The outstanding development of the financial market in the 4.0 technology era has opened up countless attractive business opportunities for investors. And it would be really remiss not to mention forex – a potential financial investment channel today.
What is Forex?
Forex full name is Foreign Exchange and means foreign exchange, international currency. The forex market, also known as the foreign exchange market, is a place where currency transactions take place at a certain exchange rate of countries through the banking system and credit institutions around the world.(forex market)
Simply put, Forex is the exchange of 2 currencies from 2 different countries.
Forex is considered to be the largest and most liquid financial market with an average daily trading volume of more than $500 billion. While the major stock exchanges in the US average about 26 billion USD is traded every day.
Furthermore, Forex is an interbank market and there is no need to transact through financial centers. While other financial markets all need a financial center with a definite location for customers to follow.
What is forex trading?
Forex trading is simply the act of buying and selling currencies (foreign currency exchange) against predetermined exchange rates. The exchange rate is the relationship between the price of one country’s currency and the price of another country’s currency, so when trading forex, traders will always work with both.
In fact, currency exchange activities always take place in our lives. Only, you are a direct or indirect participant in this process. For example, when you travel to Singapore, you will often have to change Vietnamese currency into Singapore dollars (SGD) to facilitate the exchange. At that time, it can be said that you are already involved in the forex trading process.
Customers can only participate in buying and selling foreign currencies indirectly through brokers without having to participate directly in the market. Brokers in this case are Forex trading platforms.
Thanks to the rapid development of the Internet network all over the world, traders only need a smartphone or a computer (laptop/ipad/desktop,…) with wifi or 3G/4G connection. is being able to participate in transactions at brokers simply.(Read more : Financial investment)
In the Vietnamese market, up to now, there have been hundreds of forex brokers operating and the number will increase every day. This is very convenient and easy for traders in choosing a trading platform and opening accounts at reputable forex brokers.
What is forex investment?
Forex investment is essentially similar to forex trading, both of which are foreign currency exchange activities on the market. However, there is a difference in that, the purpose of investing is to make a profit through the price difference in the forex market.
For example, Forex investing is when you intend to buy 1 volume of EUR at a low price and then sell it at a higher price to collect the difference.
Unlike the stock market, forex trading or forex investing does not take place on centralized exchanges, but it happens directly between buyers and sellers in an over-the-counter (OTC) market. do).
You should remember that, regardless of Forex trading in any form, it is necessary to cultivate knowledge and study the market carefully, understand how you are investing to be a real investment, simply because forex is a strategy. extremely dangerous field can make you “empty hand” at any time.
Forex trading analysis methods
In fact, all financial markets operate on a single basic rule, which is the law of supply and demand. The same goes for currency rates in the foreign exchange market. Therefore, to determine the right time to buy and sell and make a profitable trade, investors use the following two popular analysis methods:
Fundamental Analysis (FA)
Fundamental analysis is the timely monitoring and capture of economic, political and social news in countries such as interest rates, GDP, growth percentage, etc. to make judgments about market movements. long term.
For example, the US handing out money to people with a $1.9 trillion relief package during the covid 19 pandemic has caused the value of the US dollar (USD) to drop significantly. At this point, traders should sell USD to make a profit.
Technical Analysis (TA)
Technical analysis is a method that investors need to use exchange rate charts in combination with technical tools and indicators (candlestick patterns, resistance/support, Fibonacci sequence, Ichimoku, RSI…) to analyze, comment, and then make judgments about the exchange rate’s rise and fall in the future.(Read more : Copy Trade)
If you are a trader following the school of technical analysis, the minimum requirement is that you need to know how to read charts and use technical patterns proficiently to increase the probability of success to the highest.
In general, these two methods are mainly applied in other financial markets such as stocks, cryptocurrencies, binary options, etc.
Why is forex so attractive to so many people?
According to experts, Forex is a reputable international currency market with high transparency. Besides the above attractive features, Forex also attracts the attention and trust of traders for the following reasons:
– Participating in the Forex market will promote investors to know more about financial knowledge and the economic and political situation.
– The Forex market seems to be more active than other financial markets because it is open 24/5. Traders can place orders at any time when the market is open.
Forex offers a high leverage ratio, enabling traders with a small initial capital to gain greater profits.
Forex is the most liquid market in financial investments. That is, after one mouse click, your order will be executed immediately.
– Unlike stock trading, the forex market is not manipulated by any one major maker or institution.
Advantages of the forex market
In addition to the main reasons why Forex is so attractive to investors outlined above, the forex market also has a number of outstanding advantages:
– Most brokers have the main source of income is the spread fee and free of commission.
– Allows investors to trade forex directly with the market without going through intermediaries.
