As the world’s largest financial market, the Forex market has a daily trading volume exceeding $7.5 trillion, making it unparalleled by other financial markets. Its high liquidity ensures that there are always buyers and sellers ready to trade at any given moment. This efficiency allows for fast trade execution and low transaction costs, typically with narrow spreads, enabling investors to profit from small price movements.

The Forex market operates as an “Over-the-Counter” (OTC) market, where trading takes place through the banking networks of major financial centers worldwide rather than on a centralized exchange. Advances in internet technology have further enhanced trading efficiency, with real-time exchange rate updates creating more opportunities for traders.

Moreover, the Forex market plays a crucial role in supporting the global economy, facilitating currency exchange for individuals, businesses, and financial institutions while allowing for capital appreciation and risk management through exchange rate fluctuations. Its global reach, high liquidity, and diverse trading mechanisms make the Forex market an indispensable part of today’s financial system.

  Key Features of the Forex Market The Forex market has become one of the most popular financial markets worldwide, primarily due to its unique characteristics. These features not only enhance market flexibility and efficiency but also create more trading opportunities and potential profits for investors.

These characteristics of the forex market make it a highly flexible, efficient, and opportunity-rich market, attracting traders from around the world. Whether seeking stable returns or aiming for high-risk, high-reward opportunities, investors can find suitable prospects in the forex market.

  Basic Knowledge of Forex Trading

In the forex market, the core trading format is the “currency pair.” A currency pair represents the value relationship between two currencies, such as EUR/USD (Euro/US Dollar) or GBP/USD (British Pound/US Dollar). These combinations reflect the exchange rate fluctuations between the base currency and the quote currency, forming the foundation of all transactions in the forex market.

基礎貨幣 → Base Currency 報價貨幣 → Quote Currency

In a currency pair, the currency on the left is called the base currency, while the currency on the right is called the quote currency. For example, in the EUR/USD (Euro/US Dollar) pair, a quote of 1.35361 means that one euro can be exchanged for 1.35361 US dollars. If the euro appreciates, the quote for this currency pair will rise; if the US dollar appreciates, the quote will fall.

The uniqueness of the forex market lies in the fact that investors are simultaneously buying one currency while selling another. Therefore, the price fluctuation of a currency pair represents the relative changes in the economies, policies, and market conditions of the two countries involved. This relative trading mechanism is not only the core operational principle of the forex market but also provides investors with diverse trading opportunities.

Currency pairs are generally classified into three types:

Overall, currency pair trading is the core of the forex market. Investors analyze exchange rate fluctuations to achieve capital appreciation and risk management. A deep understanding of currency pair characteristics is a fundamental requirement for successful forex market participation.

In the forex market, spread and leverage are two important concepts that traders must understand in depth, as they relate to transaction costs and capital efficiency. These concepts directly impact traders’ strategies and are closely linked to potential returns and risk management.

Spread refers to the difference between the buying price (Ask) and the selling price (Bid), reflecting the cost traders need to pay when entering the market. In the forex market, spread is one of the primary revenue sources for brokers.

Spread Calculation Method: For example, if the buying price of GBP/USD (British Pound/US Dollar) is 1.3065 and the selling price is 1.3063, the difference between the two is 0.0002, which equals 2 pips.

Impact of Spread: The smaller the spread, the lower the transaction cost, which is particularly beneficial for short-term traders. Conversely, a larger spread increases transaction costs and has a greater impact on trading outcomes. For example, when going long on GBP/USD, you can only make a profit if the market price rises above the buying price plus the spread. Similarly, when going short, the price must fall below the selling price minus the spread to generate a profit.

The spread in the forex market is usually influenced by market liquidity and the currency pair being traded. Major currency pairs (such as EUR/USD) typically have lower spreads due to their high liquidity, while exotic currency pairs tend to have wider spreads.

Leverage is a key feature of the forex market that allows investors to control larger trade sizes with a smaller amount of capital, achieving the effect of amplifying returns. However, while leverage increases profit potential, it also raises risks, so it must be used with caution.

How Leverage Works: If a broker offers 20:1 leverage, this means that an investor can control 20 units of capital with just 1 unit of their own funds. For example, if an investor wants to buy 40,000 units of EUR/USD (Euro/US Dollar), they only need to deposit 2,000 euros as margin to open the position.

