view, even if that means taking a loss to exit a bad trade.”
Teamwork is also important. Traders must build close relationships with their colleagues and clients that they can maintain under high pressure. This means athletes have become popular recruits on the trading desk, as well as people with military training. Mr Rosen’s team includes an Olympic gold medallist.
But specialists in behavioural finance, which draws on experimental psychology to predict systematic errors by investors, argue that women often have traits that make them more successful traders than men.
Alexander Elder, who specialises in the psychology of trading, says women are more realistic and less ego-driven. “They are not afraid to ask difficult questions and they have less tolerance for pain. Men like to prove that they can handle the pain, and that’s what gets them into trouble.”
In Mr Peterson’s experience, however, the best traders are those that can control their emotions, and avoid “analysis paralysis”.
More extroverted money managers tend to have more clients, but they also have lower returns, he says. It seems that science still cannot explain the hard to find qualities that make a good trader but both men and women can have them in spades.
==
Wall Street’s gender agenda
By Saskia Scholtes
Published: February 27 2007 17:30 | Last updated: February 27 2007 17:30
In the cut-throat world of financial trading, Angie Long is a natural. Promoted to head JPMorgan’s high-yield credit derivative trading desk at 29, her clients and colleagues describe her as “a force of nature in her markets” and “one of the best strategic thinkers on the street”. And until last year, says one client, few could have imagined her doing anything else.
Until, that is, she became a mother. In January 2006, three months after her daughter was born, Ms Long returned to the trading desk. A month later, she was ready to resign.
What happened next would have been unthinkable 20 years ago, when many of Wall Street’s trading rooms were still home to overt sexism and exclusionary tactics that often drove women away. The investment bank urged Ms Long to take a leave of absence and then come back in a role that would be sustainable for her as a working mother.
“I dealt with some creative people in human resources who told me to think outside of the box. I didn’t have to choose a full-time or a standard role,” she says.
The result was one of the most unusual working arrangements on Wall Street – a 20-hour week consulting on new product development for JPMorgan’s credit derivative trading desk, all the way from Kansas City.
Ms Long’s new role is not just testimony to how attitudes toward women on Wall Street have evolved or how advances in technology have made flexible working arrangements possible. It is also a mark of how banks must fight to keep their best people amid intense competition for talented traders, male or female, in increasingly complex markets.
Eric Rosen, JPMorgan’s head of North American credit trading and Ms Long’s manager, says: “Competition for talent is at all-time highs. There is always a new start-up hedge fund looking for smart traders, so you have to be creative about talent retention.”
Mr Rosen acknowledges that the job engineered for Ms Long is experimental, but he says it is a trade like any other. “When you have someone as strong as Angie, you work hard to find the right seat for them,” he says. “The bottom line is that as a manager, I would rather have some of Angie on the team than none of Angie.”
Part of the challenge, say recruiters, is that while the most successful traders come with a variety of skills and educational backgrounds, they all have a dash of something both indefinable and hard to find.
“There is no one set of skills that makes a good trader – some of the best are literature majors, while others are mathematics geniuses,” says Irene Tse, co-head of US rate trading at Goldman Sachs. “If they have one thing in common, it’s a willingness to be a student of the market.”
Even so, not all those willing to learn, she adds, make great traders.
Mr Rosen says he looks for “conviction” in traders. They must be comfortable taking risk, he says, especially if they hold a contrarian point of view. At the same time they must have the discipline, ability and willingess to recognise when to get out. “What that means is believing in your position, but not falling in love with it,” he says. “You need to have the ability to assess new information and update your view, even if that means taking a loss to exit a bad trade.”
Teamwork is also important. Traders must build close relationships with their colleagues and clients that they can maintain under high pressure. This means athletes have become popular recruits on the trading desk, as well as people with military training. Mr Rosen’s team includes an Olympic gold medallist.
However, one head of trading at an investment bank relates hiring the archetypal overachiever – a young woman who had graduated from an Ivy League school summa cum laude and was captain of the university women’s rugby team, but who fell far short of expectations on the trading desk. “In the end, she was too arrogant about her credentials,” says the trading head. “In my experience, it’s often the people you least expect who are the most successful.”
Investment banks are therefore putting significant resources into hiring traders from diverse backgrounds and with an emphasis on hiring from a demographic group that is still a rarity on the trading floor – women.
Few heads of trading desks will be drawn on gender in the workplace. But specialists in behavioural finance, which draws on experimental psychology to predict systematic errors by investors, argue that women often have traits that make them more successful traders than men.
Alexander Elder, who specialises in the psychology of trading, says women are more realistic and less ego-driven. “They are not afraid to ask difficult questions and they have less tolerance for pain. Men like to prove that they can handle the pain, and that’s what gets them into trouble.”
Richard Peterson, a behavioural scientist who runs Market Psychology Consulting, says studies have shown that as individual investors, women tend to make more money than men over the long term. Single men are the least successful group, while single women are the most successful. But he adds that it is difficult to establish why that is the case.
One possibility, says Mr Peterson, is the concept of emotional memory formation. In numerous studies, women appear to have stronger memories of emotional events, resulting in some interesting hypotheses for investors. “Women who have lost money in the markets are more likely to retain negative memories of investing, and as a result, they are more likely to keep their money on the sidelines after a bear market,” says Mr Peterson. Men, on the other hand, are more resilient following negative emotional experiences. “Men are more likely to ‘get back on the bull’ even after a painful setback.”
In Mr Peterson’s experience, however, the best traders are those that can control their emotions, and avoid “analysis paralysis”.
More extroverted money managers tend to have more clients, but they also have lower returns, he says. It seems that science still cannot explain the hard to find qualities that make a good trader but both men and women can have them in spades.
Deterred by a sense of swagger
Although securities industry professionals insist that trading floors have undergone a cultural evolution in recent years, the female proportion of the trading community remains lean. According to the Securities Traders Association of New York, women represent 15 per cent of the membership.
Part of the problem, say recruiters, is that women still perceive the trading floor as a place that rewards macho aggression.
Angie Long, formerly head of high-yield credit derivatives trading at JPMorgan says: “There is a perception that sales and trading is more rough and tumble, while investment banking opens doors for you.”
Trading desks are fighting to change that view by creating ways to interest potential female applicants and showing them that women progress on the trading floor.
Sonali Shah, a credit derivatives trader who joined JPMorgan on Angie Long’s desk, says that seeing a woman in charge was encouraging. “To me it was very impressive to have a woman running the desk, especially for a new product area such as high yield credit derivatives when there are still so few women on the trading floor.”
JPMorgan runs a competition for potential applicants called “Fantasy Futures” in which students trade a virtual portfolio for eight weeks. The winners spend time on JPMorgan’s Park Avenue trading floor in New York. Last year, 2,600 students in the US and Europe played.
Devon George-Eghdami, head of preferred trading at JPMorgan, says such programmes have attracted female applicants: “Every time we run on-campus events to attract female traders, it’s standing room only.”
However, Ginny Darrow, head of Rooftop Mortgages at Bear Stearns and a former trader, says once women apply they also need to see how women progress. “We have no problem getting women in the door from top schools, but recruitment surveys show female applicants are concerned that they don’t see any female executives. So we created programmes to show them.”
Copyright The Financial Times Limited 2007
Comments