Do Retail FX Traders Learn?

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.