How to play the currency markets

It's easier than ever for retail investors to win in the forex markets. So why not place your bets in the world's fastest-moving casino?

The closest most private investors get to foreign exchange dealing is when they buy their holiday money. Yet they could be missing out on some great profit-making opportunities. Foreign exchange (forex, or FX) is by far the biggest of the financial markets. According to International Financial Services, London (IFSL), in April average daily global turnover exceeded $2.7trn, over ten times the combined daily turnover of the world's equity markets. (This is an extended version of a story that appeared in MoneyWeek issue 334. See also: The MoneyWeek guide to Forex jargon and Paul Rodriguez's full recommendations in What are the best bets in Forex now?)

Currency trading is undeniably riskier and faster moving than other markets. As financial writer Hugo Dixon says, some view it as the ultimate example of "casino capitalism in action". But there are plenty of advantages to knowing how the FX market works. For a start, you can protect yourself against adverse currency movements useful if your portfolio has exposure to overseas investments. And unlike parts of the equity and bond markets, trading is quick, costs are low, and liquidity (the ability to buy and sell when you want) is deep. It's also becoming more accessible to retail investors. The number of UK brokers offering FX dealing to private investors doubled last year and the rise of spread betting has made it easy to get involved. So if you're tempted to dabble in the world's largest market, what do you need to know?

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.