Many young people today are achieving success through their passions and interests. Some excel in marketing, business, and trade, while others choose to immerse themselves in the financial markets, specifically forex trading. Many of these individuals have found success and proven that their choices were indeed wise.
Not everyone understands or has knowledge of forex trading. Let’s dive in together and explore this fascinating market.
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What is Forex?
First, you need to understand what Forex is. Forex, short for Foreign Exchange, is the exchange of two different currencies at a pre-agreed exchange rate. In Vietnam, Forex is also known as FX or foreign exchange.
What is forex trading?
- Simply put, forex trading is the act of buying and selling currencies. As a decentralized market, transactions here occur quickly, cost-effectively, and without third-party supervision.
- Forex trading involves speculative activities based on price fluctuations when you buy one currency while simultaneously selling another.
- Due to factors such as economics, technology, or politics, currency values can fluctuate, leading to increases or decreases in exchange rates. To delve deeper, you need to understand the origin and concept of the forex market to gain more valuable insights into this market.
The Forex trading market and what you need to know.
- The Forex market is often described as a market that “never sleeps.” This description stems from its unique opening hours.
- The market operates 24 hours a day, five days a week from Monday to Friday. It starts on Monday morning in Wellington, New Zealand, moves to Asian markets (Tokyo and Singapore), and finally closes on Friday evening in New York.
- However, even when the market is closed on Saturdays and Sundays, currency values continue to fluctuate due to news and events.
- Regardless of whether exchange rates rise or fall, you can still make a profit. This is because the drop in one currency’s value leads to an increase in another. This is one of the key differences between the forex and stock markets. In the stock market, a single trend can cause difficulties in transactions and prevent short-term profits.
- Another unique feature of forex trading is that it protects investors from economic crises. Trading activities can continue normally, something the stock market cannot do (the stock market can completely collapse during an economic crisis).
Successful Forex trading platforms – The world’s largest financial market.
- The forex market is the largest by capitalization, with a total daily trading volume exceeding $5 trillion. The constant fluctuations in currency values create countless opportunities for investors to seek profits.
- Many people may have unknowingly participated in forex trading. For example, when planning a trip to the U.S., you may need to exchange VND for USD for spending. Today, you find a currency exchange offering an exchange rate of USD/VND at 26,000 VND, meaning 26,000 VND equals 1 USD.
- A few weeks later, after returning from your trip, you have some leftover USD and want to convert it back to VND. At this time, the latest exchange rate for USD/VND is 24,000 VND, meaning 24,000 VND equals 1 USD—a decrease of 2,000 VND compared to the initial rate—indicating that the VND has depreciated against the USD.
Some basic principles in forex trading
- The exchange rates of currency pairs constantly fluctuate due to changes in the economic strength of various countries. Investors seek to profit by speculating on these fluctuations.
- Each currency pair consists of a base currency listed first and a quote currency listed second. Each currency can either depreciate (also known as weaken) or appreciate (also known as strengthen). If you predict that the value of the first currency will rise compared to the second currency, you should buy it. Conversely, if the first currency is expected to decline compared to the second currency, you should sell it.
- For example, if you believe the USD will appreciate against the VND or the VND will depreciate against the USD, you should buy the USD/VND pair. On the other hand, if you think the USD will weaken against the VND or the VND will strengthen against the USD, you should sell the USD/VND pair.
Hopefully, the above information will help you better understand the forex trading market and equip you with the necessary knowledge to take your first steps toward becoming a successful investor. Thank you!