2000歐元保證金 → €2,000 Margin

20倍槓桿 → 20x Leverage

進行4萬歐元投資 → €40,000 Investment

Impact of Leverage: Leverage can significantly improve capital efficiency but also increases potential losses. Therefore, investors must implement strict risk management strategies when using leverage to prevent capital losses caused by market fluctuations.

Leverage and spread are among the core mechanisms of the forex market. For investors, understanding and flexibly applying these two concepts can not only effectively reduce trading costs but also enhance capital efficiency, leading to better trading outcomes. However, investors should always be mindful of balancing returns and risks to ensure the safety of their funds.

In the forex market, choosing the right trading method is the foundation for developing an effective investment strategy. Different trading methods are suitable for different types of investors. Whether you are a beginner or an experienced trader, you need to select an appropriate approach based on your risk tolerance and capital size.

The following section introduces four major forex trading methods to help you gain a deeper understanding of their characteristics, advantages, and application scenarios.

外匯交易方式有哪些？ → What are the forex trading methods?

外匯交易者 → Forex Trader

現貨外匯 → Spot Forex

遠期外匯 → Forward Forex

期貨外匯 → Futures Forex

外匯保證金交易 → Forex Margin Trading

Spot Forex, also known as immediate forex, is one of the most fundamental trading methods, where investors directly buy or sell foreign currency cash or deposits through banks or other financial institutions.

Example: If you expect the US dollar to appreciate, you can use New Taiwan dollars to buy US dollars and exchange them back into New Taiwan dollars after the exchange rate rises to earn a profit from the rate difference. This approach usually requires referring to the spot exchange rate or cash exchange rate provided by banks.

Forward Forex is a trading method where two parties agree on a specific exchange rate and settlement date for a future transaction, commonly used for hedging exchange rate risks. This type of transaction is particularly suitable for import/export companies or investors planning large capital allocations.

Application Scenario: If a company expects to pay $500,000 for imported goods in three months, it can use forward forex trading to lock in the current exchange rate, preventing cost increases due to exchange rate appreciation.

Forward forex transactions are further categorized into:

Forex Futures is a standardized contract traded on a futures exchange, specifying the settlement date, contract amount, and exchange rate. Compared to forward forex, forex futures offer higher liquidity and transparency, making them suitable for investors with market experience.

Trading Example: If you anticipate the Euro will appreciate in the future, you can buy Euro futures and sell them after the price increases to earn a profit from the price difference.

Forex Margin Trading is a trading method that utilizes leverage to amplify capital operations, allowing investors to control large amounts of capital with a small margin deposit. This approach offers high flexibility, but both risk and profit potential are amplified.

Example: If a trading platform offers 200:1 leverage, you only need to deposit $200 as margin to trade up to $40,000. However, market movements against your position can quickly lead to capital losses, making risk management crucial.

The forex market is the largest financial market in the world, with participants ranging from various organizations to individual traders of different scales and types. Each category of participants plays a unique role in the market and has distinct objectives, collectively forming the structure of forex market operations. Their actions not only impact market liquidity but also directly or indirectly influence exchange rate movements.

The following section introduces the key participants in the forex market and their functions.

The forex market is the largest financial market in the world, involving participants of different scales and types. Each category of participants plays a unique role and serves different purposes, collectively forming the structure of forex market operations. Their actions influence market liquidity and directly or indirectly affect exchange rate trends. The following section introduces the major participants in the forex market and their functions.

Central banks and government institutions are the most influential participants in the forex market. They are responsible for implementing monetary policies and stabilizing exchange rate fluctuations.

Central banks control inflation and economic growth by adjusting interest rates and other monetary tools. For example, increasing interest rates can attract foreign capital inflows, leading to domestic currency appreciation. Conversely, lowering interest rates can devalue the currency to stimulate exports and economic growth.

When exchange rates fluctuate excessively, central banks may directly buy or sell foreign exchange to stabilize the national currency. For instance, in 2015, the Swiss National Bank (SNB) removed the exchange rate cap on the Swiss franc against the euro, causing a sharp appreciation of the franc, which became a significant event in the forex market.

