Technology

What is Forex? Is it risky, can you lose money, is it legal in Vietnam?

If you don't have any experience, you might not know what Forex is. It is a field that is gaining as much attention as cryptocurrency. The following article will explain what Forex is and whether it is legal to trade Forex in Vietnam.

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26 December, 2023

In the following article, we will learn about Forex, what it is, and how it differs from Crypto!

1. What is Forex?

Forex is short for Foreign Exchange, which means international currency exchange. However, many people still do not understand what Forex is, what the Forex market is.

The Forex market is often referred to as the foreign exchange market, one of the largest financial markets globally, along with Crypto. This is where multinational currency transactions take place through the banking system and credit institutions, such as exchanging USD for Vietnamese dong or exchanging SGD (Australian dollar) for USD.

Basically, Forex trading is the act of exchanging one currency for another, with the aim of making a profit when the value of the currency increases, similar to buying and selling gold.

2. Differences between Crypto and Forex

To better understand what Forex is, we can compare it to the Crypto market as follows:

2.1. Market participants

Initially, Crypto started mainly with small traders, while Forex started with large banks. Over time, larger organizations have joined Crypto, and, conversely, small traders have also become involved in Forex.

Currently, anyone can participate in both markets, even if they do not fully understand what Forex is and its characteristics.

2.2. Comparison of trading pairs

In Forex, currencies are priced in pairs. For example, with 07 major traded currencies, there will be 21 trading pairs based on the following table:

In Crypto trading, digital currency pairs are also used, but mainly based on the original coins of the exchange, such as Tether (USDT), Bitcoin (BTC), or Ethereum (ETH). Currently, with over 10,000 types of cryptocurrencies, it would be complex without these base coins as intermediaries.

2.3. Profit potential

Forex trading has a very high leverage, starting from 50x and above, making the risk extremely high. This makes trading in this market notorious for being a game that can easily result in losing money.

Crypto trading also has a leverage of 50x, but the minimum leverage ranges from 5x to 100x, suitable for both inexperienced traders and market-savvy individuals.

2.4. Liquidity comparison

Due to the smaller price fluctuations, Forex trading has higher liquidity. According to estimates, the liquidity in the Forex market is 12-60 times higher than that of Crypto. Many people who do not know what Forex is will overlook this factor.

2.5. Price volatility comparison

Crypto trading has higher price volatility than Forex, resulting in higher profits. However, the coin products in the Crypto market are also more likely to lose value. Therefore, the leverage ratio in Forex is usually higher than in Crypto.

2.6. Operating hours comparison

The Forex market allows trading 24 hours a day, 5 days a week, starting from Monday morning in Wellington and ending on Friday afternoon in New York.

On the other hand, Crypto allows trading 24 hours a day, 7 days a week globally. That’s why the Crypto market is known as the market that never sleeps.

3. Frequently asked questions for new participants in the investment market

3.1. Should I participate in the Forex market or Crypto market?

In addition to wondering what Forex is, many people still do not know whether to choose Forex or Crypto?

If you do not want high risks and do not need breakthrough profits, then Forex is a safe and suitable choice, especially for those with less experience.

If you are not afraid of risks and want attractive profits, then Crypto is a lucrative field for you to explore. However, it requires thorough research before participating in this market.

3.2. From a legal perspective, which market is safer between Forex and Crypto?

Forex trading is considered safer than Crypto. Unlike Forex, Crypto does not have a third party to verify and manage transactions. Moreover, according to Vietnamese law, bitcoin and other cryptocurrencies are not yet recognized as means of payment in Vietnam. That is the reason why most people learn about what Forex is as an alternative to Crypto.

3.3. Which Forex trading platforms are reliable?

You can refer to some reputable Forex trading platforms such as Exness, XM, FxPro, ICMarkets, Forex4you,…

Summary

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Hopefully, through this article, you have learned about what Forex is and the differences between Forex and Crypto!

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Frequently asked questions

Forex, or Foreign Exchange, is a global market for trading currencies. It is a decentralized market, meaning there is no physical location, and it operates 24 hours a day through a network of banks, corporations, and individuals trading one currency for another.

Yes, Forex trading carries a high level of risk due to its volatile nature. Currency values can fluctuate rapidly, and traders can lose money if they make incorrect predictions about the market direction. Proper risk management strategies are essential for anyone considering Forex trading.

Yes, losing money is a very real possibility in Forex trading. It is important to remember that Forex is a zero-sum game, meaning for every winner, there is a loser. Traders should only risk capital they can afford to lose and always use stop-loss orders to limit potential losses.

As of 2022, Forex trading is legal in Vietnam, but it is heavily regulated. The State Bank of Vietnam (SBV) is the main regulatory body, and it only allows licensed credit institutions and authorized Forex brokers to operate in the country. Individuals are allowed to trade Forex but must do so through these licensed entities.

While Forex trading is legal in Vietnam, there are risks associated with the activity. These include the typical market risks of currency fluctuations, as well as the potential for scams and fraudulent activities. It is important for traders to only use licensed and reputable brokers to mitigate these risks.

To start Forex trading in Vietnam, you would need to open an account with a licensed credit institution or authorized Forex broker. You would typically need to provide proof of identity and residency, and then you can fund your account and begin trading using their platform.