Foreign Exchange: The Massive Currency Trading Market and Forex Investment Opportunities for Beginners

Understanding the Foreign Exchange Market Is the First Step

In recent years, the foreign exchange market has attracted the attention of tens of thousands of Vietnamese investors. However, many people still confuse this concept. Besides international currencies like USD, EUR, or AUD, foreign exchange also includes payment tools such as (international credit cards, )bills of exchange, (government bonds, )stocks, (Bitcoin, Ethereum, gold, and even domestic currency used in international transactions.

When talking about the foreign exchange market )Forex, FX(, we refer to a decentralized trading platform where investors can buy, sell, and exchange different currencies for various purposes—from import-export to currency risk hedging.

Foreign exchange trading is the activity of buying, selling, and exchanging currencies. Central banks participate to manage foreign currency supply, but as individual investors, your sole goal is to exploit exchange rate fluctuations for profit.

This market is enormous—about 5.3 trillion USD are traded daily, making stock markets, bonds, or other markets seem small in comparison. Thanks to its continuous volatility, the foreign exchange market creates countless profit-making opportunities.

Trading Assets: Currencies in Pairs

The main commodity on the Forex platform is currency, traded in pairs like EUR/USD. In this pair, EUR )Euro of the European Union( is the base currency )—the unit on the left, while USD (US Dollar) is the quote currency (—the unit on the right.

Because exchange rates between currencies constantly change depending on economic and geopolitical factors, trading opportunities are endless, allowing anyone to participate and seek profits.

Although over 30 major currencies are traded, some pairs account for 85% of the market value and have high liquidity—these are called major currency pairs: EUR/USD, USD/JPY, GBP/USD, AUD/USD, USD/CHF, NZD/USD, USD/CAD.

Reputable forex brokers not only offer Forex but also integrate assets like stock indices, commodities, gold, and cryptocurrencies.

How Forex Investment Works

Forex investment essentially involves trading a currency pair and profiting from exchange rate differences. Suppose you predict EUR/USD will rise in the future—you place a buy order, wait for the rate to increase, then sell to realize profit. The advantage is you can buy and sell )two-way market(—if your prediction is wrong, you can perform a short sell.

)Real Example of a Buy Trade

You spend 11,500 USD to buy 10,000 Euros at EUR/USD = 1.1500. Two weeks later, you sell 10,000 Euros at 1.2500, receiving 12,500 USD. Result: a profit of 1,000 USD from the exchange rate difference.

However, a key difference on the Forex platform is leverage. Instead of paying the full 11,500 USD, a broker can support you with leverage up to 200 times—meaning you only need to deposit about 60 USD as margin to execute the same trade. But leverage is a double-edged sword: it can amplify profits but also increase losses.

Advantages of Investing in Forex

Minimum Trading Cost

Forex trading eliminates intermediary costs such as asset management fees, brokerage fees, or taxes. Brokers profit from the spread—the difference between the bid and ask prices—measured in pips (decimal points).

24/7 Market Operation

Forex operates continuously worldwide, suitable for those who want to trade as an additional investment channel. You have full control over when to participate—morning, afternoon, evening, or even during sleep.

No One Can Manipulate the Market

With its enormous scale and participation from countless groups, no single entity ###including central banks( can control or manipulate the market.

Leverage Power

You can deposit a small amount of margin but trade with a much larger amount of currency, creating opportunities to multiply profits many times over. However, use it carefully.

Low Entry Barriers

You only need a few hundred thousand VND as margin to start—something that stocks, precious materials, or real estate cannot offer.

Types of Forex Markets

Spot Forex Market )Spot Forex(

Trading at agreed prices, with settlement immediately or within 2 business days. This is where banks and financial institutions participate widely. In Vietnam, this type of market is prohibited.

CFD - Contract for Difference

A contract between two parties on the price difference of assets )foreign currencies, indices, stocks(. CFDs allow speculation without owning the underlying asset. In Vietnam, 99% of Forex brokers operate this way. CFD trading is not banned, but you should choose brokers licensed by international authorities like ASIC, FCA, CySEC.

Futures Contract )Futures(

A contract to exchange currencies on a specific future date at a predetermined price. In Vietnam, this type is not common.

FX Options )FX Options(

A tool that allows you to predict whether the asset price will rise or fall beyond a fixed level. If correct, you profit; if wrong, you lose money. Not popular in Vietnam either.

ETFs - Exchange-Traded Funds )ETFs(

Funds that track the relative value of a currency against USD or a basket of currencies. Less common in Vietnam.

Conclusion: In Vietnam, you can trade Forex as CFDs, but it’s advisable to choose reputable brokers with reasonable costs and suitable products.

