Forex Trading From A to Z: The Complete Guide for Beginners 2025

What Is Forex? Understanding It Correctly From the Start for Success

Foreign exchange - Forex - Currency market. These three names refer to the same thing: a decentralized trading platform where people can buy and sell different currencies. It’s not just USD, EUR, or JPY; besides real currencies, gold, cryptocurrencies, and stock indices are also integrated into modern trading platforms.

The Forex market has an average daily trading volume of 5.3 trillion USD — an enormous figure that makes other markets like stocks or bonds seem insignificant in comparison. Due to this massive scale, no one — whether a central bank or a large organization — can manipulate the market.

Why do people participate in Forex trading? Simply: to profit from exchange rate differences.

Basic Tools You Need to Know

When starting Forex trading, familiarize yourself with these 8 fundamental concepts:

1. Long (Buy) - You predict the currency will appreciate, so you buy. Profit comes from each upward price movement.

2. Short (Sell) - You believe the currency will depreciate, so you short sell. Profit comes from each downward price movement.

3. Leverage (Leverage) - The trader’s “double-edged sword.” With $100, you can trade $10,000 thanks to 100:1 leverage. However, this is a double-edged sword — profits can be multiplied, but so can losses.

4. Margin (Margin) - The amount you must deposit into your account to open a position. The trading platform locks this amount until you close the position.

5. Pip - The smallest unit of price movement. For example, EUR/USD from 1.2000 to 1.2005 = 5 pips.

6. Spread - The difference between the bid price (bid) and the ask price (ask). This is the profit for the service provider.

7. Lot - The trading volume. Ranges from nano (100 units) to standard (100,000 units).

8. Base Currency vs Quote Currency - Base currency (price quote) is on the left, quote currency (price valuation) is on the right. In EUR/USD, EUR is the base, USD is the quote.

Which Currency Pairs Are Easiest to Profit From?

Over 30 currencies are traded on Forex, but 7 main currency pairs account for 85% of the market value:

These pairs are the easiest to trade because they have high liquidity, low spreads, and abundant economic data for analysis.

8 Steps to Start Forex Trading Today

Step 1: Learn the Market Before Investing Money

This is the most important step. No one succeeds by “placing orders and hoping.” You need to:

• Understand basic concepts (the 8 terms above)
• Know how to read price charts (candlestick chart)
• Grasp factors influencing exchange rates (interest rate policies, economic reports, geopolitical events)
• Have a trading plan before entering positions

Step 2: Understand Different Types of Forex Markets

Spot Forex Market - Trading real-time prices, settlement within 2 business days. In Vietnam, this type is prohibited.

Forex CFD (Contract for Difference) - You do not actually own the currency, only bet on price differences. 99% of Vietnamese brokers operate this way. Not prohibited but lacks specific regulations, so choose brokers licensed by international authorities like ASIC, FCA, CySEC.

Currency Futures - Futures contracts with fixed prices. Not common in Vietnam.

Currency Options - Betting on whether prices will rise or fall. Not common in Vietnam.

Step 3: Choose a Reputable Broker

Criteria for selecting a broker:

• ✓ Licensed by international authorities (ASIC, FCA, CySEC)
• ✓ Low spread (usually 1-2 pips for major pairs)
• ✓ No slippage (unwanted price difference)
• ✓ Stable, user-friendly trading platform
• ✓ Good customer support in Vietnamese

Step 4: Open an Account

Simple process:

1. Fill in personal info (name, email, phone number)
2. Verify identity with ID card (front and back)
3. Link bank account
4. Deposit funds (usually from $50 or more)

Step 5: Decide Which Currency Pair to Trade

Start with major pairs like EUR/USD because:

• High liquidity → easy entry/exit
• Rich economic data → easy analysis
• Low spread → low trading costs

When analyzing, consider:

Economic Situation - Countries with high GDP growth and stable inflation tend to have stronger currencies.

Interest Rate Policies - Central banks raising interest rates usually strengthen their currencies (because higher deposit interest rates attract investors).

Trade Balance - Export-heavy countries receive more foreign currency, increasing their currency value.

Political Events - Elections, wars, trade agreements all have significant impacts.

Step 6: Determine Margin

Golden rule: Use only 2% of total capital for each trade.

For example: You have $10,000 in your account → only allocate a maximum of $200 margin per position.

