What is Forex? All About the Foreign Exchange Market You Need to Know in 2025

📊 Discover the Excitement of the Forex Market

In recent years, the foreign exchange trading market (Forex) has become one of the most popular financial investment channels worldwide. But fx là gì really? And why do millions of traders choose it?

This market operates 24/7 with a daily trading volume of up to 5.3 trillion USD, making it the largest financial market in the world. Compared to stocks or real estate, Forex offers continuous trading opportunities and extremely high liquidity.

Forex – Basic Definition

When mentioning giao dịch ngoại hối là gì, you are talking about buying, selling, and exchanging currency pairs on the global market. The term “Forex” or “FX” is short for “Foreign Exchange” – meaning currency exchange.

Forex includes not only currencies like USD, EUR, JPY but also:

• International payment tools: bank cards, bills of exchange, checks
• Value certificates: government bonds, international company stocks
• Digital currencies: Bitcoin, Ethereum, and other cryptocurrencies
• Precious metals: considered as foreign exchange assets

The forex market is where financial institutions, businesses, governments, and individual investors meet to exchange currencies. Unlike centralized stock exchanges, Forex operates decentralized worldwide, preventing any single entity from controlling or manipulating the entire market.

🎯 Why Trade Forex Instead of Other Channels?

✅ Extremely Low Participation Costs

The biggest difference is that you can start with a small capital. While stocks or real estate require large capital, forex trading only needs a few hundred thousand VND as margin. Transaction fees are also lower compared to other investment forms because forex brokers only earn profit from the spread (the difference between the bid and ask prices).

✅ Continuous Market Operation

No trading hours limit – from Monday to Friday (24/7). You can trade early in the morning, in the afternoon, late at night, or anytime that fits your schedule.

✅ The Power of Leverage

With leverage tools (leverage), you can control a much larger trading amount than your actual capital. For example, with 100:1 leverage, you only need to $100 margin but can trade $10,000.

✅ Not Controlled by Central Authorities

The market is too large and dispersed, so central banks cannot intervene or fully manipulate it. This creates a fair opportunity for all participants.

📈 Trading Mechanism: Which Currency Pairs Can You Buy and Sell?

Major Currency Pairs in the Market

Although over 30 currencies are traded on Forex, only a few account for 85% of the market value. These are called “Major Pairs”:

How to Read and Understand Currency Pairs

Each currency pair consists of two currencies: Base Currency (the currency being priced) on the left and Quote Currency (the currency used for pricing) on the right.

Example: EUR/USD = 1.1500

• This means 1 Euro can be exchanged for 1.15 USD
• If the rate increases to 1.2500, Euro has strengthened, and traders buying EUR/USD will profit

Other Assets Besides Currencies

Many reputable trading platforms not only offer Forex but also allow trading:

• Stock indices (S&P 500, Nasdaq, DAX, etc.)
• Commodities (oil, gold, silver, coffee)
• Cryptocurrencies (Bitcoin, Ethereum)

🚀 How Forex Trading Works and How to Profit

Basic Principle: Buy Low, Sell High

Suppose you believe EUR/USD will increase in value. You will buy this pair, wait for the rate to rise, then sell to make a profit. Conversely, if you predict EUR/USD will decrease, you can short sell – sell first, then buy back later.

Detailed Example

Buying Scenario:

• You buy 10,000 Euros at EUR/USD = 1.1500 (cost $11,500)
• Two weeks later, you sell 10,000 Euros at 1.2500 (receive $12,500)
• Profit: $1,000

Using 100:1 Leverage (:

• You only need to put up )margin instead of $11,500
• Profit remains $1,000
• Profit ratio: $1,000 / $115 margin = 870% $115 return on margin(

⚠️ Note: Leverage is a double-edged sword – it can magnify profits but also amplify losses. If the rate moves against your prediction, you can lose money quickly.

📚 8 Fundamental Concepts Every Trader Must Know

) 1. Long ###Buy( Buy a currency pair expecting the price to rise. Profit comes from the increase of the Base Currency relative to the Quote Currency.

