The trends seen in the past 30 years of FX trading are on track to continue. Daily average turnover in global FX trading has gone from over $1 trillion a day in 2001 to over $2 trillion a day in 2007. This increase in volume, in what is already the world’s largest financial market, will likely continue. This growth will come from many sectors; global commerce, financial institutions, hedge funds and retail investors

The past ten years have seen an explosion of alternative asset managers in the investment industry. These hedge funds now control over $2.4 trillion in customer assets, compared to $130 billion in 1997. Hedge funds pursue carry trade strategies, high frequency strategies, arbitrage strategies, among others in the foreign currency markets. All this is in pursuit of returns for their clients independent of traditional investing benchmarks.

Technology will continue to lower the transaction costs of trading in foreign exchange. Yesterday’s average spreads were 6 or 8 pips on the most liquid currency pairs. Today’s average spreads seen on the majors are about 3 to 4 pips. Tomorrow will see an even greater reduction of the spread as more powerful and efficient technology will connect market participants from all forums.

The individual investor is just beginning to participate in the foreign currency markets. As knowledge and experience in this market expands, individual investors will learn the diversification advantages of adding foreign currency assets in order to balance a portfolio of strictly stocks and bonds.

 All these sources of increased volume will mean increased opportunities for trading and increased liquidity in the FX market. Better liquidity will give market participants better opportunities to enter and exit the market at their desired levels. Increased volume will also afford speculators opportunities to trade in continuously active markets. Technological innovations will continue to decrease the costs of trading as all firms in the FX market from brokers to market makers to back office accounting departments become more efficient and pass those savings on to the customers.