Journey to Explore the Forex Market: Structure, Opportunities, and Challenges in Vietnam

1. Forex Market Structure: A Decentralized Global System

The foreign exchange market is one of the largest financial systems in the world. Unlike stock markets with centralized exchanges in each country, forex market structure operates based on a decentralized OTC (Over-The-Counter) model, meaning direct transactions between parties without an official exchange.

Why is this structure important? Because it creates a market with extremely high liquidity — with an average daily trading volume reaching 6.6 trillion USD (according to 2020 statistics). This enormous scale ensures that forex market structure cannot be manipulated by any individual investor or even a large group of investors.

2. Participants in the Forex Market

Initially, the forex market was only accessible to major financial institutions such as central banks and international import-export companies. They used foreign exchange to hedge against currency fluctuations in international contracts, protect assets from inflation, and store value amid political instability.

However, as international trade increased and individual investors’ diversification needs grew, forex gradually became a more popular investment tool. Although trading volume from individual investors remains small compared to institutions, the appeal of liquidity and continuous price volatility attracts more and more participants to this market.

3. Legal Barriers When Trading Forex in Vietnam

Currently, Vietnam has not legalized forex trading through domestic brokers. The government only licenses banks to conduct foreign exchange transactions and does not permit the establishment of forex brokerage companies or forex trading platforms within Vietnam.

However, this does not mean forex trading is illegal. Individual investors are fully allowed to participate in forex trading as an investment tool. As long as you trade through internationally licensed brokers regulated by reputable financial authorities (such as securities regulators in developed countries), you will be outside the scope of Vietnamese law violations.

Note: If you trade forex through a company claiming to be “licensed by Vietnam,” it is definitely a scam, as Vietnam does not authorize such activities.

4. Most Traded Major Currency Pairs

According to the Bank for International Settlements (BIS) in 2019, the three dominant currency pairs in the market are:

EUR/USD leading with over 24% of daily trading volume. This pair is heavily influenced by interest rate decisions of the European Central Bank (ECB) and the US Federal Reserve (FED).

USD/JPY with 13.2% of trading, reflecting interest rate decisions of the Bank of Japan (BoJ) and the FED.

GBP/USD accounting for 9.6%, affected by the economic growth rates of the UK and US, as well as interest rate decisions of the Bank of England (BoE).

Beyond these three main pairs, other pairs such as AUD/USD (5.4%), USD/CAD (4.4%), USD/CNY (4.1%), USD/CHF (3.5%), USD/HKD (3.3%), EUR/GBP (2.0%), and USD/KRW (1.9%) can also generate significant profits depending on market conditions.

5. Economic Factors Affecting Price Volatility

Five main economic factors influence all currency pairs in the forex market:

Central bank interest rate decisions are the most critical. The interest rate is the “price” of a currency — raising interest rates increases the currency’s value, lowering interest rates decreases it. Information about interest rate changes immediately impacts price volatility.

Gross Domestic Product (GDP) provides an overview of economic health. When GDP falls below expectations, the currency tends to weaken; when GDP exceeds expectations, the currency usually appreciates.

Consumer Price Index (CPI) and inflation are indirect measures of currency value. High inflation forces central banks to raise interest rates, directly affecting currency fluctuations.

Unemployment rate helps central banks assess labor market conditions. Higher employment often leads to inflationary pressures, resulting in interest rate hikes. The most watched unemployment indicators are the US ADP and NFP reports, released monthly.

FOMC (Federal Open Market Committee) meetings create key turning points. Each month, the FOMC sets interest rates and releases economic assessments. These announcements can cause significant market volatility — for example, on March 18, 2015, the EUR/USD surged 400 pips within minutes after the FOMC statement.

6. Trading Hours and Liquidity by Region

The forex market operates 24 hours a day, five days a week, with main trading sessions at major financial centers:

Each currency pair exhibits different volatility depending on the trading session. For example, AUD tends to be more volatile during the Sydney session, while European pairs are more active when London opens. This creates opportunities for traders to choose optimal times to participate.

7. Tax Issues When Trading Forex in Vietnam

According to current Vietnamese law, forex trading has not yet been authorized by the government. Since this field is not legally recognized, Vietnam currently does not have specific tax policies for profits from forex trading.

However, this is a legally unclear area, so investors should exercise caution and understand the legal risks before participating.

8. Should You Participate in Forex Trading?

This question does not have a simple answer. Forex offers many opportunities due to high liquidity, continuous volatility, and 24/5 trading capability. With a non-centralized forex market structure, individual traders can compete on the same playing field as institutional investors.

However, the risks are also significant: sharp price swings can lead to rapid losses, especially if leverage is used. Additionally, the unclear legal environment in Vietnam adds further risk.

If you decide to participate, make sure to:

• Choose a reputable international broker licensed by official financial regulators
• Start with a small amount to understand the market
• Have a clear risk management plan
• Always stay updated on economic news affecting your traded currency pairs
• Accept that you may lose your entire investment

Forex is not for everyone, but with thorough preparation and disciplined trading, it can be a potential investment channel for those who understand the risks.