What Is the Forex Market? Should You Participate in Forex Trading in Vietnam?

The foreign exchange market (Forex) is one of the largest financial markets worldwide. However, for Vietnamese investors, it remains a relatively new field and raises many concerns. This article will help you understand the nature of the Forex market, the opportunities and risks involved, as well as the legal regulations that Vietnamese investors need to know.

1. The Nature of the Forex Market

What is the foreign exchange market?

The Forex market, also known as the foreign exchange market, is a decentralized (OTC) market where currencies are traded between financial institutions, banks, companies, and individual investors. Unlike stock markets with centralized exchanges in each country, the Forex market operates globally without a fixed trading center.

To participate in Forex trading, investors must go through licensed brokerage firms to access this decentralized trading market.

Market size and liquidity

Forex is the most liquid market in the world, with an average daily trading volume reaching 6.6 trillion USD (according to 2020 statistics). Thanks to its large scale and the vast number of participants, the foreign exchange market cannot be manipulated and always maintains high transparency.

Participants in the Forex market

Initially, the foreign exchange market was mainly a playground for central banks, financial institutions, and import-export companies. They use Forex to hedge against exchange rate risks, prevent inflation, and protect asset values during economic-political instability.

Today, as international trade develops strongly and individual investors’ investment demand increases, Forex has become an attractive investment tool for diversification. Although individual trading volume remains low compared to large organizations, the appeal of Forex is gradually attracting more investors.

2. Is Playing Forex Legal in Vietnam?

Current legal situation

In Vietnam, the state tightly manages foreign exchange reserves, so foreign exchange trading rights are only granted to commercial banks. Currently, no Forex trading platform has been legalized in Vietnam, and the government does not license the establishment of Forex trading platforms within the country.

However, this does not mean that playing Forex is illegal. Individual investors are fully allowed to conduct foreign exchange transactions for personal investment purposes.

Legal ways to participate in Forex

Although there are no Vietnamese Forex platforms, Vietnamese investors can still trade Forex on reputable international trading platforms licensed by credible foreign financial regulatory organizations.

Important note: If you trade Forex through a brokerage “licensed by Vietnam,” it is illegal because the Vietnamese government definitely does not permit such activities. Therefore, choose international brokers licensed by reputable securities commissions.

3. Most Traded Currency Pairs

According to the Bank for International Settlements (BIS) survey in 2019, EUR/USD is the most traded currency pair, accounting for over 24% of daily trading volume. Next are USD/JPY (13.2%) and GBP/USD (9.6%). These are all high-value pairs and the most widely traded in Forex.

Top 10 popular currency pairs:

4. Forex Trading Hours

The Forex market operates 24 hours a day, 5 days a week, corresponding to the opening hours of major financial centers:

Each trading session has different volatility depending on the local currency. For example, Sydney’s session sees strong AUD movements, while London’s session often has significant fluctuations in European pairs. Investors can trade Forex 24/5 through a single platform.

5. Major News Impacting the Forex Market

Traders should pay attention to 5 main types of economic information that directly influence currency prices:

Central Bank Interest Rate Decisions

Interest rates are considered the “price of money.” An increase in interest rates = currency appreciation; a decrease = currency depreciation. This information has the most immediate and strong impact on Forex trading.

Gross Domestic Product (GDP)

Higher-than-expected GDP → currency appreciation; lower-than-expected GDP → currency depreciation.

Consumer Price Index (CPI) and Inflation

High CPI/inflation → central banks tend to raise interest rates → currency appreciation.

Unemployment Rate

Low unemployment (more jobs) → central banks increase interest rates to curb inflation. Important indicators include US ADP and NFP, released monthly.

FOMC Meeting (US Federal Open Market Committee)

FOMC meets monthly to set interest rates and comment on economic conditions. These decisions often cause significant market volatility. For example, on 18/3/2015, the EUR/USD surged 400 pips within minutes after the FOMC meeting results were announced.

6. How to Start Trading Forex?

Criteria for choosing a reputable broker

Vietnam currently has over 100,000 online trading platforms, including both reputable and scam platforms. To avoid risks, check the following factors:

• Reputation and security - Licensed by official financial regulatory organizations
• Trading costs - Compare commissions, spreads, and other fees
• Deposit and withdrawal - Processing times, payment methods
• Trading platform - User interface, analysis tools, stability
• Order execution speed - Latency, accuracy
• Customer service - 24/7 support, multiple languages

Steps to open a trading account:

Step 1: Create an online account (choose a demo account for practice or a real account for live trading)

Step 2: Select the market you want to trade (foreign exchange, commodities, metals, indices, etc.)

Step 3: Open buy or sell positions based on your trend forecast

Step 4: Set position size, take profit, stop loss levels

Step 5: Confirm and execute the trade

7. Tax Issues When Trading Forex in Vietnam

According to current Vietnamese law, foreign exchange trading is an area not yet permitted by law. Therefore, there are no legally recognized Forex platforms in Vietnam, and there is no clear policy on income tax from Forex trading.

Important note: Since this is a prohibited area in Vietnam, engaging in Forex trading may carry legal risks. Investors should carefully consider before proceeding.

8. Should You Trade Forex? Important Points to Consider

Benefits

• The largest market globally with extremely high liquidity
• Can trade 24/5, suitable for diverse schedules
• Supports high leverage (leverage)
• Transparent economic information, not manipulated
• High profit opportunities when predicting trends accurately

Risks

• High risk: possible rapid loss of entire capital
• Weak trading psychology → emotional decisions leading to losses
• Fast market fluctuations requiring quick reactions
• Legal issues in Vietnam remain unclear
• Fraud risks from untrustworthy platforms

Advice for Vietnamese investors

If you decide to trade Forex:

1. Choose a reputable broker - Licensed by international regulatory bodies (such as ASIC, CySEC, FCA, etc.)
2. Start with a demo account - Practice risk-free before trading real money
3. Manage risks strictly - Use only disposable capital, set stop-loss orders
4. Build knowledge - Learn technical analysis, fundamental analysis, money management
5. Stay updated - Follow economic news, monitor economic calendars
6. Check legal regulations - Stay informed about the latest Vietnamese regulations related to Forex trading

In summary, Forex trading can offer profit opportunities but also involves significant risks. Only when you understand the market well, have a solid trading plan, and choose reputable brokers will Forex trading become a worthwhile investment channel.