Commercial banks and investment banks are among the core participants in the forex market, providing liquidity and executing large-scale transactions.

Commercial banks handle currency settlement needs for enterprises engaged in international trade, ensuring the smooth flow of capital across different countries.

As market makers, commercial banks provide both buy and sell quotes in the market, helping maintain market stability.

Many investment banks have professional forex trading teams that engage in high-frequency or strategic speculative trading, profiting from exchange rate fluctuations.

Hedge funds and other large institutional investors are often regarded as “major players” in the forex market. These participants execute high-risk, high-reward investment strategies based on global economic trends and technical analysis.

With substantial capital and highly active trading styles, hedge funds can cause significant short-term fluctuations in exchange rates.

They often use strategies such as arbitrage, hedging, and speculation to navigate market volatility. For example, when predicting economic growth in a specific country, they may increase long positions in that country’s currency.

Advancements in technology have made it easier for individual investors to participate in the forex market. While retail traders conduct smaller transactions per trade, their large numbers make them an essential part of the forex market.

Forex brokers offer leveraged trading and user-friendly trading platforms (such as MetaTrader), enabling retail traders to enter the market with small amounts of capital.

Brokers serve as intermediaries, connecting retail traders with the interbank market. Their primary role is to provide market quotes and trading tools.

Forex brokers route retail traders’ orders into the interbank market, ensuring smooth execution of trades.

Popular trading platforms such as MetaTrader and cTrader provide traders with:

The forex market, as the most liquid financial market globally, attracts countless investors. However, for beginners entering the forex market, understanding how to start trading is crucial. From opening an account to developing a trading strategy, every step requires careful preparation. Below are three key steps to help you enter the forex market steadily.

The first step in starting forex trading is to open a forex account. This serves as the foundation for all trading activities, as only through a forex account can you participate in currency buying and selling.

To apply for a forex trading account, the basic required documents include:

Once you have gathered these documents, you can choose to open an account through a physical bank or via an online forex broker platform. During the application process, it is recommended to select a regulated and reputable broker, as this not only ensures fund security but also provides professional trading support.

After completing the account setup, you will receive login credentials for a forex trading platform, officially stepping into the world of forex trading.

The forex market is highly volatile, with numerous factors influencing currency prices. Therefore, learning market analysis is essential before trading.

Forex market analysis mainly falls into two categories:

Regardless of the analysis method you choose, continuous learning and practice are necessary. It is recommended to start with free online resources (such as blogs and tutorial videos) to gradually familiarize yourself with the forex market’s mechanics. If you wish to gain a more structured understanding, enrolling in professional forex training courses can significantly enhance your investment skills and market judgment.

After acquiring basic knowledge, the next step is to apply it in practice. A well-defined trading strategy helps you remain rational in the forex market and avoid impulsive decisions.

At the early stages of trading, it is advisable to practice with a demo account to familiarize yourself with the trading platform and its functions. Additionally, always adhere to your trading plan and avoid making impulsive decisions influenced by emotions.

In the forex market, margin trading is a highly popular method, especially in Contract for Difference (CFD) trading. Due to its low capital requirements and flexible operation, margin trading attracts a large number of traders. Through margin trading, investors can find profit opportunities whether the market rises or falls, thereby maximizing capital efficiency.

Additionally, modern forex trading platforms have streamlined account opening procedures, with most platforms supporting online applications, enabling traders to start trading within minutes and quickly enter the forex market.

However, selecting a reliable and regulated forex margin CFD trading platform is crucial to ensuring fund security and fair trading conditions. Forex trading is strictly regulated worldwide, with oversight provided by authoritative regulatory bodies to offer investors legal and financial protection.

Below are some globally recognized forex regulatory agencies:

Choosing a trading platform regulated by these authoritative bodies can significantly reduce investment risks while ensuring a transparent and fair trading environment. For beginners in forex investment, this is a crucial step in establishing a safe trading foundation.

Globally renowned forex trading platforms include Ultima Markets, Vantage, IC Markets, and Exness.

The author personally uses Ultima Markets for trading and is therefore most familiar with it. Below is an introduction to Ultima Markets.

