Forex Investment Guide from Basics to Practice - Everything You Need to Know

What Is Forex? Why Is This Market So Attractive to Millions of Investors?

Forex (Foreign Exchange) or the foreign exchange market is where global traders buy and sell currencies 24/7. Unlike stocks or real estate, forex trading has enormous scale — with an average daily trading volume of 5.3 trillion USD.

Forex is not just about money — it includes international payment tools, investment certificates, cryptocurrencies like Bitcoin and Ethereum, and even gold is considered part of the forex market. But when talking about forex trading, most people understand it as exchanging currency pairs like EUR/USD — meaning exchanging Euro for US Dollar.

For individual investors, the sole goal when participating in the market is to exploit exchange rate fluctuations for profit. And this is exactly why millions worldwide are willing to engage in forex trading.

What Can You Trade on the Forex Market?

The main commodity on the forex market is currency, and they are always traded in pairs. For example, EUR/USD means how many US Dollars one Euro can buy. Because these exchange rates fluctuate constantly based on economic and geopolitical factors, they create continuous trading opportunities.

Basic Concepts About Exchange Rates

Base Currency (Yết giá đồng): The currency on the left side, representing its value relative to the currency on the right. For example, EUR/USD at 1.1500 means 1 EUR = 1.1500 USD.

Quote Currency (Đồng định giá): The currency on the right side, used to quote the value of the base currency.

Major Currency Pairs in the Market

Although over 30 currencies are traded, about 85% of the market value concentrates on 7 major pairs: EUR/USD, USD/JPY, GBP/USD, AUD/USD, USD/CHF, NZD/USD, and USD/CAD.

Besides forex, reputable trading platforms also offer trading on stock indices, commodities, gold, and cryptocurrencies.

How Does Forex Investment Work?

The principle is extremely simple: you predict whether a currency pair will go up or down, place a buy or sell order, wait for the price to move as predicted, then close the trade to profit from the difference.

Real-Life Example

Suppose you buy 10,000 Euros at an exchange rate of EUR/USD 1.1500, costing a total of 11,500 USD. Two weeks later, the rate rises to 1.2500, and you sell 10,000 Euros for 12,500 USD. Your profit is 1,000 USD.

However, on the forex platform, there is a powerful tool called leverage. Instead of needing to put down 11,500 USD, you can use 200:1 leverage to only require about 60 USD margin for the same trade. This is the main attraction of forex — the ability to amplify profits. But remember, leverage also amplifies losses, so use it cautiously.

5 Reasons Why Forex Is a Popular Investment Channel

1. Very Low Trading Fees
Forex trading has no management or brokerage fees like stocks. The platform only earns a small profit called the spread (the difference between bid and ask prices).

2. Market Operates 24/7
No trading hours restrictions. You can participate anytime during the day, suitable for part-time traders.

3. No One Can Manipulate the Market
With a daily volume of 5 trillion USD and millions of participants, no organization — not even central banks — can manipulate the forex market.

4. Power of Leverage
You only need a few hundred thousand VND in margin but can trade currency pairs worth millions. However, this also means corresponding risks.

5. Very Low Entry Barriers
Unlike stocks or real estate, you only need from 50 USD to start forex trading.

Step-by-Step Guide to Starting Forex Investment

Step 1: Master 8 Basic Concepts

Before trading, you must understand industry terms:

• Long: Buying, expecting the price to rise to sell at a profit
• Short: Selling short, predicting the price will fall
• Leverage (Đòn Bẩy): Trading with a larger amount of money than you have (ratios like 50:1, 100:1, 500:1)
• Margin (Tiền Ký Quỹ): The amount you must deposit to open and maintain a position
• Pip: The smallest unit of exchange rate movement, usually four decimal places (EUR/USD from 1.2000 to 1.2005 is 5 pips)
• Spread: The difference between bid (bid) and ask (ask) prices, measured in pips
• Lot: The trading lot size — from nano (100 units) to standard lot (100,000 units)
• CFD: Contract for Difference, allowing speculation on currency prices without actual ownership

Step 2: Understand Types of Forex Markets

Spot Forex Market: Immediate price trading, settlement within 2 days. In Vietnam, this type is prohibited.

Forex CFD: You do not own the actual currency but trade on price differences. 99% of forex platforms in Vietnam operate this way, not banned but only choose licensed brokers from international regulators like ASIC, FCA, or CySEC.

Currency Futures & Options: Less common in Vietnam.

Step 3: Choose a Reputable Forex Broker

The most important criterion is trustworthiness — the broker must be licensed by an international regulatory authority. Also consider trading fees, commissions, product offerings, and platform quality.

Step 4: Open an Account

You need to provide:

• ID card (front and back)
• Email and phone number
• Bank account

Step 5: Select Currency Pairs and Analyze

Before trading, analyze factors:

Economic Conditions: If the US economy weakens, the dollar will depreciate. You can sell USD to buy the currency of a stronger economy.

Trade Balance: Countries with high exports will receive more foreign currency, increasing their currency value.

Political Situation: Elections, policy changes, and interest rate adjustments all influence currency prices.

Step 6: Determine Margin

If you want to trade 100,000 USD with a 1% margin requirement, you need to prepare 1,000 USD. The golden rule: only allocate about 2% of your capital as margin per currency pair to manage risk.

Step 7: Decide to Buy or Sell

BUY EUR/USD if you believe Euro will strengthen against the dollar:

• Profits increase with upward movements
• Losses occur with downward movements

SELL EUR/USD if you believe Euro will weaken against the dollar:

• Profits increase with downward movements
• Losses occur with upward movements

Step 8: Use Risk Management Orders

Stop Loss: An automatic order to close the trade when the price hits your maximum acceptable loss level.

Take Profit: An automatic order to close the trade when the price reaches your target profit.

Example: EUR/USD is currently 1.11128. You predict it will rise to 1.2000 then fall. You set a sell limit order at 1.2000, and when the price hits this level, the order executes automatically.

Step 9: Monitor and Be Patient

Avoid emotional trading. Forex markets are highly volatile, with prices constantly fluctuating. The key is to stick to your strategy, keep learning, and eventually you will see profits.

Factors Affecting Forex Prices

Central Banks: Monetary easing or interest rate hikes directly impact currency prices.

Financial News: Good news in the market attracts investors, increasing demand and raising the currency value.

Market Sentiment: When traders believe a currency will move in a certain direction, they trade accordingly and can influence others to follow, affecting supply and demand.

Frequently Asked Questions About Forex Investment Guide

How Is the Forex Market Regulated?

The forex market is very large but lightly regulated because there is no single overseeing authority 24/7. Instead, each country has its own agencies: the US has CFTC and NFA, the EU has respective organizations. This allows offshore brokers to operate, but you should choose those licensed by reputable authorities.

What Is the Daily Trading Volume?

Approximately 5 trillion USD daily, about 220 billion USD per hour. Most trading centers around USD, EUR, and JPY.

Who Are the Main Participants?

Governments, central banks, large banks, forex brokers, and retail investors. Retail investors account for about ⅓ of the volume — roughly 1.7 trillion USD daily.

Conclusion

This Forex Investment Guide has provided you with comprehensive knowledge from basics to practical steps. Forex is the largest financial market in the world, with high transparency and low entry costs. Anyone can start, but success requires perseverance, continuous learning, and prudent risk management.

Begin with the fundamentals, practice on demo accounts, then gradually move to real trading. The forex market is waiting for you!