Why? Because markets are unpredictable. Using all your funds on one trade means a loss could wipe out everything.

Step 7: Place Buy or Sell Orders

Buy (Long) if you believe the base currency will strengthen against the quote currency.

• Example: Buy EUR/USD expecting EUR to rise against USD
• Profit: whenever EUR/USD increases

Sell (Short) if you believe the base currency will weaken against the quote currency.

• Example: Sell GBP/USD expecting GBP to fall against USD
• Profit: whenever GBP/USD decreases

Real Example:

• You have $11,500
• Buy 10,000 EUR at EUR/USD = 1.1500
• After 2 weeks, EUR/USD rises to 1.2500
• Sell 10,000 EUR, receive $12,500
• Profit: $1,000 (from the difference 1.1500 → 1.2500)

But with 200:1 leverage, you only need about $60 margin instead of $11,500!

Step 8: Set Protective Orders

These are automatic orders to help you:

Stop Loss (Dừng Lỗ) - Automatically close the position when the price drops to a level you can tolerate.

• Example: Buy EUR/USD at 1.1500, set stop loss at 1.1400
• If EUR/USD drops to 1.1400, system automatically sells, cutting losses at -100 pips

Take Profit (Chốt Lời) - Automatically close the position when profit reaches your target.

• Example: Set take profit at 1.2500
• When EUR/USD hits 1.2500, system automatically sells, locking in +1000 pips profit

Step 9: Monitor and Adjust

After entering a position:

• ✓ Don’t panic over small fluctuations
• ✓ Stick to your strategy, avoid emotional decisions
• ✓ Record each trade to find patterns
• ✓ If the market moves against your prediction, accept the stop loss and exit

What Factors Drive the Forex Market?

Central Banks - “Market Presidents”

Central banks (Fed, ECB, BOJ…) control the money supply. When they:

• Raise interest rates → Currency usually appreciates
• Lower interest rates (or loosen monetary policy) → Currency usually depreciates

Economic Data - “Market’s Heartbeat”

GDP, inflation, unemployment rates — changes in these figures can shake the market. Good data → invest in → currency appreciation.

Market Sentiment - “Herd Effect”

When many traders believe in a certain direction, they trade accordingly, creating strong trends. That’s why a rumor can cause a significant market shift.

Advantages of Forex Trading

1. Lowest Fees Among Financial Markets

• No asset management fees
• No brokerage fees
• Only spread (difference between buy and sell prices), usually very small

2. 24/7 Global Operation

• Market open day and night (Monday-Friday)
• You control your trading time, no restrictions on trading hours

3. No One Can Manipulate

• The market is huge (5.3 trillion USD/day)
• Many participants (banks, corporations, governments, individual investors)
• Very difficult for anyone to manipulate prices

4. Leverage for Big Profits

• With $100, you can trade $10,000+ (depending on leverage)
• Profits can be many times your initial capital
• ⚠️ But also losses can be many times, so risk management is essential

5. Low Entry Barriers

• No large capital needed (start from $50-100)
• No certificates or degrees required
• Quick account opening in minutes

Frequently Asked Questions About Forex Trading

Q: How much money is traded on Forex daily? A: About 5.3 trillion USD daily, equivalent to 220 billion USD per hour. This huge number shows the market is very large and highly liquid.

Q: Who participates in the market? A: Central banks, large banks, investment funds, multinational companies, and individual investors. Individual investors account for nearly ⅓ of trading volume!

Q: How is the Forex market regulated? A: There is no single regulatory authority. Instead, each country has its own agencies (in the US, CFTC and NFA). Choose brokers licensed by ASIC, FCA, or CySEC for safety.

Q: Can I make money from Forex? A: Yes, but it requires knowledge, skills, and patience. 90% of beginners lose money because they lack a plan. The key is: learn first → demo first → real money later.

Conclusion: Take Action Today

The Forex market is not a way to “get rich quick,” but a investment tool for those who:

• Are willing to learn
• Have discipline in trading
• Manage risks well

If you are ready, do:

1. ✓ Learn basic concepts
2. ✓ Choose a reputable broker
3. ✓ Start with a demo account (virtual trading)
4. ✓ After mastering, switch to real money with a small amount
5. ✓ Record every trade, continuously improve

Forex trading is not difficult, just follow the right method and practice persistently!