Ultima Markets is a forex trading platform under Viapac Group, a well-known Australian real estate company. It is regulated by CySEC (Cyprus Securities and Exchange Commission), ASIC (Australian Securities and Investments Commission), and FSC (Mauritius Financial Services Commission).

The platform allows trading in over 60 forex currency pairs, as well as gold, silver, US stocks, stock indices, and cryptocurrencies.

If you are not yet ready to trade with real funds, demo trading is an excellent option. Ultima Markets offers a free demo account that simulates real market conditions, allowing you to practice trading without using actual funds or taking on real financial risks.

With a demo account, you can:

Through demo trading, you can develop an understanding of market dynamics, improve your sensitivity to market fluctuations, and establish a solid foundation for future real trading.

In the forex market, investors face both high-return opportunities and potential risks. As the world’s largest financial market, it attracts various investors, but its high liquidity, 24-hour trading cycle, and dynamic environment make risk management a crucial factor for success. Below, we will explore the sources of forex market risks, strategies for risk management, and how to seize opportunities while tackling challenges.

The main risks in the forex market stem from market volatility, high leverage, economic and political uncertainty, and broker credit risks. Here is a detailed analysis of these risks:

The forex market is known for its high volatility, with exchange rates fluctuating due to currency supply and demand, economic data releases, and geopolitical events. These fluctuations can be sudden and substantial. For example, a sudden economic data release or a central bank policy change may cause rapid price swings, increasing trading risks.

Leverage is a major attraction for forex traders, but it is also a potential risk. While leverage amplifies profits, it also magnifies losses, particularly when the market moves against a trader’s expectations.

Geopolitical events, election outcomes, and central bank policy changes can significantly impact forex markets. For example, when a new president takes office in 2025, market expectations for that country’s future monetary policies may directly influence its currency exchange rate.

Choosing an unregulated broker can lead to fund security issues, including potential fraud or withdrawal difficulties.

Despite the challenges, the forex market presents numerous opportunities that make it appealing to investors.

With a daily trading volume exceeding $7 trillion, the forex market is one of the most liquid markets in the world. Investors can execute trades at almost any time, ensuring quick order execution and smooth capital entry and exit.

Unlike traditional markets, forex trading allows investors to profit in both bullish and bearish conditions by going long (buying) or short (selling). This flexibility makes forex trading highly attractive.

The forex market is not limited to currency pairs; it also includes gold, crude oil, stock indices, and other Contracts for Difference (CFDs), catering to investors with different risk preferences and trading styles.

With abundant historical data, forex traders can apply technical analysis tools (such as trend lines, MACD, RSI indicators) alongside fundamental analysis to identify ideal entry and exit points.

For major currency pairs (e.g., EUR/USD, GBP/USD, which are typically quoted to four decimal places):

Pip Value=1Exchange Rate×100,000\text{Pip Value} = \frac{1}{\text{Exchange Rate}} \times 100,000Pip Value=Exchange Rate1×100,000

If EUR/USD is trading at 1.1000, the calculation would be:

11.1000×100,000=90.91 USD\frac{1}{1.1000} \times 100,000 = 90.91 \text{ USD}1.10001×100,000=90.91 USD

This means a 1 pip movement in EUR/USD results in a gain or loss of $90.91 per standard lot.

For JPY currency pairs (e.g., USD/JPY), which are quoted to two decimal places, 1 pip equals 0.01.

For 1 standard lot (100,000 units) of USD/JPY at an exchange rate of 110.00:

1110.00×100,000=9.09 USD\frac{1}{110.00} \times 100,000 = 9.09 \text{ USD}110.001×100,000=9.09 USD

Thus, a 1 pip movement in USD/JPY affects $9.09 per standard lot.

In forex trading:

If EUR/USD is quoted as:

Then:

The spread is 2 pips (1.1002–1.1000).

A high foreign exchange reserve is not always beneficial — its impact depends on multiple factors:

Conclusion: The ideal scenario is to maintain sufficient forex reserves for stability while ensuring capital is efficiently utilized.

In Taiwan, forex trading profits are taxable, with tax treatment depending on the nature of the income:

Recommendation: Consult a tax professional to ensure compliance with tax regulations.