With a spot market like Forex, traders get to choose their trading volume. Accordingly, even with a small amount you can already participate in the market.
– Forex is too large a market with a huge number of transactions, so no force (even the Central Bank) can control price changes in the market.
– No degree and age requirements to join the market.
– The documents on forex are very complete and rich.
– Traders can familiarize themselves with and practice their trading skills with a demo account before trading with a real account. And this is completely free.
The profit earned when investing in forex is very high when you trade at a reputable exchange, especially in the short term.
– Trading is still profitable even if the exchange rate rises or falls, so traders do not need to worry too much about market trends like investing in stocks.
Suppose, you want to trade the USD/EUR currency pair, if the USD rises, the trader places a BUY order to make a profit; Conversely, if the USD falls, traders should sell for profit.(Read more : price patterns in forex trading)
Trading products on the forex market
If you have a question about what products are traded on the forex market? Then the answer is very short and simple, it is money. In other words, it is the currency pairs of countries around the world.
Popular currency pairs that are regularly traded include: majors, crosses and exotics.
Major currency pair
Major currency pairs are currency pairs with the US dollar (USD) with strong currencies from countries with large and stable economies such as: EUR/USD, USD/JPY, AUD/USD, USD/CAD, NZD/USD, GBP/USD, USD/CHF….
These are currency pairs whose trading volume accounts for almost 85% of the total trading volume in the market. The exchange rate volatility of these currency pairs is usually very low, but the liquidity is extremely high. There is almost no risk of manipulation and the spreads are also lower than other currency pairs.
Cross currency pair
Cross currency pairs are currency pairs that do not contain USD, including: EUR/GBP, EUR/JPY, GBP/JPY, NZD/JPY, CAD/CHF, AUD/JPY. They often have relatively high volatility but are less liquid than the major currency pairs.
Exotic currency pairs
Exotic pairs, also known as weak pairs, are currency pairs that are paired from USD/EUR with a currency from less developed or emerging economies, including: USD /MXN, GBP/NOK, GBP/DKK, CHF/NOK, EUR/TRY, USD/TRY.
Of the 3 types of exchange rates, trading with exotic currency pairs is usually more risky because they are easily manipulated and changed by political factors; high volatility, moreover the liquidity is not high.
Should you choose to invest in forex or stocks?
In essence, the Forex market or the stock market both have certain attractions and risks. So according to objective assessment, it is difficult to make a comment whether to choose forex investment or stock investment. To get the right answer for you, you can refer to the detailed comparisons between the 2 markets presented below:
According to experts, Forex is a reputable international currency market with high transparency. Besides the above attractive features, Forex also attracts the attention and trust of traders for the following reasons:
– Participating in the Forex market will promote investors to know more about financial knowledge and the economic and political situation.
– The Forex market seems to be more active than other financial markets because it is open 24/5. Traders can place orders at any time when the market is open.
Forex offers a high leverage ratio, enabling traders with a small initial capital to gain greater profits.
Forex is the most liquid market in financial investments. That is, after one mouse click, your order will be executed immediately.
– Unlike stock trading, the forex market is not manipulated by any one major maker or institution.
Forex trading guide for beginners
New traders entering the forex market will inevitably be confused as to where to start, because there is so much information and forex documents online. Therefore, the following Tradervn will guide the steps of forex trading for newbies in detail from a – z. Specifically, you just need to follow these instructions:
Step 1: Choose an exchange
To enter the forex market, you first need to choose a reputable exchange to ensure safety during the transaction. Some reputable forex brokers can be mentioned as: Exness . XM, FBS, XTB…
Step 2: Sign up for an account
For beginners, we recommend setting up a demo account first to familiarize yourself with the trading platform, how to place orders, manage trading positions and how to use technical indicators. Once you have mastered trading with a demo account, you can switch to a live account. Choose the type of trading account that suits your experience and capital.(Read more : forex trading methods)
Step 3: Download the trading platform to your device
After successful account registration, please download the trading platform to your computer. Then, log in and proceed to top up your account to prepare for the transaction. Some reputable trading platforms, used by many traders today are: MT4 and MT5 .
Step 4: Start trading
Select currency pairs for investment, develop specific trading strategies depending on market conditions; Apply fundamental and technical analysis methods to determine the ideal timeframe and entry point.
Conclude
Thus, through our sharing, you must have understood what forex is as well as how to start participating in forex investment. In general, forex has always been a “fatty” market that gives you many opportunities to earn great bargains.
However, investing in foreign exchange will certainly always have risks, partly because Vietnam has not yet licensed any forex broker. So, always remember, all investment activities can become gambling if players lack knowledge and seriousness when participating.
