Forex Foreign Exchange: Market Reality, Vietnamese Laws, and What Investors Need to Know

What Is the Forex Market? Its Scale and Liquidity

The global foreign exchange market has existed for decades, closely linked to international trade activities. However, from the perspective of individual investors, Forex remains a somewhat vague concept, especially in Vietnam where the financial market is still developing.

The nature of the foreign exchange market is a decentralized trading system (OTC - Over The Counter), unlike stock markets with fixed exchanges. Due to its global nature, investors must go through brokerage firms to access this market.

Forex boasts impressive figures: with an average daily trading volume of 6.6 trillion USD (according to 2020 statistics), it is the most liquid market in the world. Its scale and the number of participants make the foreign exchange market an unmanipulable playground, where macroeconomic fundamentals influence price movements.

Main Players in the Forex Arena

Initially, the Forex market was exclusively for large financial institutions, central banks, and import-export companies. They use foreign exchange to hedge against currency volatility risks in international contracts, protect against inflation, or store value during political instability.

As the demand for diversification among individual investors increased, Forex gradually became a tool worth considering. Although the trading volume of retail investors remains small compared to financial institutions, the appeal of liquidity, price volatility, and profit opportunities is increasingly attracting ordinary investors to participate in this market.

Vietnamese Laws on Forex Trading

This is a question that most Vietnamese investors are concerned about: Is it illegal to participate in foreign exchange trading?

In Vietnam, the government maintains strict control over foreign exchange reserves, so the right to trade foreign currencies is only granted to commercial banks. The establishment of Forex trading platforms in Vietnam is not legally permitted, so you will not find any Forex platforms with a Vietnamese map.

However, not licensing a trading platform does not equate to banning forex trading. Vietnamese law currently does not clearly specify whether individual trading in foreign currencies as an investment tool is illegal or not. Individual investors are fully entitled to trade forex through internationally licensed brokers in countries where Forex business is permitted.

Note: If you trade through a company claiming to be “licensed by Vietnam,” that is a red flag. Always choose reputable brokers licensed by regulatory authorities in countries like Australia, the UK, or other countries with clear Forex regulations.

Top 10 Most Traded Currency Pairs and Influencing Factors

According to the Bank for International Settlements (BIS) in 2019, EUR/USD dominates with over 24% of daily trading volume. These are the highest-value currencies in the world and the most preferred in the market:

Each currency pair reacts differently to economic events, but the most common factors are central bank interest rate decisions and GDP growth.

5 Major Economic News Impacting Forex Prices

Interest rate decisions: The interest rate is the “price” of a currency. Raising interest rates = currency appreciation, lowering interest rates = currency depreciation. This information directly and quickly influences currency pair fluctuations.

Gross Domestic Product (GDP): When GDP exceeds expectations, the currency tends to appreciate. Conversely, lower-than-expected GDP causes depreciation.

Consumer Price Index (CPI) and inflation: These indices indirectly reflect the value of money through the quantity of goods it can buy. High inflation often leads to higher interest rates.

Unemployment rate: Higher employment → higher interest rates. Important unemployment indicators like ADP and NFP in the US are released monthly and closely watched by traders.

US Federal Open Market Committee (FOMC) meetings: The FOMC meets monthly to set interest rates. Post-meeting statements on economic conditions and monetary policy can cause significant market volatility—for example, on 18/3/2015, when EUR/USD surged 400 pips within minutes.

Forex Trading Hours: When Is the Best Time?

The Forex market operates 24 hours a day, 5 days a week, covering trading sessions in Sydney, Tokyo, London, and New York. The table below shows trading hours according to these exchanges’ time zones:

Price volatility is usually strongest when a new trading session opens. For example, the AUD will fluctuate strongly when Sydney opens, and European currency pairs tend to be more volatile when London opens.

Tax and Other Legal Issues

According to current Vietnamese law, foreign exchange trading is not permitted. There are no policies allowing Forex trading or any regulations regarding personal income tax from Forex.

However, this area is not clearly regulated by law. Individual investors should be aware that engaging in forex trading in Vietnam still carries potential legal risks.

Should You Start Forex Trading? Final Considerations

Forex is the world’s largest financial market with extremely high liquidity and attractive profit opportunities. All economic news contribute to increasing liquidity and causing significant fluctuations in currency prices.

If you are an individual investor wanting to participate in this vibrant market, you can open an account with reputable international brokers. To ensure safety, choose brokers that:

• Are licensed by reputable regulatory agencies (ASIC, FCA, etc.)
• Have long-standing reputation and positive community reviews
• Offer stable and user-friendly trading platforms
• Provide competitive costs and good customer service
• Support multiple deposit and withdrawal methods

Choosing a trustworthy, legally licensed partner in countries where Forex is permitted is the most important step to ensure your rights and peace of mind when participating in the foreign exchange market.