- 1 What is Forex?
- 2 Where to trade Forex?
- 3 Why is Forex so attractive to so many people?
- 4 How to get profit on Forex
- 5 Trading analysis methods
- 6 The advantages of the Forex market
- 7 Should you choose the Forex market or the stock market?
- 8 Currencies
- 9 A Beginner’s Guide to Forex Trading
- 10 Other Forex Brokers
What is Forex?
Forex is an acronym for Foreign Exchange, also known as FX, spot FX, foreign exchange market… is the largest financial market in the world, with a daily amount of transactions up to 5.1 trillion USD. (according to World Bank report in 2016). In short, Forex is a decentralized market for the exchange of currencies around the globe.
The beginnings of today’s Forex market began in 1971, after the global economy had transformed from the “gold standard” to a free currency. This advance was caused by many different factors, but in general was influenced by the fact that the US officially withdrew from the Bretton Woods monetary system, allowing the exchange rate to float.
Forex Market – Forex is a very valuable currency exchange market. You can imagine: If the New York Stock Exchange has a trading value of up to 25 billion USD / day, this number is still very small compared to 510 billion USD / day in Forex. The reason is because all trading activities, buying and selling, exchanging … between countries around the world must go through the foreign exchange market.
Participants in the Forex market are financial institutions including international banks, central banks, financial funds and large trading companies; individual traders (traders) account for only about 7%.
So what is the “commodity” of Forex? It’s MONEY. Forex trading is the transaction of buying one amount of money and selling another amount of money at the same time. Easier to understand, it is the money exchange. For example, when you exchange 1USD for 23,000 VND, this operation takes place at the same time and it is also considered a foreign exchange transaction. Money is traded through the broker in pairs; for example EUR/USD or GBP/JPY.
Individuals cannot participate in this market on their own, but must go through a broker; commonly known as Brokers – Forex brokers. You simply understand that trading a certain currency is buying shares of that country. For example, when you buy the US dollar USD, you are affecting the exchange rate of this currency and indirectly affecting the US economy. Because the value of money is a reflection of the health of a country’s economy now and in the future.
Where to trade Forex?
Unlike other markets, the Forex market has no financial or trading center. The foreign exchange market is an interbank market and is based on electronic transactions between banks and operates 24 hours a day and 5 days a week (except Saturday and Sunday).
In previous decades, individuals could not participate in this market on their own. The condition to enter the market is that you must have from 10 to 50 million USD. Forex was born to meet the needs of banks and giant companies in the industry. However, with the help of the Internet, brokerage firms were born to meet the needs of small-volume individuals to exchange foreign exchange. Trades are made through the phones and computers of hundreds of thousands of different locations around the world.
Why is Forex so attractive to so many people?
As you know, Forex is a global currency trading market through the Central Bank system of countries, so transparency is certain. In addition, traders only need to invest a small amount of capital to be able to participate in the Forex market and make profits in a short time. And some other advantages as follows:
Easy access to Forex learning materials on the internet.
The Forex market is open 24/7 for 5.5 days a week.
You can trade at any time while the market is open.
The forex system is highly leveraged, so there is a possibility of a profit greater than a small initial investment.
You can trade anywhere, with just a laptop or smartphone with an internet connection.
Highest liquidity of all investments.
Not subject to price manipulation by any organization or individual.
How to get profit on Forex
To make a profit from this market, you need to understand the simple concept as follows: You buy a currency pair at a low price and sell it at a high price then you will make a profit from the difference. . The broker will collect an amount from your trade called the Spread fee.
For example: You want to trade the EUR/USD currency pair, the current exchange rate of this currency pair is 1.25, ie with 1 EUR you will buy 1.25 USD. This rate will change continuously. Then you expect that the price of EUR will rise against the USD. You decide to buy 100 EUR for 125 USD.
If the market goes according to your expectations, EUR/USD goes up from 1.25 to 1.30, you can take profit by selling 100 EUR for 130 USD, making 5 USD profit.
If you feel that this 5 USD profit figure is too small, brokers also provide you with a leverage ratio that increases your profits many times over. For example, when you trade with 1:100 leverage, your profit from the above trade will be 500 USD after just one trade.
But if the market goes against your expectations then you will lose.
Trading analysis methods
But when you start making trades, one big question arises here, which is when you should buy or sell that currency pair.
Currency rates are determined by the supply and demand of the global market. Therefore, you need to fully grasp and update all the news about the forex market, to be able to correctly predict the up and down trend of the exchange rate to help you determine the right time to buy & sell.
Fundamental analysis is the monitoring and updating of economic and political news in different countries. Example: If there is news that the unemployment rate in Canada is falling, this means that the value of the Canadian dollar (CAD) will increase. So you should sell USD/CAD to be able to profit from this trade!
You can use currency rate charts to make predictions, this is similar to chart analysis in other financial markets such as stocks, cryptocurrencies, binary options, etc.
In Vietnam, fundamental analysis and chart analysis are often referred to as news analysis and technical analysis. With the school of technical analysis, you need to learn how to read charts, refer to many technical patterns that have the ability to bring a high winning rate of trades.
The advantages of the Forex market
1. High profits when trading at a reputable Forex broker
Forex investing for many people is not only a profession but also the best way to make big profits in a short time. Profits from Forex trading are actually much higher than inflation or bank interest rates. Forex investors can make very high income when trading at reputable Forex brokers.
