What You Need to Know Before Entering the Forex Trading World

Understanding the Nature of Forex Trading Before You Start

When mentioning the global financial markets, the foreign exchange market (Forex) ranks at the top in trading volume. However, it is also the field most prone to common misconceptions. Information about what trade forex is widely available online, but most of it is personal in nature, lacking scientific basis, leading many to misunderstand the true essence of this market.

What is forex trading? In the simplest definition, it is the activity of buying and selling international currency pairs. The history of this market shows it is controlled by governments, central banks, large financial corporations, and investment funds. To participate, individual investors need an intermediary called a broker - who provides a (trading platform) to execute Buy (Buy) or Sell (Sell) orders.

One of the outstanding advantages of forex trading compared to other markets is its extremely high liquidity, 24/7 operation, and T+0 (immediate execution) transactions, unlike domestic stock markets with T+2 cycles. You can trade nearly 60 different currency pairs.

Common Misconceptions About Getting Rich Quickly in Forex

Many people enter Forex with dreams of quick wealth, imagining free-spirited traders traveling the world. But the truth is 90-95% of traders will incur losses. This is just one of many harsh realities investors face.

Currency pairs can indeed generate quick profits, but the trap lies in the phrase “not sustainable.” The market’s constant volatility requires traders to use intelligence, knowledge, and especially strong psychological resilience. Acting on emotions, rushing after a few big wins, will cause the market to wipe out your entire capital.

Another common misconception: Forex is a scam. Not necessarily, the issue lies with fraudulent brokers, not the market itself. Due to Forex’s lively nature, many scammers impersonate brokers to lure investors. You may deposit money but cannot withdraw - that is a warning sign. Therefore, choosing a reputable broker is a crucial first step.

Initial Capital and Real Market Rules

Another misconception: you need a lot of money to start trading forex. In reality, this is not true. The unit of profit measurement in Forex is called a pip - the smallest price difference. If trading the EUR/USD pair with 1 pip = 0.0001, you only earn $10 when buying 100,000 EUR (excluding spread).

However, leverage (leverage) solves this problem. You can buy 100,000 EUR with only 100 EUR of actual capital. Therefore, you do not need to be a millionaire to participate in Forex trading.

Another mistake: Forex is only for short-term investors. The truth is, historical currency trends show long-term tendencies, and Buy and Hold strategies are entirely feasible. Currencies are also used to diversify investment portfolios or hedge risks when other assets are less liquid. This is why governments and large banks always hold foreign currency reserves.

Market Prediction Skills and Psychological Traps

Accurately predicting market trends is truly a way to profit in Forex, but it also causes many traders to fall into traps. When predictions are correct, you feel infinitely confident. When wrong and suffering losses, frustration leads to unconscious actions - opening more positions to “prove” the prediction right.

A smarter approach: when you have a forecast, wait to see the actual price movement to confirm. The market never moves straight - it consists of many waves up and down. Whether prices go up or down, you have opportunities to profit through Long (mua) or Short @E0=bán( positions. However, if a Long position is wrong, how long do you wait for the price to return? No one knows. Therefore, always set a Stop-loss for each position to limit small failures instead of risking total loss.

Trading Strategies: Consistent or Adaptive?

The Forex market is constantly volatile, seemingly requiring traders to continually change strategies. But market history repeats itself with certain laws. Strategies that worked in the past can work again in the future. The key is to have a “library” of short-term and long-term strategies and truly understand how they operate. The best strategies are always simple, easy to understand, and easy to implement.

A common mistake among beginners: overtrading - opening too many positions in all directions, hoping every price movement yields profit. This approach only increases trading costs and margin requirements. Instead, spend time studying the market to make wise Buy-Sell decisions.

Achieving Profits from Small Percentages

A simple yet profound fact: successful forex traders do not make enormous profits from each trade, but rather through analyzing, trading, and accumulating small profits. This approach requires discipline and patience. Each trade yielding 1-2% profit may not impress, but when accumulating dozens or hundreds of successful trades, the total becomes significant.

Professional Knowledge: Necessary or Not?

Forex was once considered an exclusive playground for financial experts. The market is indeed complex, with prices influenced by numerous global macro factors. However, history shows that individual traders without a financial background can succeed. The key is investing time to learn about the forex market and gaining experience from real trades without losing motivation.

Learning from Professional Traders but Making Independent Decisions

When starting out, engaging with experienced traders is very valuable for skill accumulation. However, even experts are not right 100% of the time. Receive information critically, then verify yourself. The most important thing: you are responsible for your own trading decisions, not anyone else.

Is Forex Worth the Risk?

Compared to stock trading, Forex offers higher profit potential. A stock investment typically yields 10-20% annually, while Forex can achieve that in weeks or even days. The risks are also higher, but if you are willing to accept risks, have a strong mindset, and know how to manage risks, the Forex market is a suitable playground.

Entering the world of forex trading correctly involves understanding the market’s nature, avoiding common misconceptions, choosing a reputable broker, developing suitable strategies, and always learning from mistakes. This journey requires perseverance, but the results will be worth the effort.