Top 5 Tools Every Forex Trader Should use

Spencer MechamBy: Spencer Mecham

March 10, 2017March 10, 2017

top forex tools

If you have dabbled in Forex, then you know that there are a few things that make a trader particularly successful on a consistent basis. These include factors such as experience, risk management, knowledge, and even a little bit of luck. However, the tools at the disposal of the trader are also very important in shaping a trader’s profitability. Getting the latest news, reliable charting and notifications allows the trader to make the most informed decisions. In this post, we will take a look into 5 of the most important trading tools that a beginning trader should consider adding to their “portfolio”.

Charting Software

Even if you are not a devout technical analyst or chartist, having the right charting tools is essential to identifying the correct trends, patterns, and market sentiment. The charting software that you use should also have a number of customization variables available. Knowing the right charting software is also important when deciding which Forex broker to select.

This is because many brokers include a number of these tools as standard on their platforms. Some brokers also allow other third-party software to be connected to their platform. As a starting point, the charting software should include a number of technical indicators as a standard. These include all volume, accumulation/distribution, MACD, RSI, and the stochastic oscillator.

These are all used in order to best shape the trader’s view of the strength of trends, market sentiment, and possible reversals. The software should also include trend studies such as Bollinger bands, moving averages, and standard deviations. These are usually very helpful for the trader to establish movements around the mean in the current trend.

If you have already chosen a broker, not to worry, as there are a number of third-party trading resources that you can use together with your broker’s platform. This can either be software that is able to plug into your broker’s platform or a separate charting website entirely. When it comes to third-party software, one of the best known in the industry is Meta Trader 5 (MT5). MT5 is used by a number of traders including mostly professionals who like to develop their own algorithms. The charting capability is truly powerful and incorporates nearly every indicator a trader could want. If your broker does not have MT5 capability, then you can always use a website that has charting applications that are built-in. You can try out the charting analysis available on various sites as a starting point.

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Economic Calendar

When it comes to trading using fundamental analysis and price action, the Economic Calendar is an essential tool that helps one plot market-moving news. An economic calendar contains a list of the upcoming Economic announcements and data releases for a specified time period. Given that Forex spans the globe and is often quoted with respect to another currency, the trader needs to know the upcoming data releases that will impact both currencies in the Cross.

For example, when monitoring USD/JPY the trader wants to know about the news that will be released related to both the USA and Japan. A good Economic calendar should allow the trader to filter the data according to region, currency, and date. Some Economic calendars also include consensus forecasts of the data release as well as previous numbers. This is very helpful for the price action trader.

Economic calendars are not usually available on broker platforms but there is a number of websites that provide standardized versions of them. There are also a few MT5 plugins that allow the trader to present an economic calendar right on their trading platform.

Reliable Technology

Trading online obviously requires constant internet connectivity. Although one can still analyze charts offline, dependable internet is a must when receiving data and placing orders. Moreover, merely having internet access is not really enough these days. Forex movements are generally extremely fast and opportunities usually disappear quite quickly. In order to secure trades at the chosen level, fast broadband internet is essential. This also limits the chance of failed order executions.

When it comes to hardware, having a computer that can manage resource-heavy charting programs is essential. MetaTrader 5 requires a certain minimum processing power in order to be used efficiently and smoothly. For traders who are not regularly on the road, having a multiple monitor setup can greatly improve efficiency as well as allow for the easier reading of breaking data. Many professional traders have more than one PC screen with most deciding on at least 4. Before purchasing a PC it is also prudent to check whether the graphics card is one that will allow a multiple monitor setup. Some PCs and Laptops come standard with this but if not you can always order a separate video graphics card for your PC.

Price Alerts

Price alerts are usually signals sent to you by a provider on important movements in the forex pairs you have chosen to monitor. Once the price goes above or below a certain level, you are sent a notification about it. For the technical analysis trader, important price levels are good indications for the trader of when to either enter or exit particular trades. This allows the trader to monitor also monitor a number of key levels without directly examining the charts directly. These signals are usually sent through email or text message.

Premium signal providers usually have their own mobile applications. Their proprietary data scanning technology will then send these notifications to their applications. Most of the top forex brokers these days will provide you with an option to receive pricing notifications from their platform or through SMS and email. However, if this is not provided there are a number of online signal providers. These online signal providers may offer a free service with some charging a monthly fee. These may differ according to their speed and regularity.

Demo Account

No matter how many tools that the trader has at his disposal, if he does not know how to use them in the right combination, the expected returns may not materialize. This is where a demo or practice account can be most useful. Although not a tool that directly contributes to generating profits, a demo account is a great tool that allows a trader to best hone his skills before putting capital on the line. Demo accounts are also usually available for free at most brokers. Using a free demo account at a broker that you are considering investing with is also a smart way to get used to the platform, charting software, and additional functionality. Even if you are a trader who is currently trading a live account, demo accounts are helpful when you are considering branching out to other forex pairs or experimenting with new strategies that you have not tried before.

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Spencer Mecham

About the Author:

Spencer is a Brigham Young University graduate with a degree in public relations. He has a passion for startups, recurring income, and digital marketing. Also check out his contributions to LifeHack, The Daily Universe and The Innovation Enterprise<.

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