One of the key features of the forex market is the high volatility combined with liquidity. Both these features of international currency pairs have made it the most popular asset class among global traders. Thus, the forex market is considered the world’s largest and most lucrative trading market. Still, all forex traders will agree that trading in the fast-moving currency market is a challenging venture. That’s why every trader in the forex market needs to gather some powerful tools that can help them explore the market with ease.
Today, we will be learning about popular forex trading tools and how you can use them to your advantage to optimise your trading process.
What Are Forex Trading Tools?
As you may already know, forex trading can be complex for beginners and experienced traders. Attempting to predict the price movements that are about to take place and placing trades with profit potential is a challenge for a newbie. Experienced traders also come across many hurdles and issues on a daily basis. Hence, traders of all levels will require some tools that can simplify the trading process to some extent, taking them closer to profitability and success.
For forex traders, these tools will come in handy in analysing the market, identifying the right trade setups, planning trades, performing trade-related calculations and also playing a role in the perfect execution of trades. In short, the forex trading tools can be referred to as an inseparable and integral part of the trading process. With the proper tools, even the most skilled trader can succeed in the market and using the right tools can transform a beginner into a skilled trader over time.
Top Forex Trading Tools
1. Forex Trading Platform
The first tool in our list is a forex trading platform, which you can afford to ignore if you want to get into trading. You need fully functional trading software to access the forex market and place trades. This is the most basic but also an essential forex tool that needs to be there in your trader’s toolkit. When you sign up for a trading account with a Forex broker, you will see the trading platforms they support.
The most popular and commonly used trading platforms are MT4 and MT5. Some top brokers also offer other platforms like cTrader and ActTrader. You just need to check the features, tools and functionality offered by each of these platforms in order to choose the best one for yourself after considering your own requirements.
2. Charting Tools
Most forex trading platforms come with in-built charting tools that can be customised based on your needs and preferences. Price charts are one of the most important tools forex traders use for technical analysis of the market situation. The most popular chart type in forex is Japanese candlestick charts, as they are the most detailed and comprehensive when it comes to trading. You can also find many good charting software if you want to use more advanced charts in trading.
3. Forex Trading Calculators
Planning and executing your trades with perfection would only be possible in the absence of logical calculations. Forex trading calculators are automated tools that can help you perform trade-related calculations faster and more accurately. There are different types of trading calculators for performing various functions. Let’s have a look at some of the most commonly used online forex calculators that are offered by many forex brokers and trading platforms and can be used free of cost by anyone.
- Pip calculators – Pip calculators are used for calculating the pip value, the unit of measurement for currency price movements. For this, you need to enter details like the currency pair you are trading with, the base currency of your account and trade size in lots. Then the pip calculator will instantly return the results in your account’s base currency.
- Position size calculator – Proper position sizing is crucial to profitable trading. Hence, a position size calculator can be useful for anyone who finds it hard to manually determine the optimal position size for their trades. You need to specify the percentage of risk you are willing to take, account balance before placing the trade along with the entry price and stop loss levels of the trade. After this, the calculator will tell you the best position size for the trade considering your risk tolerance level. So, a position size calculator is not just a calculator but also a tool for risk management.
- Profit calculators- Calculating profits and losses are integral to the trading process. But a trader needs to calculate the potential profits and losses of trade in advance to manage the risk and attain the best possible results. A profit calculator can be used for the same as you just need to enter the type of position opened, prices at which you will be opening and closing the trade, lot size and base currency of your account. Then the profit calculator can tell you a trade’s possible profits/losses even before you place the trade.
4. Economic Calendars
Economic calendars are a must-have tool for fundamental analysis of the forex market. This tool contains all the information and updates regarding key economic data releases, central bank meetings and more which can impact the exchange rates of currencies you trade with. Hence, every forex trader should use this tool to stay up to date with economic changes.
What To Look For When Choosing A Forex Trading Tool?
- Cost-effectiveness – Forex trading is a costly venture on its own, and you might want to spend less money using the trading tools as that adds more to the total trading cost. So, you need to find free or affordable tools that are cost-effective in nature.
- Dependable- Make sure the tools you choose for trading are dependable and trustworthy. Faulty tools can affect your progress as a trader, and you cannot compromise the functionality of the tools that become a part of your day-to-day trading process. Find tools you can use for a very long time, as success should be sustainable for reaching your goals as a trader.
To sum it up, forex trading tools are not just mere tools but serve as stepping stones to success in the forex market. Because each and every trader will have to use these tools for upgrading their trading skills and climbing to the top, you just need to find the right set of tools that can assist you in the process, as these tools play a key role in your trading journey.