Reuters Money

Do you have the heart for foreign exchange trading?

When he isn’t working as a Sacramento-area chiropractor, Neil Kalia likes to watch the currencies of other countries closely. Very closely.

Kalia, 34, estimates that he spends between 40 and 50 hours a week boning up on how the Euro, Australian dollar and British pound stack up against the U.S. dollar. When he trades, it’s usually quick: “anywhere between 24 hours to two weeks, I get out.”

Statistics confirm tremendous growth in foreign exchange trading by individuals such as Kalia in the past decade. According to the Bank of International Settlements (BIS), daily volume of foreign exchange trading has nearly quadrupled since 2001, from $1.2 trillion in 2001 to just below $4 trillion today. “That’s more than all the stock market volume combined on a daily basis, and that goes back to how liquid the currency market is,” says Brian Dolan, the chief currency strategist at FOREX.com and the co-author of “Currency Trading for Dummies.”

But it’s much more debatable to what extent currency belongs in the average investor’s portfolio, how trades should transpire — and who should execute them. Insiders stress that mapping the peaks and valleys of pounds and dollars is not for hobbyists, but well-equipped pros.

“The average investor should not speculate in currency, in much the same way I would say the average person should avoid going to Vegas,” says Steve Horan, head of Private Wealth at CFA Institute, and co-author of “The Forbes/CFA Institute Investment Course.” “There are a lot of smart people playing the currency market; they’ve got more tools, more data and more training — and I don’t want to play against them.”

“The increase is being driven by investors — hedge funds and alternative assets funds — looking for extra return over the market,” says John Mathis, a professor of global banking and finance at the Thunderbird School of Global Management.

Meanwhile, online trading platforms have exploded. According to FXWeek.com, Citi FX Pro enjoyed more than 10-fold growth in monthly trading volume between July 2009 and July 2010, a period during which it set up operations in Singapore and the United Kingdom. With as little as $10,000, users can set up non-collateralized accounts and trade on margin. FOREX.com also has brokerages worldwide, and you can even try out currency trading with a free account that has $50,000 virtual cash. Other players include TradeStation and Zecco (which uses FOREX’s platform, a practice known as “white labeling”).