Introduction to Forex for Beginners - Detailed Guide 2025

What Is Forex? Why Is the Foreign Exchange Market Attractive to Investors?

Forex, short for Foreign Exchange or the foreign exchange market, is a decentralized market where participants can buy, sell, and exchange currencies from different countries. Simply put, this is where you predict currency fluctuations to make a profit.

Currently, the Forex market has become one of the most popular investment channels in Vietnam, with an average daily trading volume of $5.3 trillion globally. Compared to stock or real estate markets, Forex has an enormous scale, creating countless continuous trading opportunities.

Types of Forex You Need to Know

Foreign currencies: USD, EUR, AUD, JPY, and other international currencies.

International payment tools: International bank cards, bills of exchange, wire transfer orders.

International certificates: Government bonds, foreign company stocks.

Digital assets: Bitcoin, Ethereum, and other cryptocurrencies.

Precious commodities: Gold and other precious metals are also considered forex.

How Does Forex Trading Work? From Currency Pairs to Profits

Characteristics of the Forex Market You Should Know

Global 24/7 trading: Unlike stocks that open for a few hours, Forex operates continuously worldwide—morning, noon, night—you can participate anytime that fits your schedule.

Very low transaction fees: Intermediary costs such as management fees or brokerage commissions are significantly minimized. Forex brokers only earn profits from the spread (the difference between buy and sell prices).

Market manipulation is impossible: With its enormous scale and millions of participants, even central banks cannot control the entire market.

Leverage power: This is a highlight of Forex—you only need to deposit a small margin but can trade larger values. For example, with 200:1 leverage, you only need $60 to control a $12,000 position.

What You Will Trade on Forex

The main commodity in the Forex market is currencies, traded in pairs like EUR/USD, USD/JPY, GBP/USD, etc.

When buying the EUR/USD pair at an exchange rate of 1.1500, you are buying 1 Euro at 1.1500 USD. If the rate rises to 1.2500, you can sell and profit from the difference.

Major currency pairs are traded the most (accounting for 85% of market value):

• EUR/USD (Euro/US Dollar)
• USD/JPY (US Dollar/Japanese Yen)
• GBP/USD (Pound Sterling/US Dollar)
• AUD/USD (Australian Dollar/US Dollar)
• USD/CHF (US Dollar/Swiss Franc)
• NZD/USD (New Zealand Dollar/US Dollar)
• USD/CAD (US Dollar/Canadian Dollar)

Besides Forex, reputable trading platforms also offer trading in other assets such as stock indices, commodities, gold, and cryptocurrencies.

Real-Life Example: How to Profit from Forex?

Suppose you predict EUR/USD will increase in value. You place a buy order for 10,000 Euros at an exchange rate of 1.1500, costing $11,500. Two weeks later, the rate rises to 1.2500. You sell 10,000 Euros, receiving $12,500.

Result: A profit of $1,000 from just 10,000 EUR.

Especially, thanks to leverage, you don’t need to put up the full $11,500. With a 1% margin, you only need $115, or with 200:1 leverage, about $60 margin to control this trade!

8 Basic Concepts About Forex That Beginners Must Understand

Long (Buy): Predict that the currency will increase in value; you buy in and expect to sell higher.

Short (Sell): Predict that the currency will decrease in value; you short sell and expect to buy back lower.

Leverage (Leverage): Trading with a larger amount of money than you actually have. For example, 100:1 leverage means controlling $100 with $1.

Margin (Margin): The amount of money you need to deposit at the broker to open a trade.

Pip: The smallest change in the exchange rate, usually to the 4th decimal place. If EUR/USD moves from 1.2000 to 1.2005, you gain 5 pips.

Spread: The difference between the bid price (bid) and the ask price (ask), measured in pips. This is the broker’s income.

Lot (Lot): The trading size, calculated in lots—nano (100 units), micro (1,000 units), mini (10,000 units), or standard (100,000 units).

Base Currency & Quote Currency: The currency listed first is the base currency (EUR/USD means EUR is the base), and the second is the quote currency (USD).

Types of Forex Markets You Can Participate In

Spot Forex Market (Spot Forex Market): Trading at agreed prices with immediate or 2-day settlement. In Vietnam, this type is prohibited.

Forex CFD (CFD (Contract for Difference)): You don’t need to own the actual currency but only predict the price difference. This is the most common type in Vietnam (99% of Forex platforms). Although regulations are not clear, you should choose platforms licensed by international authorities like ASIC, FCA, CySEC for safety.

