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Investment Patterns of Japanese Retail Investors in Foreign Exchange Margin Trading

November 20, 2018
Yui Mukoyama, Naoya Kikuta, and Kazuaki Washimi
Financial Markets Department

Japanese retail investors in foreign exchange margin trading have long been known to be contrarian and are expected to reduce price fluctuations to a certain degree. In contrast, a recent survey among these investors suggests that 70 percent of them adopt a trend-following strategy. Given that these trend followers are expected to both buy and sell in a very short time frame, this report examines the investment patterns of retail investors by investment time horizon using high-frequency transaction data. The result confirms a contrarian pattern for trading where positions are held overnight or longer. However, a trend-following pattern can be observed for trading within a day depending on the market situation (while a contrarian pattern is observed as a whole), which implies that trading within a day does not necessarily reduce intraday fluctuations.


Bank of Japan Review is published by the Bank of Japan to explain recent economic and financial topics for a wide range of readers. This report, 2018-E-3, is a translation of the original Japanese version, 2018-J-8, published in November 2018. The views expressed in the Review are those of the authors and do not necessarily represent those of the Bank of Japan.

If you have comments or questions, please contact the Foreign Exchange Division, Financial Markets Department (Tel: +81-3-3279-1111).