If you embark on a trading career, it becomes important for you to familiarise yourself with some essential tools. Trading tools are incredibly valuable, particularly when starting your trading career, regardless of the financial instruments you decide to trade. These tools can provide valuable insights and support to enhance your trading experience. Therefore, in this article, we’ll introduce you to various forex tools to kickstart your trading journey and how they can assist you in your trading endeavours.
The Best Forex Trading Tools:
Trading Platforms: A trading platform is like an online marketplace where you can buy and sell different financial assets. It gives you access to various tools and features, including real-time quotes, trading calculators, news updates, and charts to help you decide which position to take and when to enter or exit a trade. There are two main types of trading platforms – Proprietary trading platforms and Commercial trading platforms. Large brokerage firms design proprietary trading platforms to match their specific trading style. Commercial trading platforms, on the other hand, target retail investors and day traders. They are user-friendly and offer helpful features like charts and news feeds to assist investors in their research.
Charting Software: Forex charting software is a computer program that helps currency traders analyse foreign exchange markets. It uses interactive price charts and technical indicators to provide insights into currency pair movements. Forex charting software presents information visually through different charts, such as bar charts, line charts, and candlestick charts. These charts show the historical prices of currency pairs and can include additional data for technical analysis. This data helps traders identify the best currency pairs, timeframes, and trade entry and exit points. Many forex brokers offer charting software to their traders, either for free or through a subscription service. Choosing the right charting software depends on a trader’s needs and experience level.
Financial News Platforms: Financial news platforms are online sources that provide up-to-date news about the financial markets and the global economy. These platforms deliver news related to different financial assets and data that may impact those assets. They aim to inform participants about market trends, economic developments, policy changes, and financial events that may impact investments and financial decision-making. Financial news platforms can be accessed through websites, mobile applications, television channels, and specialised news services, offering a wide range of news articles, market data, charts, expert opinions, interviews, and commentary from financial experts and analysts.
Copy Trading Service: Copy trading is an innovative approach to trading the financial markets, and traders can access this feature on classic MT4 or its advanced version, i.e., MT5 trading platforms. It involves automatically copying the trades of other successful traders. The key players involved in copy trading are Providers (whose trades are being copied) and Copier (who copy or follow the trades of the providers). In copy trading, traders search for successful providers with a reliable trading history and copy their trades. It’s similar to mirror trading, where one can copy the trading techniques of another investor. Copy trading mainly focuses on short-term trading styles like swing and day trading. It covers various assets, including the forex, stock, and other volatile markets. It allows traders to connect a portion of their portfolio with others, automatically copying future actions and open trades. This provides a way to diversify a trading portfolio and reduce exposure to a single asset.
Time Zone Converter: The forex market operates 24 hours daily from Monday to Friday, allowing traders to trade anytime. Understanding the market’s operating hours is crucial for traders. It’s important to know when the market opens and closes and be aware of the four main trading sessions.
The forex market comprises 4 major trading sessions: Sydney, Tokyo, London, and New York. Most market activity occurs when one or more sessions overlap and are open simultaneously. These times are usually the most active. Consider these overlapping periods when planning your trading activities.
The Forex Market Time Zone Converter helps you see which trading session(s) are currently open in your local time. The best time to trade is when the market is active and many traders are opening and closing positions, leading to a high volume of trades.
Economic Calendar: Economic calendars are useful tools for scheduled releases of important economic reports in a specific country. These calendars include events such as reports on new home statistics, changes in interest rates, updates from banks, economic surveys, or financial events. Traders often time their positions based on specific events or high trading volumes preceding scheduled announcements. This strategy allows them to align their trades with the announcement’s impact on the market. For example, suppose a trader anticipates a positive announcement. In that case, they may open a position just before the scheduled event and close it within a few hours after the announcement, taking advantage of potential price movements.
Trade Journal: A trading journal is used by traders to record their trades. It helps them reflect on their past trades and evaluate their performance. Creating a trading journal is simple and can be customised based on individual trading goals and style. Traders can choose between a physical notebook or a digital spreadsheet, where the latter is recommended if you want to organise and analyse your data easily. The journal should include important information such as the date of the trade, underlying asset, position size, entry and exit prices, stop-loss and take-profit levels, and any other relevant details. Periodically reviewing the journal, whether daily, weekly, or monthly is really helpful in making trading-related decisions.
Currency Correlation Matrix: Currency correlation refers to the relationship between two different currency pairs, which can be positive or negative. Two currencies are positively correlated when they move in the same direction and negatively correlated when moving in opposite directions.
Understanding currency correlations can be beneficial in multiple ways. If you notice a positive correlation between two currency pairs, it means that they tend to move together. This presents an opportunity to increase your potential profit by opening additional positions in line with the correlation. On the other hand, if you observe a negative correlation, it suggests that the two currency pairs move in opposite directions. This can be advantageous for hedging purposes, as you can open a position to offset potential risks if the market becomes more volatile.
Forex Volatility Indicator: Forex volatility indicates how much the price of a currency pair fluctuates. As such, Volatility indicators in forex help traders identify periods of high or low volatility. Not only that, but traders can also find out whether a currency pair is experiencing rapid or stable price changes within a specific period. Volatility indicators also help identify potential market reversals. When an uptrend shows signs of reversing, traders can consider placing short orders to benefit from the downward movement. Conversely, traders can place long orders to capitalise on the upward movement if a downtrend signals a possible reversal.
Trading Signals Apps: Forex signals apps offer detailed price information, economic and political news updates, and sentiment analysis from fellow traders. With custom alerts and insightful trader commentary, traders can access all the necessary information from a single source. The popularity of free Forex signals apps is on the rise as more traders recognise their benefits. They provide a convenient and accessible platform to access valuable information, making it easier for traders to stay informed.
Forex Trading Simulators: A Forex market simulator is a software tool that creates a virtual environment mimicking real market conditions. It enables traders to practise trading strategies using virtual money before engaging in live trading. The risk-free demo account, offered by your broker or trading platforms like MT4 and MT5, allows traders to trade without losing real money. It includes all trading features and functions, such as order types, charting tools, and technical indicators, providing a comprehensive trading experience. Traders can test and refine any forex strategy in the simulator to evaluate its performance under different market conditions.
Final Thoughts
Trading can be profitable, but it’s important to recognise its complexity. To make it big in the forex market, you should deeply understand the various tools available. Since there is a wide range of options, you should take your time to carefully evaluate each of them and weigh the advantages and disadvantages. Doing so lets you select the tool that best aligns with your trading goals and strategies. Remember, thorough research and careful consideration will help you make the right choice.