Currency Futures (Futures Contracts): Less common in Vietnam.

Currency Options (Forex Options): Predict whether the price will rise or fall relative to a fixed level. Less common in Vietnam.

Currency ETFs (Exchange-Traded Funds): Track the exchange rate of a currency against USD or other currencies. Less common in Vietnam.

5 Steps to Start Forex Trading for Beginners

Step 1: Choose a Reputable Forex Broker

The most important criterion is trustworthiness—the broker must be licensed by international regulatory agencies like ASIC, FCA, or CySEC. You should also compare other factors:

• Trading fees and commissions
• Available trading products
• User-friendly trading platform
• Customer support quality

Step 2: Open a Forex Account

The account opening process is quite simple:

• Provide ID/CCCD (front and back)
• Email and phone number
• Bank account information
• Complete identity verification survey

Step 3: Deposit Trading Capital

The minimum amount is usually from $50 USD. You can start with a small amount but must follow the rule: only invest 2% of your total capital in a single trade.

Step 4: Choose Currency Pairs & Analyze

Before trading, you need to analyze the likely direction of the exchange rate. Factors to consider:

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

Trade balance: Countries with strong exports will receive more foreign currency, increasing their currency value.

Political situation: Elections, monetary policy decisions by central banks also influence currencies.

Step 5: Place Orders & Manage Risks

Decide to buy or sell:

• BUY if you believe the quote will strengthen
• SELL if you believe the quote will weaken

Use risk management orders:

• Stop Loss: Automatically close the trade when losses reach a certain level to limit damage
• Take Profit: Automatically close the trade when profits reach your target

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

What Affects the Forex Market?

Central banks: Decide monetary policy, interest rates, money printing. For example, quantitative easing (QE) can weaken the currency.

Financial news: Good economic data encourages investment in that country, increasing demand for its currency and raising its value.

Market sentiment: If most traders believe a currency will rise, they will buy heavily, creating a surge in demand. This can become self-fulfilling.

Geopolitical events: Conflicts, elections, or major policy decisions can cause strong volatility.

Who Participates in Forex Trading?

The Forex market includes many groups:

Governments & central banks: Participate to manage foreign reserves and support the economy.

Large banks: Trade large volumes, providing liquidity to the market.

Forex brokers: Connect investors with the market.

Retail investors: Account for nearly 1/3 of daily trading volume (about 1,700 billion USD), participating to earn profits.

How Is the Forex Market Regulated?

The Forex market is enormous but relatively loosely regulated because there is no single overseeing authority 24/7. Instead, each country has its own agencies:

In the US: The Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA) oversee.

Globally: Trading oversight organizations check to ensure Forex providers comply with standards.

Therefore, choose a broker licensed by reputable international agencies to protect your account.

Advantages of Forex Trading Compared to Other Investment Channels

✓ Very low costs: No asset management fees or expensive brokerage commissions.

✓ Market open 24/7: Trade anytime, no opening hours restrictions.

✓ Very difficult to manipulate: With a daily volume of $5.3 trillion, no one can control the market.

✓ Leverage power: Maximize profits from small capital.

✓ Easy to start: Just a few hundred thousand VND to deposit (compared to stocks, real estate).

✓ Two-way trading: Can profit whether the market goes up or down.

✓ High liquidity: Always find buyers/sellers, no worries about being “stuck.”

Daily Forex Trading Volume

Every day, around the world, about $5,000 billion worth of Forex is traded, equivalent to $220 billion per hour. The market mainly consists of organizations, corporations, governments, and currency speculators.

Notably, 90% of trading volume comes from speculators (speculators), not from actual trade needs. Most trading focuses on USD, EUR, and JPY.

Conclusion: Start Your Forex Journey

Learning about Forex for beginners is not as difficult as you think. The foreign exchange market is the largest financial investment channel globally, with transparency, low costs, and countless opportunities.

However, remember that Forex is a double-edged sword—leverage can multiply profits hundreds of times but can also amplify losses. You need to:

✓ Understand basic concepts ✓ Choose a reputable broker ✓ Start with a small amount ✓ Always use Stop Loss ✓ Follow trading discipline ✓ Continuously learn from experience

Once you master the knowledge, Forex will become an effective investment channel bringing steady profits.