Forex Basics: What Beginners Need to Know Before Getting Started 2568

The foreign exchange market (Forex) holds the position as the highest trading volume market in the world. In 2024, it indicates that the average daily trading activity reaches 7.5 trillion US dollars. Such massive liquidity provides opportunities for various types of traders to seek profits easily. However, before jumping into the Forex trading arena, it is essential to understand the system and the specific characteristics of this market clearly.

What is Forex and How Do Currencies Move?

Forex trading involves buying and selling currencies internationally. Unlike trading other assets, currencies do not have a fixed price; their value is determined by comparison with other currencies, known as Currency Pairs (Currency Pairs).

The Infrastructure of Currency Trading

Currency pairs, such as USD/THB, consist of two parts:

• Base Currency (First currency) = the currency being bought
• Quote Currency (Second currency) = the currency being sold

For example: Buying USD/THB at 35.00 means you use 35 Baht to buy 1 US dollar. Similarly, buying USD/JPY at 160.00 means using 160 Yen to get 1 dollar.

Forex is not limited to currency trading alone. Sometimes, the term also includes trading CFDs of various types, such as commodities, gold, or stock indices. But for clarity, true Forex refers to buying and selling currencies through various instruments, from Spot Trading to Futures and CFDs.

Why Does This Market Attract Traders Worldwide?

The Forex market is renowned for advantages that humanity cannot overlook:

1. Deep Liquidity
The excellent trading volume allows traders to enter and exit orders easily without worrying about spreads.

2. Flexible Market Hours
Open 24/5, allowing traders to choose times that suit their schedules—morning or evening.

3. Multiple Profit Opportunities in Different Directions
Whether going Long (Intend to Rise) or Short (Intend to Fall), there are many currency pairs to choose from, enabling traders to play according to market advantages.

4. Risk Management Tools
Forex can be used to hedge investment portfolios or for short-term speculation as needed.

5. Leverage to Amplify Capital
Using high leverage ratios allows small accounts to control large trading volumes.

What Factors Drive Currency Value Changes?

Forex does not move randomly; various events can cause sharp market fluctuations:

Central Bank Policies
Decisions on interest rates by Fed, ECB, Bank of Japan, not only affect currency values but also send ripple effects to other markets.

Economic Data and Employment Statistics
Inflation rates, employment figures, trade balances—all fuel the volatility of currencies.

Cross-Border Capital Flows
Trade policies, elections, geopolitical risks influence foreign investment decisions.

Global Market Conditions
Stock markets, bonds, commodities—all send signals to the Forex market.

Demand for “Safe Haven” Assets (Safe Haven)
When global risk signals appear, the US dollar and Yen often become safe havens for investors.

Three Ways to Play Forex

Individual investors have three main options to participate in this market:

First Method: Spot Market – Buying and Selling Real Currencies

The simplest approach: exchanging one currency for another. When prices change, you convert back to realize profits or losses.

Advantages: Simple
Disadvantages: Full amount needed upfront, limited choices, high transaction fees, not suitable for short-term trading

Second Method: Futures – Standard Contracts

Trade Futures contracts such as USD Futures on TFEX in Thailand or EUR/USD on the Chicago Mercantile Exchange.

Advantages: High liquidity, open nearly 24 hours, leverage available
Disadvantages: Large contract sizes, significant capital required, may not be accessible to retail traders

Third Method: CFDs – Flexible and Popular

[Contracts for Difference (CFDs)]( are instruments that allow you to profit from price changes without owning the actual asset.

Advantages: Highly flexible, 24/5 trading, low initial capital, leverage available
Disadvantages: High risk, strong leverage, large price volatility, potential for significant losses

CFDs are very popular among traders because they enable quick profits with less capital, but require strict risk management.

Which Currency Pairs Are Suitable for Beginners?

Choosing the right currency pair is half the success. Criteria include:

Considerations:

• Liquidity: Pairs with high trading volume, narrow spreads, and desired price movements
• Volatility: Too low makes timing difficult; too high makes risk hard to control. The ideal is moderate volatility.
• Trading Hours: Different pairs are most liquid at different times, depending on market open hours in various regions.
• News Impact: Forex markets react quickly to news; traders focusing on news can select pairs based on impactful news.

Big 3 Currency Pairs for Beginners:

EUR/USD
Top liquidity, moderate volatility, suitable for short- and medium-term trading, most active during European-American market hours.

USD/JPY
Popular, good liquidity, low to moderate volatility, sometimes very active when Bank of Japan intervenes, especially during Tokyo-USA sessions.

GBP/USD
High appeal, good liquidity, but high volatility due to the UK’s unique political and economic factors, such as Brexit and other uncertainties. Active during Europe-USA hours.

How to Trade Forex for Beginners

( Step 1: Choose Your Currency Pair

Select a currency pair that matches your investment style.

) Step 2: Start Trading

Check current prices, analyze charts, and place orders:

• Buy: Expect currency to strengthen, profit from rising prices
• Sell: Expect currency to weaken, profit from falling prices

Step 3: Set Entry Conditions

Use Limit Orders to buy/sell at desired prices, and set Stop Loss to protect against large losses.

Step 4: Manage Margin and Wait for Results

Monitor your margin ###Margin###, close the trade when profits meet expectations.

( Step 5: Review and Improve

After closing each trade, review what you learned, identify mistakes, and apply lessons to future trades.

As Charlie Munger )Berkshire Hathaway### once said at the 2010 annual meeting:

“When something works well, do it repeatedly. That’s what life teaches us.”

Cautions When Trading Forex

The risks in this market are no joke, especially with leverage involved:

Beware of Excessive Leverage
High leverage makes your money work harder but also increases risk. Use leverage appropriate to market volatility and your capital.

Price Volatility
News and economic events can cause sharp price swings. Without proper preparation, you may need to cut losses with (Stop Loss) or avoid high-volatility periods; otherwise, losses can be severe.

Overtrading
Avoid the trap of placing orders constantly. Overtrading often leads to losses. Trade only with a clear plan.

Summary

Forex attracts traders with abundant liquidity, 24/5 trading hours, and diverse investment options. CFDs are particularly accessible for beginners, requiring less capital and offering high short-term returns.

Trading Forex is a continuous learning process. When you find a strategy that works, repeat it. The key is to manage risk, accept losses, and keep improving. For traders, stopping learning is the beginning of losing.