Foreign exchange (FX) trading among individual investors has seen an explosion of growth in the past few years and this trend is expected to continue this year, as investors search for the elusive alpha for their investments. According to Betsy Waters, global director, dbFX at Deutsche Bank's online FX trading platform, the growth will be primarily driven by an increase in the number of experienced active traders moving to FX from other asset classes, leading to a significant uptake in trading volumes. The FX markets appeal to individual investors for five key reasons: for sophisticated investors who are looking to put some of their investments into a diversified asset class, FX offers significant advantages because of its 24-hour liquidity, tight spreads, convenient access to margin, and easy and ready access. Secondly, Waters says that the fundamental principles of trading currencies are similar to those required for other asset classes. For example, active traders who are following technical and fundamental analysis of the global markets should be well equipped to take a view on the direction of the FX markets, while FX typically remains uncorrelated to the direction of stock and bond markets, according to the Deutsche Bank analysis. These traders are able to diversify their investment portfolios from traditional bond and equity assets to FX, spreading their risk more effectively. Waters adds that continual technological advances are helping the retail investors. Investors increasingly want to make their own investment decisions and, with the development of sophisticated trading platforms such as dbFX, clients have access to the forex markets from their home or office PC. With tools such as stop-losses or trailing stops included on the platform, clients can execute their trading plans using combinations of orders to effectively manage their currency risk. Also being able to trade from embedded charts enhances clients' FX trading experience, she says. Investors also demand fair and transparent pricing and access to the latest research such as that provided to clients of dbFX, Deutsche Bank's online margin FX trading platform. The fourth reason is the continuing demand for algorithmic trading systems which will drive future growth. After accounting for less than 1 per cent of trades this January, algorithmic trades accounted for 25 per cent of all dbFX's trading volume during the month and continues to attract new entrants to FX markets, although they should only be used to supplement a trader's existing investment strategy. Lastly, the growth in popularity of Managed Account programmes, such as those offered by dbFX.com, are making FX markets even more popular, Waters points out. Managed Accounts are targeted at investors who want to gain exposure to currencies without actually having to trade themselves - but still ensuring they have full access and control over their capital. Retail forex trading has a bright future, and the case for long-term and sustainable growth in the market is compelling. The key to taking advantage of this potential is to educate investors on the benefits of trading forex and provide them with a multitude of ways they can access the market.