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Experiences of Retail Currency Traders

Posted in Currency Trading, Individual Investing

How do individual currency traders view their trading experience? In his June 2016 paper entitled “Retail FX Trader Survey Results”, Chris Davison reports results of an anonymous survey of retail currency traders asking 14 questions about the way they trade. He elicited participants via posts on two online currency trading forums: Forex Factory and MyFXbook. Using responses from 133 traders during late November 2015 through late April 2016, he finds that:

  • Over their last six months trading, 49% (38%) report overall losses (gains).
  • 50% have more than four years of currency trading experience, with a positive correlation between experience and overall performance.
  • 72% trade at least daily, with no correlation between trading frequency and overall performance.
  • 50% trade more than five currency pairs, with a small positive correlation between number of pairs traded and overall performance.
  • 75% hold trades from one hour to one week, with a small negative correlation between holding time and overall performance (perhaps due to broker charges).
  • 74% (68%) use stop-losses (target gains), with 44% having target gains larger in magnitude than stop-losses.
  • 37% (38%) regularly (never) check bid-ask spreads before placing trades, and only a quarter occasionally/usually check broker interest rates.
  • 58% (39%) have received margin calls or blown up their accounts at least once (twice). There are positive correlations between these events and both experience and trading frequency.
  • Causes cited for worst trades include: excessive trade size (45%), holding losing trade too long (36%), significant adverse market move (31%), failure to set a stop-loss (26%) and having a poor system (18%).
  • Causes cited for best trades include: significant favorable market move (42%), holding winning trade for a long time (35%), having a good system (24%) and luck (20%).
  • Regarding number one desired improvement, 43% cite some personal trait (such as more patience, discipline or confidence) and 39% cite a better trading system.

In summary, evidence from a survey of individual currency traders suggests frequent trading losses.

Cautions regarding findings include:

  • The respondent sample is not large, and the six-month (recollected) performance interval is short in terms of variety of market conditions.
  • Self-reported behaviors are not validated and may be subject to recollection errors and attribution bias.
  • The survey offers little evidence that traders know what causes good and bad trading performance.
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