The forex market is the biggest market in the world and by virtue of this vast size it can be utterly confusing.
To help traders realize profits, there are many essential tools to aid them easily analyze the market and predict market trends.
The forex trading tools discussed in this article are in my opinion ten of the most essential tools best for beginners and experienced traders.
- Trading Platform
The primary tool that allows traders to make safe and timely transactions is the trading platform. If you want to trade currency online then this is only possible by using a broker’s trading platform.
When choosing your forex trading platform, choose one that is run by a reputable broker over a secure network. Choose one that guarantees the safety of your trading transactions and is free from hackers.
Be extra diligent by doing background checks on the brokers and ensure that they are duly registered and are under a reputable regulatory authority.
Here is a review of some of the best brokers in the industry: https://www.forextradingbig.com/category/brokers/
- Demo Account
One of the best tools for a forex trader is a free demo or practice account. You can never be too good for a demo account and neither can you ever overuse it.
A demo account enables forex traders to familiarize themselves with the basic knowledge about trading and tricks to enhance one’s profitability.
A forex market demo account simulates the live market in real time and therefore prepares one on how to react to all sorts of market forces and situations.
- Forex Chart
The forex market is basically a place to trade on the price fluctuations of many different currencies. Therefore, a successful trader has to have ways to monitor currency price changes and analyze price trends.
Forex price charts are the primary tools for aiding forex traders monitor and analyze price movements and make trade decisions.
Forex charts are some of the very first tools every trader should know how to read and interpret from the very beginning of their trading life.
Check this article to learn more on forex charts: Types of charts in forex trading.
- Forex Trading Signals
Forex trading signals are some of the most essential tools required by a forex trader. They help traders make profitable entry and exit decisions by pinpointing the best times to buy or sell currency pairs.
More experienced traders can usually create their own signals using their own indicators derived from their technical analysis.
However, there are many merchants who will sell you some quality signals and any trader can benefit from their professional expertise.
- Stop Loss Orders
To be a successful trader in the fx market, you need to safeguard your capital investment.
There will be many occasions when your price movement predictions will be wrong and you do not want those moments to result in losses that are too high for you to manage.
To keep your losses reasonable and manageable, you need to decide your level of risk.
Most professional traders, brokers, and consultants will advise limiting your risks to a maximum of 2% of the total forex capital on any single trade.
Therefore, a trader should put stop orders to match the set risk limit.
- Take Profit Orders
It is usually very heartbreaking and discouraging to be in a profitable position at one moment, only to come back and find your profits have either been reduced or even entirely lost in a price reversal.
A take profit order locks in earned profits, protecting them from getting lost in case of a price reversal.
Take profit orders are very essential tools that any shrewd investor should use to ensure s/he always protects the gains made from each trade.
- Rate History Calculator
Every trader needs historical data showing the exchange rates of his/her chosen currency pair.
This helps the trader determine how price action is likely to behave during particular time frames.
A rate history calculator is just the tool to help a trader analyze historical price movements and predict future price behaviors.
- Pip Value Calculator
Pip values are not easy to calculate. They give different values for different currency pairs and that can get confusing for even the best mathematically-endowed traders.
To help you analyze risk levels and expected profits, a pip value calculator comes in very handy as an essential tool for any currency trader.
- Pivot Point Calculator
By utilizing current period’s close values, high values, and low values, a pivot point calculator calculates the resistance and support levels of up to four currency pairs at a time.
By choosing your desired formula, you can get results for either the pivot points, mid points, support levels, or resistance levels.
The pivot point calculator is especially useful for traders trading on high volumes and high liquidity levels.
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- Social Network
One of the most recent phenomena in fx trading is the appearance of social networks based on forex trading. In such networks, traders come together to share ideas and support each other.
As a tool, social trading has helped many newbies realize great profits by simply copying the actions of more seasoned, more knowledgeable traders.
Apart from following the more successful traders, the less experienced traders can use the experts’ actions and advise to confirm their own decisions.
Summary
In order to make consistent, significant profits, a trader needs some essential forex trading tools. A new trader should make sure s/he first gets the correct trading platform and opens up a demo account.
Apart from that, a trader should familiarize him/herself well with other tools such as price charts, trading signals, and stop loss orders.
The ten forex trading tolls featured above are just the essential ones to help one become successful. However, there are more advanced tools available, especially for the highly advanced traders.
Photo credit: Nickforex
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All are important and essential tools for better analysis of the trade, if you know the factors that influence the Forex market is achieved very successful and beneficial investment.