The interbank foreign exchange market, known as forex or sometimes abbreviated as FX, is the largest single market in the world. Its participants include banks, financial management firms, international businesses and individual investors and speculators.

In contrast with most markets where instruments are traded individually, currencies are tradecd in pairs in the interbank market. For example, a trader may go long the EUR/USD pair. Taking such a position actually consists of two parts, borrowing the currency on the right and converting it to the currency on the left. If the value of the currency on the left increases while the currency on the right decreases, the trade will result in a profit. Alternately, if the currencies don't fluctuate much, but the interest from holding the currency on the left exceeds the interest from borrowing the currency on the right, the differential in interest rates may result in what is called a "carry trade" profit.

For an investor mostly familiar with stocks or mutual funds, trading alternative instruments such as currencies may seem too exotic or too risky. Before dismissing curency trading, give some thought to the following points:

• Due to the fact that there is no tradition of high commission charges and no centralized exchange to maintain, the costs of operating in the currency markets is far less than in any other market. This works to the advantage of the smaller player.

• Unlike other markets where big players can manipulate markets by virtue of their capitalization, the forex markets are too big for such tactics to work. Even world governments, with their huge reserves, have had a great deal of difficulty just slowing the natural trends in the forex markets.

• The wide variety of leverage choices available in the forex marketplace allows traders at any level of risk tolerance to tailor their approach to suit their own unique financial conditions and objectives.

• The value of a currency is derived from a large number of factors, including interest rates, political change, national economic policy, etc. As a result, forex rates tend to move in clearer trends than other instruments, with less "slop and chop."

As you can probably see, there are a lot of good reasons to consider the interbank forex markets as a way of expanding and enhancing an investing strategy.

Because the forex markets are active 24 hours a day, a lot of traders believe that they need to manage their accounts around the clock. This may be suitable for some traders but it's not a requirement. Currency rates move in trends that can last for years at a time. If you're using a system that can exploit these moves, such as the iSigma approach, once a day portfolio management is more than adequate. When a few hours' movement results in a huge price shift, a stop order in the market will take care of damage control if the move is against your position. Also, many forex brokers will have guarantees on how your stop or limit orders are filled, protecting you from slippage in volatile situations.

All forex brokers offer leveraged accounts, making it possible to enhance the performance of a trading approach. This can be a double edged sword, as a highly margined losing trade can be very damaging, possibly resulting in a margin call from the broker. The key here is to use margin in a way that reflects a realistic evaluation of one's tolerance for risk, in conjunction with a solid trading plan built to control risk.

While there is no one market perfect for all traders, we hope that you'll give the forex market due consideration as a venue to enhance your trading plan. Forex trading offers minimal operating expenses, generous leverage choices and plenty of opportunities for profit. If you have any questions about forex markets that you believe are not addressed here, don't hesitate to ask via one of the available contact methods.