Do Retail FX Traders Learn?

41 Pages Posted: 11 Sep 2015  

Simon Hayley

City University London - Sir John Cass Business School

Ian W. Marsh

City University London - Sir John Cass Business School

Date Written: September 11, 2015

Abstract

What is the benefit of experience? Using data from a leading trading platform we find no evidence that retail FX traders learn to trade better, but they do appear to make valid inferences about their innate abilities as traders. In particular, following an unsuccessful trading day they are more likely to cease trading, to trade smaller amounts and to trade less frequently. These effects are stronger for younger and less experienced traders who might be expected to have more to learn than older, more experienced traders. As regards learning through experience, surprisingly we find that more seasoned traders demonstrate a slight decline in performance once we account for the endogenous decision to cease trading, and even very experienced traders consistently lose money.

Keywords: Market microstructure, foreign exchange, retail trading, learning

Suggested Citation

Hayley, Simon and Marsh, Ian W., Do Retail FX Traders Learn? (September 11, 2015). Available at SSRN: https://ssrn.com/abstract=2659293 or http://dx.doi.org/10.2139/ssrn.2659293

Simon Hayley

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Ian William Marsh (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 20 7040 5121 (Phone)
+44 20 7040 8881 (Fax)

HOME PAGE: http://www.cass.city.ac.uk/faculty/i.marsh

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