The power of the internet and the forces of globalisation have come together in recent years to create a dynamic new market in online margin foreign exchange trading. The attractions for retail investors are the speed and comparative ease of executing transactions plus the prospect of returns potentially outpacing gains from the bond or equity markets.
While noting the rapid growth of the sector, K. Duker, the global co-head of dbFX and Asia-Pacific head of global liquidity for Deutsche Bank, stressed the need for caution and for learning the intricacies of the business before diving in.
He emphasised that Deutsche Bank London branch's online margin trading platform, which has been operating in Hong Kong since late last year, was for individuals serious about the foreign exchange markets who knew exactly what they were doing. At present, it enables retail investors to trade 27 currency pairs, and there is a 24-hour support desk, manned by staff fluent in nine languages, including Putonghua and Cantonese. The minimum deposit required was US$5,000, but some trading positions could involve as much as US$50 million.
Mr Duker said the best way to learn to trade forex online was through experience, but that 'can be expensive'. So dbFX provides a demo system, the same in every way as the real thing, except that it is virtual. The bank also provides access to in-house research, while ensuring there is no pressure to trade.
'Typically, we don't give advice; investors take their own counsel,' Mr Duker said. 'But we do try to give an idea of what to look for, and our research gives a window into parts of the market not open to the ordinary investor.'
As a general example, he noted how increased demand for iron ore in India could have a direct impact on prices paid in China, production in Australia, and perhaps even on shipbuilding orders in South Korea. At each point, there were implications for the valuation of currencies and forex demand.
'People tend to forget how globally linked the markets are today,' Mr Duker said.