Developing any skill would become a lot easier when you learn to use the tools that can enhance the skill that you are trying to master. Forex trading is also a skill that takes time and effort for an average beginner to get a grasp of. You can start by understanding the basic trading concepts and theories which can be easily found in books written by experts. Once you gather some surface level knowledge you can dig into the technical aspects of trading in the volatile forex market. This involves the proper usage of forex trading tools that makes forex trading easier for us. This beginner’s guide will give you a clear understanding of the most important forex trading tools that you should learn to use for a better trading experience.
What are Forex Trading Tools?
Forex trading tools include various tools used for fundamental and technical analysis of the market as well as advanced social trader tools. The forex risk management calculator is also a part of the trader’s toolkit. Beginners need to spend some time in order to learn about each of these tools and the role they play in trading. Let’s have a look at top forex tools for traders which are essential. The choice of these tools will also have a role in the overall trading experience.
1. Forex Trading Platform
The first and foremost thing a forex trader needs is a fully functional and feature-rich trading platform. Some examples would be platforms like MT4 and MT5 which are chosen by millions of traders all over the world. A trader also needs a demo/ live trading account with a forex broker to access the forex market and place trades. Demo trading accounts are just for practice without risking real money and live accounts are used for actual trading. Most brokers will provide a choice of supported trading platforms and you can start trading by joining any of these platforms.
2. Charting Software
Charts function as an essential forex trading tool as they will depict a clear picture of the market situation. The price data presented in visual format with the help of charts help traders to make quick trading decisions by analysing them. Chart reading is a skill that a trader needs to develop for analysing the price charts properly. Trading platforms like MT4 and MT5 also function as charting software by providing different types of charts with customisation options to users. You can also choose to download other charting softwares based on your preference. Candlestick charts are most commonly used charts among forex traders. Read More
3. Economic Calendar
An economic calendar can be found as a part of the trading tools offered by brokers on their platform. Central bank meetings, GDP, inflation rates and employment rate news releases always have an effect on currency prices. And an economic calendar will update you about such important economic events that can add up to the volatility in the forex market. This will help you to plan your trades well and hence it serves as a useful forex trading tool.
4. Forex Risk Management Calculator
Most brokers will provide you a number of different trading calculators as a part of forex tools on their platform. These calculators will perform many simple to complex calculations instantly and accurately. This includes conversion rate calculators, pip calculators, profit/loss calculators, margin calculators and most importantly a position size calculator. This position size calculator is often referred to as a forex risk management calculator, because optimal position sizing is the key to risk management in forex trading.
Doing any of these calculations manually can be a time consuming task for any trader even if they are experienced enough. On the other hand novice traders surely need some help with these calculations while trading. In short, trading calculators are there to give you accurate results with minimal effort. All you have to do here is enter correct values to the calculator and enter trades based on the results returned by the forex calculator.
Which Are the Popular Trading Tools Used in Forex Trading?
The tools we mentioned above are an inseparable part of forex trading. One cannot simply trade in the absence of a trading platform. In the absence of other trading tools such as forex risk management calculator, economic calendar and charting tools, traders wll struggle a lot and won’t be able to make trading decisions as quickly as they are supposed to. But there are also some other popular trading tools which are not found in every trading platform but are used by many traders. They are designed to make trading more easy and convenient for each and every trader irrespective of their level of knowledge.
Technical indicators are one of the best forex trading tools to help you with technical analysis. They help you to make better trading decisions about entry prices, exit prices and more. Using the correct combination of leading and lagging indicators will be useful to spot the ideal trade setup for your strategy with ease. Indicators like moving averages, RSI and volatility indicators are used by the majority of forex traders. But you should not enter a trade by blindly trusting an indicator. You can use them to a certain extent but do not rely on them completely. Many traders are totally against the use of indicators and they prefer to watch naked charts instead for a better analysis. You can just see which approach works best for you as you move forward.
Social Trader Tools
Social trader tools are found in trading platforms that have social trading or copy trading features. Social trader tools make it possible for people to get the benefits of trading without trading themselves. They can just choose an expert trader to copy and as soon as they follow this trader their trade positions will get copied to their account. Copy trading has been becoming more and more popular over the years as it allows beginners to explore the forex space mirroring the actions of another trader with a profitable trading system.
Some more forex trading tools that are optional but can be added to your trader’s toolkit includes
- Time zone convertor
- Online Trading journal
- Currency correlation Matrix
Things to Consider While Selecting Forex Trading Tools
1. User Friendliness
This mainly applies to the trading platforms and charting tools. Make sure they are fully functional and user friendly. Also check if the platform is suitable for executing your trading plan or strategy perfectly. Always check their demo accounts before you sign up for live trading with any broker.
2. Speed and Accuracy
Make sure the tools you choose are working well in terms of speed and accuracy. A forex trading tool being slow or inaccurate can cause a major deviation in your trading results. So, make sure you are choosing the best forex trading tools.
Not all forex trading tools are free. There are many trading tools that need to be purchased by paying a price. When you avail such tools make sure they are worth the money that you are spending for them. Try to find low-cost brokers and trading platforms, so that you can save on trading costs in terms of spreads and commission.
Best Trading Tools for Beginner Traders
One of the best trading tools for beginner traders is a demo account itself. A forex demo account is an exact replica of a real trading account minus the risk. You get to learn trading with real time market conditions and you get to see and experience the price movements that happen in real. This can be a perfect tool for learning as a beginner. You can also use a demo account for testing your strategy and improve it further based on the results.
Forex trading tools are more like a guide and assistant for a trader. Some of them must have tools while some of them are optional. In order to find the forex tools which need to be added to your kit, you will have to work on your trading plan first. Afterwards you can decide on the trading tools that are important for moving forward with your strategy. Learning to use these forex trading tools is also a skill that you need to develop for becoming a successful forex trader.