How Are Retail Forex Trading Volumes Doing?

Last week, we took a look at how forex trading volumes took a turn for the worse in March for institutional traders. As evidenced by two major interbank trading platforms, trading volume declined sharply last month, and rumor has it that threats of central bank intervention and the euro zone debt crisis are to blame.

Keep in mind, however, that although these interbank transactions make up a huge chunk of overall forex activity, they don’t speak for the forex market as a whole. The School of Pipsology‘s lesson on forex market structure will show you that there are several other players involved in the forex market hierarchy. Retail traders like you and I also make up a rung on the forex ladder, you know!

So why don’t we shift our attention on trading activity from the perspective of retail traders?

According to FXCM’s records, the retail scene pretty much told the same story as the interbank scene. Retail trading volume also posted a decline in March 2012, though the number of accounts increasedwere better off. Retail customer trading volume reached $340 billion last month, which is 2% lower than that of February.

Overall, however, it seems that March was just a particularly slow month, because from a quarterly perspective, trading volume did see growth from Q4 2011 to Q1 2012. Trading volume reached $985 billion in the first quarter of 2012, which marks a decent 1% increase from the previous quarter and an impressive 20% surge from Q1 2011.

Comparing March 2012’s monthly performance to that of March 2011 also shows growth – 8% to be exact. Average daily retail customer trading volume also saw a nice year-on-year increase as it reached $15.5 billion in March 2012, up 13% from a year earlier. Meanwhile, the average number of retail client trades per day rose to 394,679 from March 2011 to March 2012, a solid 22% jump.

Data from FXall, a world-renowned independent provider of forex trading solutions, also confirmed that daily trading volume was up in March and for the first quarter of the year. According to their latest report, average daily trading volume for the past month showed an increase of 4% from February while average daily trading volume for Q1 2012 was up by 6% from Q4 2011. Comparing it to the first quarter of 2011 revealed an increase of 13%.

Now for the billion-dollar question… What do all these figures mean?

While several uncertainties in the market seem to have restricted most institutional players from taking trades, steady growth in average daily trading volume of retail traders shows that the industry is still expanding. From those figures I’ve discussed, it seems that ain’t nothin’ gonna stop us retail traders!

In fact, market themes such as the euro zone debt situation and the potential central bank interventions may probably have provided retail traders reasons to trade more actively. I do know that Huck has taken a few opportunities to profit from the Greek debt drama while Cyclopip is playing the SNB’s EUR/CHF floor. And I’m pretty sure most traders out there wouldn’t pass up these setups too.

These figures also show that growth in the forex industry remains consistent, despite the increased regulation from the CFTC and NFA.

But, as I mentioned in a previous article on the decline in foreign exchange turnover, a few periods’ worth of data isn’t enough to make a trend. With that, we must keep an eye out for more figures in order to come up with a meaningful conclusion on how the forex industry is faring.


  • wilderp

    Retail trading will most certainly continue to expand. Barriers to entry are much less than they used to be and most retail traders have yet to be exposed to the Forex market.

    A bubble will eventually begin to build and some financial disaster will cause a tightening of regulatory standards. Only then will retail trading growth begin to slow.