Exclusive: InteractiveBrokers' Customers Most Profitable in Q3 2014 US Forex Profitability Report

(Update: Figures on the chart have been updated to include records for MB Trading which were unavailable when the report was first published on October 28th, 2014 but became available in January 2015. Average profitability has been restated to 37.3% from 38.3%, with the weighted average slipping to 37.8% from 38.0%. The decline fits our expectations when we first published the report as stated below.)

The third quarter of 2014 is best known for trading action in September as volumes finally returned to the Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term market as Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term across all major currencies spiked higher. The quarter also marked improvement for the US retail forex industry. In the latest filings from brokers that compose our Forex Magnates US Retail Forex Profitability Report, active accounts in the US grew by 3.4% to 92,729 (figures exclude MB Trading which has yet to provide figures to Forex Magnates).

During the same period though, customers recorded poorer trading performance in Q2 as on an adjusted weighted average, 38% of active accounts were profitable versus 39.5% in the previous quarter, with four out of six brokers recording falling profitability (final figures are expected to be revised lower as MB Trading’s results typically underperform other brokers and could push overall figures lower).

The story of the quarter though was the improvement in account growth. Although viewed as a second tier product compared to equities and futures trading in the US among active traders, accounts grew steadily at most brokers. Leading the way was InteractiveBrokers which saw accounts grow by 1,360 (5.4%) to 26,416. Also, OANDA, which had recorded the most profitable US customers in Q2, appeared to have been able to parley that performance to new customer growth as active accounts grew by 814 (4.0%) to 21,139.

Among other firms, FXCM also showed a solid increase of 957 accounts and topped the list at 26,617 active traders. However, a portion of those may be from IBFX, which would be double counted with IBFX’s reported figures. The two brokers are important to monitor as their Q4 report should shed light on explaining Q3 figures.

Final results above, previous figures below

Among individual brokers for performance, InteractiveBrokers retook the top spot of having the most profitable traders, with 46.9% of accounts in the black. The increase from Q2 was doubly impressive given the decline in profitability experienced at other major brokers. Falling during the quarter was OANDA, with only 37.4% of customers profitable during Q3 versus 45.5% in Q2. In recent quarters, OANDA’s US profitability results have been among the most volatile.

Elsewhere, although only a small fraction of the US market, traders at CitiFX recorded a 44% profitability rate. CitiFX’s figures tend to be in the upper half of results in the US. Average account sizes at both CitiFX and InteractiveBrokers are estimated to be well above those at other brokers. Therefore, their customer performance levels appear to have revealed that larger, more risk sensitive accounts benefited from the shift of low to high volatility taking place during the quarter.

Previous Reports: Q2 2014, Q1 2014, Q4 2013, Q3 2013, Q2 2013, Q1 2013, Q4 2012, Q3 2012, Q2 2012, Q1 2012