Discover What Forex Trading Is and What You Need to Know About the Foreign Exchange Market

What Is Forex Trading? Understanding the Global Currency Market

Forex trading, or foreign exchange trading, is one of the largest financial markets in the world, with a daily trading volume of $6.6 trillion (according to 2020 statistics). Unlike stock markets with centralized exchanges in each country, the foreign exchange market operates in a decentralized OTC (Over-The-Counter) manner worldwide.

The essence of forex trading is exchanging one currency for another based on currency price fluctuations. Initially, foreign exchange activities were mainly conducted by financial institutions, central banks, and import-export companies to hedge against currency risk and store value. However, as international trade increased and diversification of investments became more popular, more individual investors began participating in this vibrant market.

Why Is Forex Trading Attractive to Many Investors?

The foreign exchange market features:

• The highest liquidity in the world: Massive trading volume ensures you can always buy or sell currencies at competitive prices.
• Market cannot be manipulated: Due to the large and dispersed global participant base, no individual or organization can control prices.
• Profit opportunities from price volatility: The strong fluctuations of currency pairs create profit opportunities for traders.

Legal Framework of Forex Trading in Vietnam

A common question among Vietnamese investors is whether foreign exchange trading is illegal or not.

Current Regulations on Forex Trading

According to Vietnamese law, forex trading is only licensed for banks. The government does not permit the establishment of forex trading platforms in Vietnam to maintain strict control over national foreign exchange reserves.

However, this does not mean that individual forex trading is illegal. Private investors are fully allowed to engage in forex trading for investment purposes through reputable international brokerage firms licensed by countries that permit such activities.

How to Participate Safely

To engage in forex trading without legal issues, you should:

• Choose brokers licensed by reputable financial regulatory organizations (e.g., ASIC in Australia, FCA in the UK)
• Avoid “Vietnamese forex platforms” as they are definitely not legally licensed
• Verify broker information before depositing funds

Most Popular Currency Pairs in Forex Trading

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

Economic Factors Affecting Forex Trading

When trading forex, you need to monitor these economic news:

1. Central Bank Interest Rate Decisions

Interest rates are considered the “price of money.” Raising interest rates increases currency value, while lowering them has the opposite effect. This is the most critical information directly impacting currency pair fluctuations.

2. Gross Domestic Product (GDP)

Higher-than-expected GDP usually boosts currency value, while lower-than-expected GDP can decrease it.

3. Consumer Price Index (CPI) and Inflation

These indices reflect the increase in goods prices and are used by central banks to decide on interest rate adjustments. High inflation often leads to higher interest rates.

4. Unemployment Rate

Low unemployment (and rising employment) tend to lead to higher interest rates. The two key US indicators are ADP and NFP, released monthly.

5. Announcements from the US Federal Open Market Committee (FOMC)

FOMC meets monthly to set interest rates. Post-meeting announcements can cause significant market volatility; for example, on March 18, 2015, the EUR/USD pair surged 400 pips within minutes after the FOMC announcement.

Forex Market Trading Hours

The forex market operates 24 hours a day, 5 days a week, through major trading sessions:

Each trading session has its characteristics: in Sydney, AUD experiences high volatility; when London opens, European currencies are actively traded. Through a single trading platform, you can access all these sessions and trade almost continuously.

Getting Started with Forex Trading: Essential Steps

To open a forex trading account, you need to:

1. Choose a reputable broker: Check credibility, security, trading fees, deposit/withdrawal methods, trading platform, order execution speed, and customer service.

2. Create an online account: Register for a demo (practice) or live account.

3. Select currency pairs: Choose the pairs you want to trade (EUR/USD, USD/JPY, etc.).

4. Open a position: Decide to go (long) (buy) or (short) (sell) based on your analysis.

5. Manage risk: Set position size, take profit (take profit), and stop loss (stop loss).

6. Execute the trade: Confirm and place the order.

Should You Trade Forex? Final Considerations

Forex trading offers high profit potential but also involves significant risks. Before starting, ensure you:

• Understand the legal aspects: Trade through reputable international brokers to avoid legal issues.
• Have sufficient knowledge: Learn about currency pairs, economic factors, and technical analysis before investing.
• Manage your capital: Only trade with money you can afford to lose.
• Prepare psychologically: Forex trading requires discipline, patience, and the ability to handle pressure.

Although Vietnamese law has not yet explicitly authorized forex trading activities, private individuals trading for investment purposes through trusted international platforms are entirely legal. The most important thing is to choose a reliable partner to protect your capital and rights.