There are many ways to increase the size of your savings. This can be done through short-term rental, investing in listed companies, real estate trading or investing in the Forex market. The Forex market is a phrase that is quoted relatively often by investors, businessmen, and economists.

Get to know the market, or what is Forex?

The Forex market is a decentralised system which operates outside of a regulated exchange. Transactions are carried out from Monday to Friday only between currency dealers from all over the world with the use of modern communication devices such as phones, tablets, computers or fax machines. Currencies are traded in bulk across the world – from Australia to Japan, China, the Middle East, Europe and the West Coast of the United States. However, it is worth remembering that the Forex market does not operate on weekends and during national holidays.

How to play Forex?

And how to play Forex? The answer is simple – with caution. Many beginner investors do not understand the rules of the market and therefore lose all their capital in a short time. Therefore, it is important to be suitably prepared to trade your funds in this market, by trading only in virtual money at the start.

It is recommended to start investing by playing with virtual money, which is available for every beginner investor. Any future investor should learn about Forex mechanisms, instruments and trading strategies. The next stage is knowledge acquisition and system trading. This requires patience and self-discipline. The third stage is generating profits on your virtual account. Only after that, can you move on to the next phase, which is investing your own resources in global currencies.

Traders can base their investment strategy on either conservative or aggressive actions. In the case of conservative investors, the level of risk is relatively low, but the real returns to be generated by the investor are also lower. In the case of an aggressive strategy, the investor bears a risk even several times higher than the potential profit he can make on a given Forex investment.

How to invest in the Forex market?

When investing in the Forex market, it is worth making informed decisions. Each placement of cash should be preceded by a specific profit and loss account for the transaction. A good investor understands the mechanisms governing the market. It’s an enormous machine, which is influenced by dozens of factors. Therefore, you have to be patient with the market mechanisms.

At the start of your Forex journey, it is wise to invest relatively small amounts in order to avoid significant losses in case of wrong decisions. However, it is a mistake to stick to low amounts all the time, because then the trader will never gain the experience needed to invest successfully. It is, therefore, worth controlling the risk of investments and not investing large amounts of money too hastily. The best market players believe that the loss should not exceed 2-3 percent of the capital.

How to set prices on Forex?

For each currency, it is possible to calculate the PIP value, the so-called measure of the accuracy of a given currency’s quotation. In other words, PIP is the smallest value by which the price of a currency can change. It is assumed to be 0.0001 of the currency. For example, the euro exchange rate may change from 4.11452 to 4.11453 or 4.11451. This is the quotient of the part of the currency and its current exchange rate.

How do you read the Forex charts?

There are different ways of reading Forex currency charts. The first method is Price Action. It concerns the analysis of past events that may happen again in the future. This method makes it relatively easy to interpret candlestick charts. Candlestick charts should be read as follows (depending on the graphic elements visible):

  • candles with a long shadow mean that uncertainty is increasing within a particular investment,
  • candles with a long shadow and a short body indicate the increasing strength of a particular investment,
  • a long supply candle suggests that the instrument under analysis was sold by many investors within a given unit of time, but finding buyers for it was difficult,
  • a long supply candle in an upward trend suggests that there was only a temporary increase in profits from an instrument which previously brought limited income.

How to determine the support and resistance levels on the Forex market?

The analysis of the situation on the Forex market often requires proper interpretation of the level of support and resistance for a given instrument on the aforementioned market. The level of support and resistance is a situation in which the supply and demand for a given instrument are in balance. In other words:

  • the level of resistance is a situation in which the price level, the exchange rate of a given currency pair no longer increases, and the trend is downward,
  • the level of support is a situation in which the current exchange rate of the currency pair ceases to fall further, and the opposite trend (an increase) is identified.

The resistance is a price level where the exchange rate of the currency pair stops rising and begins a downward trend. The support is a price level where the exchange rate of the currency pair stops falling and begins an upward trend.

The longer the period during which the price level constitutes resistance or support, the greater its importance. For example, the trend over recent days is more significant than the line drawn by the trend from several hours.

How to read the trend lines on Forex?

It is an art which gives the best players on Forex an opportunity to be on top and multiply their capital. The trend line contains information about the rebound whose trend tends to continue, and the breakthrough, i.e. the trend shows signs of weakness while profits increase. Depending on the situation, the trend line contains information about a purchase or sale as the best solution for the investor.

Being a valued Forex trader requires experience and expertise. Intuition, composure and a risk-taking nature are also important. The answer to the questions on how to invest in Forex and how to read the Forex charts lies in the expectations, financial means and the professional knowledge of the investor. There is no perfect way to play Forex to get the most out of it. All you have to do is be prudent and be able to make sensible decisions preceded by appropriate analyses.