Who Is Successful in Foreign Exchange Margin Trading? New Survey Evidence from Japan
22 Pages Posted: 18 Jul 2019
Date Written: July 17, 2019
We use a 2018 survey of FX margin traders in Japan to investigate which key factors influence their performance: socio-demographic and economic situation, investment strategy and trading behaviour, and/orfinancial literacy. First, the data show that variables from all three groups are significant predictors oftraders’ performance. Second, we find that older traders and those without a specific trading strategydemonstrate lower performance. Performanceis higher for those who trade greater amounts, rely more on fundamental analysis, and report having profitable FX trade skills. Third, respondents’ subjectively stated claim of having FX trade skills is based on a more advanced understanding of FX trading and a reliance on professional advice. Neither objective financial knowledge nor over/underconfidence play a noteworthy role in the performance of margin traders.
Keywords: Foreign exchange margin trading, investor survey, foreign exchange trading profits, financial literacy, Japan
JEL Classification: F31, G11, G28, G40
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