How to Start Forex Trading - A Beginner's Guide for Those Interested in Learning the Exchange Market

What is the Forex Market and Why Is It Interesting

The foreign exchange market (Foreign Exchange Market) is the largest financial market in the world by trading volume. The latest data in 2024 shows that the average daily trading volume worldwide is approximately $7.5 trillion USD.

The reason Forex attracts many investors is its high liquidity, the ability to trade almost 24 hours a day, five days a week, and the variety of investment tools available, whether it’s spot trading, futures, or CFDs.

Understanding Currency Pairs and How They Are Calculated

Forex trading is not just about buying and selling a single currency but involves comparing the value of two currencies simultaneously. This is called Currency Pairs (Currency Pairs).

For example, USD/THB at 35.00 means you need 35 Thai Baht to exchange for 1 US dollar. Similarly, USD/JPY at 160.00 means you need 160 Japanese Yen to exchange for 1 US dollar.

When trading such currency pairs, traders are buying the first currency (Base Currency) and selling the second currency (Quote Currency) simultaneously.

Main Factors Affecting Exchange Rates

Currency values in the Forex market do not change randomly but are influenced by several factors:

Central Bank Policies: Adjustments in interest rates or changes in money supply by the US, Japan, or European Central Banks often cause significant volatility.

Economic Data: Inflation figures, employment statistics, and balance of payments all signal the strength of the economy and its currency.

International Capital Flows: Political events, elections, or trade policy changes impact the flow of investments across countries.

Global Financial Market Conditions: Changes in stock markets, bonds, or commodity prices like oil can directly affect certain currency pairs.

Demand for Safe-Haven Assets: During times of economic uncertainty, investors tend to move toward safe currencies like the US dollar or Japanese Yen.

Three Ways to Invest in the Forex Market

1. Spot Trading

This is the most straightforward method—exchanging one currency for another and waiting for the exchange rate to change to make a profit.

Advantages: Simple, no leverage required.

Limitations: Full amount must be paid upfront; spreads (Bid-Ask Spread) are relatively high; not suitable for short-term trading.

( 2. Currency Futures Trading

Futures contracts based on currencies, such as USD futures traded on the Thai market )TFEX### or EUR/USD futures on Chicago (CME), offer higher liquidity.

Advantages: Good liquidity, can trade almost all day, leverage used.

Limitations: Contract sizes are often large; require substantial capital.

( 3. CFDs )Contracts for Difference###

Derivative contracts that give rights to profit from price differences. This method is very flexible for individual traders.

Advantages: Low initial capital, high liquidity, nearly 24/5 trading, leverage available.

Limitations: Higher risk, especially when using high leverage.

Which Currency Pairs Are Suitable for Beginners

Choosing the right currency pair can increase profit opportunities. Consider the following factors:

Liquidity: Pairs with high trading volume, such as (Major Pairs), allow easy entry and exit at desired prices without delays.

Volatility: Too low volatility makes timing difficult, while too high makes risk management challenging. Choose a moderate level.

Trading Hours: Although Forex is open 24/5, each pair has peak times with the best liquidity and volatility, e.g., EUR/USD moves most during European and US market hours.

News and Information: If you want to trade based on news, choose pairs with high fundamental activity, such as EUR/USD, which has abundant news and data.

( Recommended Pairs for Beginners

EUR/USD: Highest liquidity, moderate volatility, suitable for short to medium-term trading.

USD/JPY: Good liquidity, low to moderate volatility, may increase during Japanese central bank meetings.

GBP/USD: Good liquidity, high volatility, due to UK-specific factors.

Step-by-Step Forex Trading Process

) Step 1: Define the Currency Pair and Analyze

Select a currency pair that matches your trading style and risk tolerance. Check current prices and analyze charts using technical or fundamental analysis.

Step 2: Place Orders

Buy Order ###BUY###: Use when you expect the currency to strengthen. If the price rises as expected, you profit; if it falls, you incur a loss.

Sell Order (SELL): Use when you expect the currency to weaken. If the price falls as expected, you profit; if it rises, you incur a loss.

( Step 3: Set Exit Conditions

Use Stop Loss orders to automatically close positions when losses reach a certain level, and Limit Orders to close positions when profits reach your target.

) Step 4: Monitor and Wait to Close

Observe price movements and margin level ###Margin Level### carefully. Be ready to close positions when profit or loss targets are reached.

( Step 5: Analyze Results and Improve

After closing a position, review what went right and wrong to improve future trades. Trading is a repetitive process; finding effective strategies and learning to execute them better is key to long-term success.

Important Cautions When Trading Forex

Forex trading involves risks, so avoid common mistakes:

Beware of Excessive Leverage: High leverage can amplify profits but also increases the risk of losing capital due to forced liquidation. Choose leverage appropriate to market volatility.

Be Prepared for Volatility: Currency prices can be highly volatile, especially during central bank meetings or major economic announcements. Use Stop Loss and avoid trading during highly volatile periods.

Trade Too Frequently: Overtrading does not guarantee profits and often leads to losses. Trade only according to your plan.

Lack of a Trading Plan: Trading based on emotions or rumors differs from trading with a plan. Have a clear strategy, profit targets, and pre-set Stop Loss points.

Summary

Successful Forex trading does not come from rushing but from careful study, consistent practice, and continuous strategy improvement.

Beginners should start with learning the basics, understanding the factors influencing currencies, and practicing with demo accounts. Once confident, gradually increase capital starting with small amounts.

Remember, Forex trading carries risks. Use leverage cautiously, have a solid money management plan, and if unsure, consult experts or study reliable sources before investing.