The Evolution of Retail Forex: Foreign Exchange Trading, Once Only for Big Players, Has Become More Mainstream, Attracting Retail Traders from around the World. Firms Offering Forex Are Playing Their Part by Meeting the Needs of These Less-Experienced Newcomers

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Forex firms agree that retail clients in the foreign exchange market are increasing at a rapid rate and will only continue to do so. Firms are trying to be attentive to the needs of these new traders, hoping to capture some of those prospective customers.


From wireless trading to fractional pips and competition to tighten spreads, retail traders can expect a lot more for a lot less going forward.

"The majority of the people out there now in forex trading have experience in foreign exchange trading, but a lot of the people that are gradually moving over are looking to test the marketplace, and we're seeing an increasing number of inquiries from people without experience," says Enis Mehmet, head of CMC Group's New York operation.

A broader acceptance of forex trading is partially fueling that growth.

"Overall, the forex market has become much more mainstream over the past several years," says Mark Galant, CEO and founder of Gain Capital. "Both self-directed traders as well as passive investors are now allocating risk capital to forex."

Galant says Gain now has clients in more than 110 countries and that its managed account program has seen a substantial increase in assets under management in the past year.

"[Forex] is no longer a completely unknown market," says Marc Prosser, chief marketing officer at Forex Capital Markets (FXCM). He says FXCM has seen more than 100% growth per year in customers in recent years.

Some unique features of forex are what make it attractive to some traders.

"It is a great alternative to other markets because it offers greater liquidity and 24-hour trading, among other benefits," says Eugene Hawkin, the chief operating officer at Capital Market Services. "In addition, increased regulation has made it a more legitimate option in the eyes of many traders, and the spread of readily available technology has made it more accessible than ever to the average trader."

Some say that despite the large growth in forex, that there is much more to come.

"The potential is just untapped, in terms of the market for forex," says Joe Nickolson, president and chief operating officer at TradeStation Securities.

TradeStation Securities has recently added forex to its offerings in an effort to capture some of that market. While TradeStation is known for the system-testing and automatic execution capabilities of its futures and equities execution platform, that technology is not yet implemented on the forex side, although Nickolson says it is in development.

"Certainly, people who trade futures and equities are perfect candidates because there's much greater leverage. Anyone who trades actively--forex is one of the best markets for them," Nickolson says.

For those active traders, the constant movement in forex, on all time frames, provides ample trading opportunities.

"Because the stock market has seen very little movement in the past six months, what we're seeing is a lot of crossover from people that have been previously trading stocks on a regular basis that are now looking to diversify their trading portfolios and that includes foreign exchange," Mehmet says. "These clients are coming on board and looking for [the brokerage firm they use] to give them guidance."

It can be difficult for a retail trader who's never traded forex, even if he's experienced in trading other markets, to just jump in, however, especially when he doesn't understand the way trading the forex market works.

"The main hurdle is education. This remains a very unfamiliar market to many retail traders, and education is the key to help them become comfortable and to overcome their natural reluctance to try something new," says Dan O'Neil, principal at Xpresstrade.

"Customer service, the ability of a retail client to pick up a phone or click onto an online chat and speak to a knowledgeable individual who can anticipate their client's needs has become more vital than ever," says Bill Hoerter, chief FX dealer at Alaron FX. …