Forex boom looms

THE head of one of the world's fastest-growing online trading providers believes Australia has only just scratched the surface in retail foreign exchange trading.

But, like the plethora of forex dealers carving out a position in the local market, he sees massive potential for growth.

Gary Tilkin, founder and chief executive of GFT, formerly Global Forex Trading, expects a new wave of investors to emerge in the wake of the financial crisis - people who believe they can do a better job than the fund managers they paid to deliver double-digits losses last year.

And with the high standard of resources and information now available to retail investors, some of them actually are.

But that is not how Mr Tilkin would promote it.

"We are here to service people who are interested in speculating and we don't promote this as anything but - it is not long-term investing, it is not safe," he said.

"We are going to promote it as a speculative investment where there is a chance for significant loss and a chance for significant gain and the more you study, the more you educate yourself and the better tools you use, the better your chances of getting into the significant profit category."

Currency trading has been around for many years, but it is only in the past decade that it has really taken off among retail investors.

Firms like GFT can now offer small investors currency spreads as good as what the world's largest banks trade currencies at.

With a career in futures and currency trading spanning 30 years, Mr Tilkin launched GFT in 1997 from the basement of his Michigan home. It was one of the first firms in the US to offer online forex trading and has since expanded throughout the world with offices in Michigan, Chicago, New York, Tokyo, London, Dubai, Singapore and, since 2005, Sydney. GFT also specialises in online contracts for difference trading.

On average, GFT's revenue has grown more than 85 per cent per annum for the past five years.

From the second quarter of last year to the second quarter of this year, its global forex trading volume grew by 78 per cent.

Forex trading volumes skyrocket when markets are volatile.

"Volatility is really what traders want or should want because it is opportunities," Mr Tilkin said.

"If there isn't volatility the markets just go sideways, and sideways without much up and down movement is not really an opportunity. It does cut both ways of course - extreme, volatile markets can be higher-risk but the other side is higher potential reward."

He predicts a great deal of volatility ahead.

"There are still serious issues in credit markets around the world and in economies - the US is printing money like there is no end and that's going to cause issues of inflation," he said.

"Some of that may get resolved and things may get better but that could cause swings in the other way. There is a lot of news and changes in the environment and that causes volatility too."