BEGINNING STEP: 10 Basic Facts About Forex Trading That You Need to Understand Clearly

Breaking Common Misconceptions About the Forex Market

The forex market is the largest financial trading arena worldwide, but it is also where investors are most easily misled. Every day, you can find countless trading tips from forums, social media, or personal blogs. However, scattered, subjective, and unverified information can lead you to false conclusions about the true nature of the foreign exchange market. Even experienced traders are not immune to losing trades if they do not fully understand the fundamentals of forex trading.

So, what is the true essence of forex trading? What mysteries about the foreign exchange market have you yet to uncover? Let’s explore the 10 most misunderstood facts about this market, helping you build a solid mindset as you step into the world of forex trading.

What Is Forex Trading?

Forex trading, or currency trading, involves buying and selling international currency pairs. Historically, it was initially a market for governments, central banks, large financial institutions, and strategic investment funds. To allow individual investors to participate, they need an intermediary – forex brokers or trading platforms.

Brokers provide you with an electronic trading platform (trading platform), where you start your journey to becoming a forex trader by clicking Buy (Buy) or Sell (Sell) on currency pairs.

Key features of the forex market:

• Extremely high liquidity – you can open/close positions almost instantly
• 24/7 trading – independent of working hours
• T+0 market – trades executed immediately upon order placement
• Supports trading over 60 different currency pairs

Before entering the market, many imagine a forex trader as someone earning huge amounts of money, traveling around the world, and enjoying financial freedom. But the harsh reality is that 90-95% of new traders lose money quickly. This is just one of the most common misconceptions.

10 Facts About Forex You Need to Know

1. Forex Can Help You Get Rich Quickly, But…

This is not entirely false – some experienced traders do make enormous profits. However, you need to know the rest of the story: “quick but not sustainable.”

The constantly fluctuating market requires you to use your mind and maintain psychological discipline. If you loosen your discipline or act impulsively, the market will take away all your accumulated profits in just a few trades. Successful traders are not indifferent; they are those who plan carefully and strictly adhere to their own rules.

2. The Forex Market Exists with Scams, But Not in the Market Itself

In fact, the forex market itself is not a scam, but untrustworthy brokers are the real danger. Because the market is lively, many fake brokers impersonate legitimate ones to lure investors. You might deposit money into an account but be unable to withdraw – a warning sign.

Before trading forex, it’s crucial to verify and choose a licensed, reputable broker. That’s the first step to protecting your capital.

3. You Don’t Need a Huge Amount of Money to Start

The unit of profit measurement in forex is pip. At first glance, it seems that to make a reasonable profit per pip, you need to buy a large amount of currency.

Real example: If one pip of the EUR/USD pair equals 0.0001, you need to buy 100,000 EUR to earn 10 USD (excluding spread).

However, thanks to leverage (leverage), you can control 100,000 EUR with only about 100 EUR of capital. This means you don’t need to be a millionaire to start forex trading – just have enough initial capital and understand how to use leverage safely.

4. Forex Is Not Just About Short-Term “Betting”

Many think forex is a market for short-term speculators because of its high liquidity and leverage. But historical exchange rate movements show that currencies have clear long-term trends.

Buy and Hold strategy (buy and hold long-term) is entirely feasible in forex. Additionally, currencies are used by investors as a diversification tool or for hedging risks. Even governments and large banks stockpile foreign currencies for long-term purposes.

5. Predicting Trends Matters, But Not Always

In theory and practice, accurately predicting the market direction is key to making profits. However, predictions can blind you – you become overly confident in your forecast and rush to open positions without real evidence.

When your prediction is correct, you rejoice, but when wrong, you feel frustrated and continue betting on the next forecast without confirmation signals. Smarter approach: wait for market confirmation before acting on your forecast. This helps you avoid impulsive trades.

6. Upward or Downward, You Still Have Opportunities

Price charts of currency pairs are all about waves of ups and downs. The strength of forex is that whether prices go up or down, you can profit from Long (predicting rise) or Short (predicting fall) positions.

However, if you open a Long position at the wrong time, you can’t just wait for the price to recover. Waiting time is unpredictable. Therefore, always set a Stop-loss for each position to limit losses instead of risking losing your entire account.

7. Fixed Strategies Are Better Than Constant Changes

The forex market is constantly changing, and many believe you must continually adjust your strategies to adapt. But in reality, market history tends to repeat itself – old patterns and price behaviors often recur.

Instead of constantly changing strategies, you should:

• Build a list of proven strategies
• Have both short-term and long-term strategies
• Ensure you truly understand each strategy before using it

The best forex strategies are simple, easy to understand, and easy to execute.

8. Success Comes from Accumulating Small Profits

This is a simple yet profound truth: successful traders do not generate huge profits from a single trade. Instead, they carefully analyze the forex market and earn small profits from each trade.

The key is not to overdo it – a common mistake among beginners is overtrading (giao dịch quá nhiều). They open multiple positions in all directions, hoping each small fluctuation will generate profit. But each trade costs fees, and each position consumes margin. Instead of reckless betting, spend time gaining real trading experience and making correct Buy/Sell decisions.

9. Forex Is Not Just for Financial Experts

Yes, initially, the forex market was a playground for financial institutions and experts. It is complex, with price movements influenced by many macro factors. However, you can succeed without a financial background.

Many individual traders, not professionals, have built successful careers in forex. The key is: invest time to learn about the forex market, accumulate experience gradually, and stay persistent. If you stay committed, you will definitely succeed.

10. Learn from Others, But Think Independently

When starting out, it’s wise to interact with experienced traders to gain insights. At first, you don’t know how to trade, and you can’t come up with strategies on your own, so listening to professionals makes sense.

However, they are not gods. Their forecasts are not always accurate. You need to process information critically and remember: you are responsible for your own trades, not anyone else. Use others’ advice as a reference point, not as an absolute command.

Is Forex Worth the Risk?

Compared to stock trading, forex can be considered a more attractive investment option. If you invest in stocks, it may take a year to earn 10-20% profit. Meanwhile, in the forex market, you can achieve similar returns in just a few weeks or even days.

Of course, higher profits come with higher risks. But risk management today is more advanced than before. If you accept risk, have a strong mindset, and know how to manage risk, then forex is a suitable market for you.

Like other investment forms, to participate in forex, you need to choose a reputable broker to access the market. Choosing a reliable broker with low trading fees will help minimize scams and maximize your profits.

Conclusion

The truths about forex trading go far beyond what is listed here. To succeed in this market, you must understand its nature to avoid disappointment when facing risks. Forex information is abundant online, and if you believe everything you read without a solid foundation, you are setting yourself up for failure.

Take the time to deeply learn about the forex market, develop a trading strategy that suits you and your vision. That way, misconceptions about forex trading will no longer be obstacles on your path to success.