2. Profit earned regardless of market trends
You can make a profit by trading on the Forex market regardless of whether the exchange rate rises or falls. Because simply, you are holding both the right to buy and sell any currency. For example, you are looking to trade on the USD/CAD currency pair, if the USD rises, you place a buy order and make a profit, otherwise you place a sell order and make a profit. With Forex, you don’t have to worry about market trends, and it’s easy to get high profits in a short time. This is the outstanding advantage of Forex over stocks.
The Forex market has the ability to protect investors from the volatility of economic crises. If a crisis occurs, the stock market can completely crash, but forex trading continues as normal as if nothing happened.
3. Opportunity to make money continuously all day on Forex
Since the market is open 24/7 5 days a week, you can open a trade and make a profit at any time. In addition, with the time difference between countries, you can completely open transactions 24/7 without stopping a day.
Actually on weekends the market is still open (called free market) and you can still trade, however at this time financial institutions and central banks are not working. to a floating market and may be subject to price manipulation by a number of private institutions. Because of the above reason, Forex brokers will stop processing transactions at the weekend to protect investors.
However, because of the time difference between countries, you can still trade 24/7 by trading at many different Forex brokers.
4. Forex trading can be done anywhere
Forex trading is done with the help of computer software – terminals. The buying and selling of currency can thus be done from anywhere in the world, as long as there is access to the Internet.
FOREX trading can be complicated for many people as they cannot buy or sell any physical assets. Think of it simply as buying a currency is like buying shares in a country. When you buy Japanese Yen, you are affecting the foreign exchange rate of Japan and indirectly the Japanese Economy, as the value of the currency represents the current and future health of a country.
Unlike other financial markets, Forex does not have a financial center or trading center. The foreign exchange market is an interbank market, and is based on electronic transactions of a system that connects banks with each other, operating 24 hours a day.
In the last decade, apart from banks and financial funds, only the “giants” were able to participate in this market. At that time, to make a trade with 10 to 50 million USD, Forex was born only to meet the needs of banks and giant companies in the industry, not traders, investors. retail trading/investment. However, with the miraculous support of the Internet, online trading systems and exchanges were born, allowing the opening of accounts for “odd” customers. Today, the exchanges in the market are allowed to use leverage to make trades with much smaller volumes than before to meet the needs of the vast majority of individual customers.
Should you choose the Forex market or the stock market?
Forex market or stock market both have certain advantages and disadvantages. The figure below will give you the most detailed comparison of these two markets.
Popular currency pairs traded in this market include: majors, crosses and exotics
Major currency pairs are those with the USD and another popular currency. Major currency pairs include EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, USD/CAD, NZD/USD.
Cross currency pairs are commonly traded currency pairs that do not contain USD in them. They include currency pairs that contain EUR, GBP, and JPY.
Exotic currency pairs are currency pairs that are formed from the USD and another currency from emerging or underdeveloped economies.
A Beginner’s Guide to Forex Trading
To enter the Forex market, you need to do the following:
Choose a reputable forex broker and the right type of trading account.
Choose a good and stable trading platform. The trading platforms used by many investors today are MetaTrader 4 and MetaTrader 5. Some brokers also offer proprietary platforms that allow you to trade smoothly and easily on the platform. gender.
Log in to your trading account and select the appropriate investment product.
Determine a trading timeframe that suits your strategy and market conditions.
Fundamental analysis and technical analysis to determine the right entry time.
Other Forex Brokers
In addition to our top nine online brokers for 2021, there are 18 others we reviewed: Swissquote, FXCM, AvaTrade, XM Group, FP Markets, Plus500, Pepperstone, IC Markets, Tickmill , OANDA, FxPro, Vantage FX, Moneta Markets, HYCM, Eightcap, VT Markets, BlackBull Markets and Octa FX. These are our top level lessons for each broker. To dig deeper, read our reviews.
“Traders willing to pay a premium to keep their brokerage accounts with a Swiss bank choose Swissquote to offer a variety of competitive assets. That said, the service is based. Swissquote’s UK base offers better rates despite offering a smaller market reach.”
“Despite the narrow range of tradable markets and middling valuations, traders who appreciate powerful trading tools coupled with quality market research will find FXCM a winner. win.
“AvaTrade is a trusted global brand best known for offering traders a wide choice of trading platforms. Our testing shows that AvaTrade is a great choice for trading. copy translation, competitive for mobile, mostly in line with industry averages for valuation and research, and a winner for investor education.
“While XM Group has struggled against industry leaders, in terms of platform offering, market reach, and pricing, XM Group offers unsurpassed service in quality educational content and research. save the market.”
“While FP Markets follows industry leaders in research and education, trades on MetaTrader are highly competitive, helping FP Markets shine as a low-cost broker for forex trading. forex and CFDs.”
“Plus500 is a trusted global brand that offers online traders an easy-to-use trading platform and a thorough selection of CFD instruments. However, Plus500 pursues industry leaders. on market research and cutting-edge trading tools that active traders want.”
“While Pepperstone offers a small set of tradable products, it offers one of the largest selections of third-party platforms, including a wide variety of social copy trading options.”
“IC Markets caters especially well to algorithmic traders through its commission-based accounts. That said, the market range and research material provided by IC Markets is unimpressive. equal.”
“Tickmill is a simple MT4 broker that offers a minimal selection of tradable securities. That said, Tickmill offers very competitive commission-based pricing to professionals through the account. VIPs and PROs.”
“As a trusted global brand, OANDA offers forex and CFD traders a limited number of FX and CFD pairs but stands out for its reputation and quality market research.”
Forex market is a market with a very high level of risk, if you intend to enter the market, prepare yourself a solid psychological foundation, with in-depth research knowledge to be able to trade. success.