## What is Forex? An In-Depth Look at the Global Currency Trading Market from A to Z

**Today, the forex market is becoming a new investment trend in Vietnam.** With a daily trading volume of up to 5.3 trillion USD, it is the largest financial market worldwide—far surpassing stocks, real estate, or any other assets.

### What is the Forex market? Why does it attract investors?

**Besides currency exchange or forex (FX)**, it fundamentally involves buying and selling currency pairs to profit from exchange rate fluctuations. Unlike traditional investment forms, forex trading offers compelling advantages:

**1. Low costs, minimal trading fees** - Unlike stocks or real estate, you only pay the spread (the difference between buy and sell prices).

**2. 24/7 Market Operation** - From Monday to Friday, you can trade anytime without time restrictions.

**3. The Power of Leverage** - This is the biggest difference. With just a few hundred thousand VND in margin, you can control larger trades hundreds of times bigger. For example: if you have 100 USD in margin with 100:1 leverage, you can trade 10,000 USD.

**4. No Market Control** - The forex market is enormous; no organization, bank, or government can manipulate it.

### What can you trade on the foreign exchange market?

The main commodities in the forex market are **currencies, traded in pairs**. For example: EUR/USD, GBP/USD, USD/JPY...

Among them:
- **Base currency** (the quote currency) - the currency on the left of the pair
- **Quote currency** (the price currency) - the currency on the right of the pair

**Major currency pairs account for 85% of trading volume:**
- EUR/USD (Euro / US Dollar)
- USD/JPY (US Dollar / Japanese Yen)
- GBP/USD (British Pound / US Dollar)
- AUD/USD, USD/CHF, NZD/USD, USD/CAD

Besides currencies, reputable trading platforms also offer other assets such as stock indices, commodities, gold, and cryptocurrencies.

### How does trading work: buy or sell for profit?

**Real-life example:**
You predict EUR/USD will increase in value. When the rate is 1.1500, you buy 10,000 EUR for 11,500 USD. Two weeks later, the rate rises to 1.2500, and you sell 10,000 EUR for 12,500 USD. **Profit: 1,000 USD** from a single trade.

But wait—you don’t need to spend the full 11,500 USD! With a 200:1 leverage from the platform, you only need a margin of **about 60 USD** to open this position. That’s the power of leverage.

### 8 Basic Concepts Every Forex Trader Needs to Know

**1. Long (Buy)** - Buying a currency, expecting its price to rise

**2. Short (Sell)** - Short selling a currency, expecting its price to fall

**3. Leverage (Leverage)** - The ability to trade with a larger amount of money than your capital. Usually 50:1, 100:1, or 500:1

**4. Margin (Margin)** - The amount you must deposit to open a trade. This is the platform’s temporary hold to maintain the position.

**5. Pip** - The smallest unit of change in the exchange rate. For example, EUR/USD from 1.2000 to 1.2005 = 5 pips

**6. Spread** - The difference between the bid price (bid) and the offer price (ask). This is the trading cost, measured in pips

**7. Lot** - The amount of currency you trade. Ranging from nano (100 units) to standard lots (100,000 units)

**8. Risk management orders:**
- **Stop Loss** - An order to limit losses when the price drops to your specified level
- **Take Profit** - An order to close the position when the price reaches your target profit

### Types of Forex Markets You Should Know

**Spot Forex Market** - Immediate currency exchange, settled within 2 business days. Banned in Vietnam.

**Forex CFD** - Contract for difference between two parties on currency price changes. This is **the operation of 99% of forex platforms in Vietnam**. You don’t own the actual currency but trade the price difference.

**Currency Futures** - Futures contracts to buy/sell currency at a specific date and pre-set price. Less common in Vietnam.

**FX Options** - Options predicting whether the price will rise or fall relative to a fixed level. Not popular in Vietnam.

### How to Start Forex Trading? 5 Simple Steps

**Step 1: Choose a reputable forex broker**
Key criteria: licensed by international regulatory agencies (ASIC, FCA, CySEC), low fees, user-friendly interface, good customer support.

**Step 2: Open an account**
Prepare: ID card with photo, email, phone number, bank account. The online process is quick, only 5-10 minutes.

**Step 3: Deposit funds**
Minimum amount usually from $50. You can start small and gradually increase after gaining experience.

**Step 4: Select currency pairs and analyze**
Observe factors:
- Economic conditions of countries
- Central bank policies (interest rates)
- Financial news and geopolitical events
- Market sentiment

**Step 5: Place orders and manage risks**
- Determine your position: buy or sell
- Set Stop Loss to limit losses
- Set Take Profit to lock in profits when targets are reached
- Monitor trades but avoid emotional decisions

### What drives the forex market?

**Central banks** - Interest rate policies, quantitative easing or tightening significantly influence currency prices.

**Economic news** - Employment reports, GDP, inflation, import-export data can cause large fluctuations.

**Market psychology** - When traders believe in a trend, they place orders accordingly, creating collective buying/selling pressure.

### Global Forex Market Size

- **Daily trading volume:** ~5 trillion USD
- **Average per hour:** ~220 billion USD
- **Participants:** Governments, central banks, large banks, brokers, retail investors
- **Retail investors account for:** ~1/3 of volume, approximately ~1.7 trillion USD/day

The forex market is the most transparent financial market, with the lowest entry costs, and offers the highest profits for investors worldwide. If you are ready to start this investment journey, remember: learning, discipline, and risk management are the keys to success.