Forex Trading for Beginners 2025 - Learn from the Basics, Comprehensive

What is Forex?

The international currency exchange market (Foreign Exchange Market) is considered the most efficient financial market in the world. Data from 2024 shows that the average daily trading volume reaches 7.5 trillion US dollars. The reason this market attracts so much attention from investors and speculators worldwide is due to its ease of trading and a variety of profit-making tools.

Basic Forex trading involves exchanging currencies of different countries with each other. When you buy a currency pair (Currency Pair) such as USD/THB at 35.00, it means you buy 1 US dollar and pay 35 Thai baht. Inside the trading system, the first part of the pair is called the Base Currency (Currency Base), and the second is the Quote Currency (Quote Currency).

In addition to trading real money, the term Forex sometimes also refers to trading other derivative instruments on currency pairs, such as futures contracts or CFD products that track exchange rate changes.

Why trade Forex? What are the advantages?

1. Abundant trading volume

The ease of entering and exiting positions is a strength of Forex. Traders can open and close positions as needed without worrying about finding counterparties or transaction delays.

2. No trading time restrictions

The Forex market operates 24 hours a day, 5 days a week, covering time zones from Tokyo to New York. This provides flexibility for traders to choose the most suitable times for themselves.

3. Various trading strategies

Whether you believe currencies will strengthen or weaken, the Forex market offers opportunities for profit. You can trade Long (buy) or Short (sell) in both bullish and bearish market conditions.

4. Versatile application

Forex traders can use this tool to seek profits from currency pair fluctuations or as a hedging method (Hedging) against risks from foreign exchange rate movements.

5. Access to small capital

Leverage, which amplifies trading power, allows traders to control large trading volumes with limited initial funds.

Main factors driving the Forex market

Central bank policies

Central banks of countries like the US, Japan, and the Eurozone use interest rates and money supply management to control their economies. Changes in these policies often cause rapid movements in currency values.

Economic indicators

Inflation figures, employment data, trade balances, and current account balances are key indicators monitored by traders as they reflect economic strength and currency health.

International capital flows

Trade policies, political changes, geopolitical events, and decisions by institutional investors influence the flow of foreign investments, affecting currency demand and prices.

Overall global market conditions

Changes in stock markets, bond markets, oil prices, and other commodities are related to certain currency pairs, e.g., crude oil prices are closely linked to USD/CAD.

Demand for safe-haven assets

During times of uncertainty or crises, investors tend to flock to safe-haven assets such as the US dollar and Japanese yen (Safe Haven).

How can retail investors trade Forex?

1. Trading real money on the Spot Market (Spot Market)

This is the most straightforward method—exchanging one currency for another and waiting for exchange rate changes to realize profits or losses. The advantage is no complex contracts, but the downside is requiring full capital upfront, high spreads (difference between buy and sell prices), and holding costs. Spot trading is less suitable for short-term traders.

2. Trading futures

Currency futures, such as those on Thailand’s TFEX or CME in the US, offer better liquidity, easy online trading, and leverage options. The disadvantage is that contract sizes are often large, requiring significant capital per trade.

3. Trading CFDs (Contracts for Difference)

CFD products offer high flexibility for Forex traders, allowing trading of only the price difference. Benefits include:

• Excellent liquidity
• Nearly 24/5 trading hours
• Low initial capital
• Leverage to expand trading capacity

However, high leverage in CFD products can also increase the risk of losses exceeding the initial investment.

Currency pairs (Currency Pairs) that beginners should choose

What factors should be considered?

Trading volume and liquidity

Pairs with high trading volume tend to have prices closer to your desired levels, with narrower spreads.

Price volatility

Balance is key. Too little movement makes profit opportunities scarce, while too much can make risk management difficult.

Appropriate trading times

Although Forex is open 24/5, liquidity and volatility vary by time zone. Major trading hours are during European and US market openings, which have the highest liquidity.

Economic news and events

Since the market is sensitive to news, traders can select currency pairs based on anticipated impactful news during specific periods.

Popular currency pairs for beginners

EUR/USD

The king of Forex pairs, with the highest trading volume, high liquidity, and moderate volatility. Suitable for short- and medium-term trading. Most active during European and American market hours.

USD/JPY

Another popular pair among traders worldwide, with good liquidity and moderate to low volatility. Movements tend to increase during major Japanese central bank announcements. Most active during Tokyo and US market hours.

GBP/USD

Good liquidity but higher volatility than the previous pairs due to UK-specific policy and economic factors. Most active during European and US market hours.

Forex trading steps for beginners

Step 1: Choose your currency pair

Select a pair that matches your trading style and capital. Consider the factors discussed above.

Step 2: Check prices and analyze

On your trading platform, review the current price of your chosen pair. Conduct technical analysis using tools like support and resistance levels or technical indicators.

Step 3: Place buy or sell orders

When you see a trading opportunity, submit:

Buy Order (Buy Order) — When you expect the currency to appreciate. If the price moves in your predicted direction, your profit increases.

Sell Order (Sell Order) — When you expect the currency to depreciate. If the movement aligns with your prediction, you profit.

Step 4: Set risk management levels

Use Stop Loss orders to automatically close positions if prices move against you to a certain level. This is a vital tool to protect your capital. Limit Orders can also be used to open or close positions at specified prices.

Step 5: Monitor and close positions

Keep an eye on price changes. When profits reach your target or risk levels become too high, close your position to realize gains.

Step 6: Review your trading

After closing a position, review your trade. Analyze what went well and what needs improvement. Trading is a learning process; successful strategies should be repeated. As Charlie Munger (Charlie Munger) said at the Berkshire Hathaway meeting in 2010: “When we find that some methods work well, we should do them often. This might be called the basic procedure of life—repeat what works.”

Warnings and risks to avoid

Overleveraging

While leverage can amplify profits, it also magnifies losses. If the market moves against you, you could lose your entire capital quickly. Choose leverage appropriate to your risk tolerance and capital size.

Unprepared for rapid movements

Major economic news, such as interest rate announcements or inflation data, can cause sharp price swings. Without proper Stop Loss settings and avoiding trading during volatile periods, you risk significant losses.

Overtrading

Trading impulsively or too frequently often leads to poor results. Build experience gradually and trade only in positions you have planned carefully.