Do Individual Currency Traders Make Money?

Using a unique online currency transactions dataset, we examine the performance, trading activity, drawdown, and timing abilities of individual currency traders. Evidence from 428 accounts during the 2004–2009 period shows that currency traders earn positive abnormal returns, even after accounting for transaction costs. Additionally, the results reveal that day traders not only trade more frequently than non-day traders, but also outperform them in terms of raw, a passive benchmark and risk-adjusted returns. Finally, sorts on trade activity, measured as the mean number of trades per day per account, and account turnover, show a positive association between performance and trade activity.