ABOUT 10 years ago, the highly volatile foreign exchange market was confined to a learned few. Those dealing in the forex market were predominantly commercial banks and big companies trading for their own books.
In the last five years an influx of investment institutions has entered the market, using foreign exchange not only as a hedging vehicle for foreign assets but also as a profit-making instrument in itself.
Solicited by aggressive forex salespeople and attracted by the potential to make five to 10 times initial investment, the small investor has joined in the foray.
But according to market experts, small investors dealing in the forex market should beware.
Because of the high risks, many investment advisers will advise against entering the market at all.
''We do not recommend it to our clients,'' said Mr David Chapman, senior portfolio manager of Matheson pfc, ''It's very high risk.'' The main reason behind the risk is its high volatility, one which far outstrips most other forms of investment. The passing of a rumour can undress the market in minutes, and fortunes can suddenly be lost.
''Time and money is needed to read the markets correctly,'' said Mr Chapman. And for the small investor, both may be in short supply.