What is the FX Market? Should you invest in Forex in Vietnam?

The Essence of the Forex Market

The (Forex) foreign exchange market has been operating for decades, closely linked to international trade transactions, but for many Vietnamese investors, it remains a relatively unfamiliar field. The questions most traders ask are: What is the nature of this market? Should I participate? Especially in a developing financial market like Vietnam, the Forex market still raises many concerns for investors.

Unlike the stock market, the foreign exchange market is global and not centered on a specific exchange in each country. To participate in the FX market, investors must access the OTC (Over-The-Counter) market through international brokerage firms.

Market Size and Liquidity of the FX Market

The Forex market is the largest financial market worldwide, with an average daily trading volume of 6.6 trillion USD (according to 2020 statistics). It is also the most liquid market globally, meaning the enormous number of participants prevents any single entity from manipulating prices.

Participants in the Forex Market

Initially, the foreign exchange market was dominated by large financial institutions, central banks, and import-export companies. They used Forex to hedge against exchange rate fluctuations in international contracts, protect against inflation, and store value during political instability.

As international trade activities grew, and individual investors’ diversification needs increased, the Forex market gradually became an investment channel. Although the trading volume of individual investors remains lower than that of organizations, the market’s liquidity and volatility are attracting more and more traders.

Forex Trading in Vietnam - Legal Issues

Current Legal Status

In Vietnam, the government tightly controls foreign exchange reserves, so foreign exchange trading rights are only granted to banks. Currently, no Forex trading platform is licensed to operate in Vietnam, and establishing such platforms is not yet permitted by law.

However, Forex trading is not illegal. Individual investors are fully entitled to participate in foreign exchange trading for investment purposes through internationally licensed brokerage companies authorized by competent authorities in countries where Forex is regulated.

Important note: If you trade through a “licensed by Vietnam” brokerage company, it is a violation of the law, because Vietnam does not permit the establishment of Forex brokerage companies. To be safe, you should choose reputable international brokers licensed by securities regulators in countries with clear legal regulations on Forex.

Tax Issues

Currently, Vietnam does not have clear policies allowing foreign exchange trading, so there are no specific personal income tax issues related to FX transactions. However, this remains an area not explicitly regulated by law in Vietnam, so investors should consider carefully before participating.

Most Traded Currency Pairs

According to the Bank for International Settlements (BIS) survey in 2019, here are the top 10 most traded currency pairs in the FX market:

How to Open a Forex Trading Account

Vietnam is becoming an attractive destination for many international Forex brokers. However, over 100,000 online trading platforms exist, some reputable and others scams. To avoid risks, you should evaluate a broker based on these criteria:

• Reputation and Security: Verify licenses from international securities regulators (such as ASIC, CMA, FCA…)
• Trading Costs: Compare spreads, commissions, and other fees
• Deposit/Withdrawal Services: Payment methods, processing times
• Trading Platform: Stability, analytical features, user experience
• Order Execution Speed: Especially important in volatile markets
• Customer Support: Quality of service and Vietnamese language support

Steps to Open an Account

1. Create an online account: Choose a demo (practice) or real (live trading) account
2. Select the market: Choose currency pairs or financial instruments you want to trade
3. Open a position: Decide to buy (long) or sell (short) based on your analysis
4. Set risk management: Determine position size, take profit (take profit), and stop loss (stop loss)
5. Confirm the trade: Complete the necessary steps for the trade to be executed

Important News Affecting the FX Market

Each currency has its own influencing factors, but five key economic indicators impact all currency pairs:

1. Central Bank Interest Rate Decisions

Interest rates are considered the “price of money.” Raising interest rates increases currency value; lowering rates decreases it. This is the most critical information, immediately affecting FX price movements.

2. Gross Domestic Product (GDP)

When GDP falls below expectations, the currency tends to depreciate. Conversely, exceeding expectations can lead to currency appreciation.

3. Consumer Price Index (CPI) and Inflation

These indicators indirectly measure the value of money through purchasing power. High CPI or inflation often leads to interest rate hikes to curb inflation.

4. Unemployment Rate

This indicator indirectly influences central bank interest rate decisions. Rising employment tends to increase interest rates. The US ADP and NFP reports, released monthly, are very important.

5. US Federal Open Market Committee (FOMC) Announcements

Each month, the FOMC meets to set interest rates. They then release statements on economic conditions and monetary policy effectiveness. FOMC decisions can cause significant volatility—for example, on 18/3/2015, EURUSD surged 400 pips within minutes after the FOMC expressed a negative outlook on USD.

To stay updated on key economic news, follow specialized economic calendars that provide data and analysis affecting each currency pair.

Forex Market Trading Hours

The Forex market operates 24/5 (24 hours, 5 days a week) thanks to the global trading system. Below are the trading hours of major exchanges (in Vietnam time):

Each market opening causes significant movements in related currency pairs. For example, when Sydney opens, AUD is highly volatile; when London opens, European currency pairs become more active. Through an online trading platform, you can access all four markets and trade almost continuously 24 hours a day, 5 days a week.

Should You Trade Forex? Important Considerations

The most critical factor in deciding whether to trade Forex in Vietnam is the legal aspect. As analyzed, Forex trading in Vietnam still has legal gaps that are not yet clearly regulated.

Forex is the largest and most liquid financial market in the world. All economic information creates liquidity and causes currency prices to fluctuate strongly. These characteristics make Forex an attractive market for investors seeking profit.

If you want to participate, the most important thing is to choose a reputable international broker licensed by securities regulators in countries with clear legal regulations. Organizations like ASIC (Australia), FCA (UK), CMA (Cyprus) are reputable authorities with licensing power.

With technological advancements, today’s trading platforms offer over 400 financial instruments, including forex, cryptocurrencies, commodities, and indices. You can start with a low deposit, minimal or no commissions, and leverage to optimize capital.

Conclusion: Forex trading is not illegal if you choose a reputable international broker. However, understanding the market, managing risks, and having a clear trading plan are key factors for success in the FX market.