Forex trading is not for the faint of heart. Without some kind of trading strategy, you will soon hit a wall. Thankfully, there are several tools forex traders can use to facilitate their trading activities. In this article, we are going to look at the best ones.
1. Economic Calendars
An economic calendar is an essential tool for all forex traders, irrespective of what level they are trading at. Economic calendars tell you when important scheduled events are taking place, such as major announcements about interest rates.
You may not be terribly interested in the latest unemployment figures, but make no mistake, this data has an impact on currency prices. All experienced traders rely on such data when opening and closing positions. Always keep an economic calendar open on your desk and refer to it when planning ahead.
2. News Websites
All forex traders follow the latest economic and political headlines. What happens in the wider world has a huge impact on foreign currency markets. For example, news that Theresa May has secured a possible Brexit breakthrough with EU leaders sent the pound soaring overnight. Contrast that with the effect on the pound when the news broke in June 2016 that the British public had voted for Brexit. GBP went tumbling into the doldrums.
Keep a close eye on what’s happening beyond your desk. Use this information to predict what might happen with your currency pairs, using historical trends as a starting point. Set up Google alerts to keep you informed about currency news.
3. Forex Trading Platforms
Forex brokers offer their services via forex trading platforms. These platforms run on software such as MetaTrader 4. Trading software makes it very easy to trade like a pro. Platforms such as MetaTrader 4 provide in-built analytical tools and indicators. You can use robo-advisors and set your own custom indicators. This takes a lot of the mystery out of forex trading and enables inexperienced traders to get a foot in the door.
MetaTrader and other trading platforms have a learning curve. For this reason, it is sensible to open a demo account before you start trading for real. Get to know how the platform works and make sure you are comfortable with the tools provided. When you are ready, you can upgrade to a ‘live’ account.
4. Forex Signals
Forex signals are trading tips. Some are provided by automated robo-advisors; others come from experienced analysts who monitor the markets and make a living helping other people trade. If you subscribe to a service, read the reviews first. Be aware that forex signals are time sensitive, so you must be ready to take action when a signal comes in.
Paid Vs. Free
It is important to point out that not all forex tools are free. Some tools, such as forex signal services, require a subscription or up-front cost. Before you pay for any tools, always do some research. Talk to other traders online, ask for recommendations on popular forex forums and make a judgment. Also, recognize that free tools have their limitations.