8 Essential Steps to Start Forex Investment

) Step 1: Master 8 Basic Concepts

To trade effectively, you need to understand technical terms:

Long (Buy): When a trader buys a currency expecting to sell it at a higher price. Profits increase as the market rises.

Short (Sell): When a trader sells a currency short expecting it to decline. Profits increase as the market falls.

Leverage ###Leverage(: Trading with a larger amount of money than your capital, expressed as ratios like )50:1, 100:1, 500:1(. For example: with 1,000 USD, you open a position of 500,000 USD, leverage = 500:1.

Margin )Margin(: The amount you must deposit with the broker to open and maintain a trade. The broker automatically deducts this amount.

Pip )Point of Decimal(: The smallest change in the exchange rate )to the thousandth(. If EUR/USD moves from 1.2000 to 1.2005 = 5 pips.

Spread )Price Difference(: The difference between the bid price )bid( and the ask price )offer(, measured in pips. This is the broker’s income.

Lot )Lot(: The number of currency units you buy/sell. Various sizes: nano )100 units(, micro )1,000(, mini )10,000(, standard )100,000(.

Bid & Ask: Bid is the price you receive when selling; Ask is the price you pay when buying.

) Step 2: Choose a Reputable Forex Broker

Criteria include: credibility (licensed by international authorities), low transaction costs, reasonable commissions, suitable products, simple and user-friendly trading platform.

( Step 3: Open an Account

Provide necessary documents:

• ID card/CCCD (front and back)
• Email and phone number
• Bank account

) Step 4: Determine the Currency Pair to Trade

Analyze whether their exchange rate will rise or fall based on:

Economic Conditions: If you believe the US economy will weaken, USD will be negatively affected. You can sell USD to exchange for a stronger economy’s currency.

Trade Power: Countries with high demand for exported goods will receive more money, stimulating economic growth and increasing their currency value.

Political Situation: Elections or tight monetary policies ###with high interest rates( can push currency prices higher.

) Step 5: Determine Margin Amount

Depending on the broker’s policy, you can trade with much more than your margin. For example: to trade 100,000 USD with 1% margin, you only need to deposit 1,000 USD. General rule: invest only 2% of your capital in a currency pair.

Step 6: Decide to Buy or Sell

BUY a pair if you believe the base currency will strengthen against the quote currency:

• Profits increase with upward movements
• Losses if the rate declines

SELL a pair if you believe the base currency will weaken:

• Profits increase with downward movements
• Losses if the rate rises

Step 7: Add Risk Management Orders

Orders are automatic instructions executed when the price reaches a specified level:

Stop Loss Order (Stop Loss): Close the trade at a lower price to minimize losses.

Take Profit Order ###Take Profit###: Close the trade at a higher price to lock in desired profits.

Example: EUR/USD is currently 1.11128, you predict it will rise to 1.2000 then fall. You set a limit sell order at 1.2000. When the price hits 1.2000, the order executes automatically, bringing profit.

Step 8: Monitor and Adjust

Avoid emotional actions. Forex markets fluctuate constantly, with prices rising and falling. The key is to continue researching and stick to your strategy. Ultimately, you will harvest profits.

Factors Affecting the Forex Market

Central Banks

They control the money supply and implement measures that significantly influence prices. Quantitative easing (injecting money into the economy) can cause the currency to depreciate.

Financial News

Commercial banks and investors tend to invest in economies with strong prospects. Good news from a region encourages investment, increases demand for that currency, and raises its value (if supply does not increase).

Market Sentiment

If traders believe a currency is heading in a certain direction, they will trade accordingly and persuade others, affecting demand and prices.

Regulations and Market Oversight

Although Forex is enormous, it is lightly regulated because there is no global authority overseeing it 24/7. Instead, national and international trading organizations supervise forex transactions to ensure providers adhere to standards. In the US, the main agencies are CFTC ###Commodity Futures Trading Commission( and NFA )National Futures Association(.

Market Size and Participants

Every day, about 5 trillion USD are traded globally, averaging 220 billion USD per hour. The market includes organizations, corporations, governments, and currency speculators. Speculators account for about 90% of the volume, mostly focusing on USD, Euro, and Yen.

Participants include:

• Governments and central banks
• Major banks
• Forex brokers
• Retail investors )accounting for nearly ⅓ of daily volume, approximately 1.7 trillion USD(

Summary: Why Choose Forex Investment

The foreign exchange market is the largest financial investment market worldwide. With transparency, low entry costs, and high profit opportunities, Forex has become one of the most effective investment channels for investors around the globe. Now that you understand what forex is, how the market operates, and the 8 steps to start forex trading, prepare yourself, choose a reputable broker, and begin your journey.