) 2. Short ###Sell( Sell a currency pair expecting the price to fall. Profit comes from the decrease of the Base Currency.

) 3. Leverage ###Leverage( The ratio between actual capital and trading capital. For example: 50:1 leverage means trading 50 times the margin. Popular options include 100:1, 200:1, 500:1.

) 4. Margin ###Margin( The amount you need to deposit into your account to open a trade. The broker holds this as collateral for risk.

) 5. Pip ###Price Point( The smallest change unit of the exchange rate, usually calculated to 4 decimal places. Example: EUR/USD changes from 1.2000 to 1.2005 = 5 pips.

) 6. Spread ###Bid-Ask Spread( The difference between the bid price )Bid( and the ask price )Ask(. This is the main profit source for Forex brokers.

) 7. Lot ###Trading Volume( Standard size of a trade:

• Nano Lot: 100 units
• Micro Lot: 1,000 units
• Mini Lot: 10,000 units
• Standard Lot: 100,000 units

) 8. Slippage ###Price Slippage( The difference between the expected price when placing an order and the actual execution price. This often occurs during high market volatility.

🏪 Types of Forex Markets You Can Participate In

) 1. Spot Forex ###Immediate Trading( Trade at the current price, settlement within 2 business days. This is the market where large banks participate. In Vietnam, this type is prohibited for individual investors.

) 2. Forex CFD ###Contract For Difference( You do not own the actual currency but trade based on price differences. This is the most common type in Vietnam, used by 99% of trading platforms. Only choose platforms licensed by international regulators like ASIC, FCA, CySEC for safety.

) 3. Currency Futures ###Futures Contract( Contracts to exchange one currency for another at a specific future date at a predetermined price. This type is not common in Vietnam.

) 4. FX Options ###Foreign Exchange Options( Predict whether the price will rise or fall relative to a fixed price. If correct, profit; if wrong, lose money. This type is also rare in Vietnam.

🎯 Detailed 8 Steps to Start Forex Trading for Beginners

) Step 1: Build Basic Knowledge Before anything else, understand what forex is, how the market operates, and what factors influence exchange rates. Many free online courses or educational materials from reputable brokers are available.

Step 2: Define Your Trading Style

• Scalping: trading within seconds to minutes
• Day Trading: opening and closing positions within the same day
• Swing Trading: holding positions from several days to weeks
• Position Trading: long-term holding from weeks to months

Step 3: Choose a Reputable Broker

Criteria:

• ✓ Licensed by international regulatory agencies ###ASIC, FCA, CySEC(
• ✓ Low trading fees, competitive spreads
• ✓ Stable trading platform )MT4, MT5, cTrader(
• ✓ Good customer support, Vietnamese language support
• ✓ Full technical analysis tools

) Step 4: Open a Trading Account Prepare:

• ID card ###both sides(
• Active email
• Phone number
• Bank account for deposits

Verification usually takes 1-3 working days.

) Step 5: Decide Which Currency Pairs to Trade Start with major pairs ###EUR/USD, USD/JPY, GBP/USD( because they have low spreads and high liquidity. Analyze factors:

Economic Situation:

• If the US economy is weak, USD may depreciate
• If Europe grows strongly, EUR will strengthen

Trade Balance:

• Export-heavy countries with high demand → currency appreciation
• Trade surplus → currency appreciation

Political Situation:

• Elections or policy changes can have major impacts
• High interest rates often attract foreign capital

) Step 6: Determine Margin Amount Golden rule: Invest only 2% of total capital per trade

Example:

• If you have $10,000, only use ###for each trade
• With 1% margin, you can trade $20,000 $200 using leverage(

) Step 7: Decide to Buy or Sell

BUY ###Long( EUR/USD if you believe:

• EUR will be stronger than USD
• Profits increase with each upward movement
• Loss occurs if the rate decreases

SELL )Short( EUR/USD if you believe:

• EUR will weaken against USD
• Profits increase with each downward movement
• Loss occurs if the rate increases

) Step 8: Use Risk Management Orders Stop Loss ###Stop-Loss Order(:

• Automatically closes the trade when losses reach a certain level
• Example: Buy EUR/USD at 1.1000, set Stop Loss at 1.0950 )lose 50 pips(

Take Profit )Take-Profit Order(:

• Automatically closes the trade when profit reaches the target
• Example: Buy EUR/USD at 1.1000, set Take Profit at 1.1200 )profit 200 pips(

Specific Example: EUR/USD at 1.11128, you predict it will rise to 1.2000 then fall. Set:

• Buy: 1 lot EUR/USD
• Stop Loss: 1.1050 )to limit losses(
• Take Profit: 1.2000 )to lock in profit(

📊 What Factors Affect Foreign Exchange Prices?

) Central Bank Monetary policy of the central bank ###raising/lowering interest rates, quantitative easing( is the most decisive factor. Easing )printing more money( causes currency value to decrease, tightening causes it to rise.

) Economic News

• Inflation, unemployment, GDP data
• Reports of major companies’ results
• Retail sales, manufacturing statistics

Good news → increased currency demand → rising prices

Market Sentiment ###Sentiment(

If most traders believe USD will rise, they will buy USD → creating a self-fulfilling prophecy )self-fulfilling prophecy(. Market sentiment is often linked to news but can also be independent.

) Geopolitical Events

• Wars, conflicts
• Economic sanctions
• Major political upheavals

Negative events → capital flows out of the country → currency depreciation

⚖️ How the Forex Market Is Managed

The Forex market operates decentralized, with no “supreme authority” managing it 24/7. Instead:

• USA: CFTC ###Commodity Futures Trading Commission( and NFA )National Futures Association( oversee
• Europe: FCA, CySEC, etc., license brokers
• International: ASIC )Australia(, FSA )Japan(, etc.

These agencies ensure brokers comply with regulations and protect investor funds.

📈 Market Numbers You Should Know

• Daily trading volume: 5.3 trillion USD
• Average per hour: 220 billion USD
• Percentage from speculation: ~90% of volume
• Percentage from retail investors: ~30% of volume )about 1.7 trillion USD(

Forex market is larger than all stocks, bonds, and commodities markets combined.

🎓 Frequently Asked Questions About Forex Trading

) How much money do I need to start? You can start with just $50-100. However, to manage risk well, at least $500-1,000 is recommended.

Can I trade anytime?

Yes, the Forex market is open 24/5 from Monday to Friday. However, the “golden” trading hours ###high liquidity( are:

• UK hours: 08:00-16:00 GMT
• US hours: 13:00-21:00 GMT
• Tokyo hours: 21:00-06:00 GMT

) Is Forex trading risky? Yes, very risky if you do not manage risk properly. Leverage can magnify losses. Always use Stop Loss and only invest what you can afford to lose.

Can I make steady money from Forex?

Yes, but it requires discipline, thorough research, good risk management, and experience. Most beginners lose money in their first year.

Which platform is best for beginners?

Choose a licensed platform with:

• Low spreads ###0.5-2 pips(
• Suitable leverage )20:1 to 100:1(
• Good customer support
• MT4 or MT5 platform

🏆 Conclusion

Forex là gì? It is a decentralized currency trading market where you can profit from exchange rate fluctuations. With a daily trading volume of 5.3 trillion USD, Forex offers unlimited opportunities.

Features like low fees, 24/7 market, leverage, and low entry barriers make it attractive to millions of investors worldwide. However, giao dịch ngoại hối also carries significant risks.

To succeed, you need:

1. ✓ Learn fundamental knowledge
2. ✓ Choose a reputable broker
3. ✓ Manage risks strictly
4. ✓ Be patient and disciplined
5. ✓ Continuously improve your skills

Start today and explore the Forex market – where global trading opportunities await you!