Forex trading is not as easy as entering or exiting the positions. It involves making many crucial decisions along the way. For instance, you will be required to choose the right lot size, consider the volatility of the pair, and understand the pip values, margin requirements and whatnot. Thankfully, traders, these days can enhance their trading skills by making use of trading tools. In this article, we are going to talk about 8 such tools that you can use to improve your trading experience.
Table of Contents
Economic News Calendar Tool
The economic news calendar is a valuable forex tool that provides a list of upcoming economic data releases, central bank policy statements, and geopolitical events. These events can impact currency values therefore, it’s extremely important for traders to keep themselves updated with this information. Most forex brokers and trading platforms typically offer economic calendars. These calendars display vital information about fundamental economic releases one or two weeks in advance. When you study the economic calendar, you will be informed about the type of release, which can be about the interest rate hike or unemployment rate etc. The Economic Calendar shows the previous outcome as well as expected changes. The impact of each release is usually coded as medium, light, or none to show its significance.
The reaction of currency pairs to economic releases depends on their impact level. Low-impact events usually have minimal effect, while medium-impact events can cause more significant moves. High-impact events can lead to substantial volatility if the released number significantly differs from market expectations.
Profit Calculator Tool
A profit calculator can be used to plan the trades before entering the positions. The profit calculator allows traders to find the potential profit or loss they would make on a trade. You can calculate the profit or loss by entering some basic details like trading instruments, currency pair, entry and exit prices, etc. This can be used to decide whether you want to take a trade or not. And if you like to proceed with a trade, you can experiment by adjusting the position sizes or entry/exit levels to see how it affects your trading outcome.
The profit calculator is a useful tool for beginners as well as experienced traders alike, so everyone should use it.
The Currency Correlation Tool
In the foreign exchange market, different currency pairs have correlations, which can be positive or negative. Some pairs have stronger correlations than others.
For instance, the Swiss Franc usually has a positive correlation with the Euro. This means that USD/CHF will typically move in the opposite direction of EUR/USD.
Another example is the correlation between EUR/USD and GBP/USD. Before Brexit, they had a strong positive correlation, but it has weakened since then.
Knowing the correlations between pairs is crucial to understand how the pairs move relative to each other. You can find a Currency Correlation Tool on your broker’s website, and it’s usually free. The tool provides precise correlations and can be coded using intervals. The intervals range from -1.0 (perfect inverse correlation) to +1.0 (perfect positive correlation). Different colours are often used to represent the strength of correlations in a correlation table.
By using the Currency Correlation Tool, you can analyse the relationships between currency pairs and make informed trading decisions based on those correlations.
Broker Spread Comparison Tool
The broker spread comparison tool is great for traders who always want to have a clear idea about their spread costs. Some traders like to examine the spreads offered by a broker before opening an account with them. It’s an excellent way to protect oneself from unnecessary costs. Usually, after deciding on a broker, it becomes less necessary to compare spreads, as switching brokers can be inconvenient. Therefore, this should be done when you are still in the “broker selecting” phase of trading.
By comparing the spreads, traders are able to choose tight spreads for their trades; it means better exchange rates and lower trading costs when entering or exiting positions. On the other hand, a wide spread can be costly, making it difficult for short-term traders to profit from small price movements.
Spread comparison tools allow traders to compare the spreads offered by different brokers by displaying the spreads offered by them, mainly for major pairs. You have the ability to filter spreads by currency pair or time frame to find the most competitive spreads.
Pip Calculator Tool
The Pip Calculator Tool is important for understanding the value of a pip in different currency pairs based on the lot size. A pip represents the smallest unit of trading for a currency pair, and its value varies based on the currencies involved.
With a pip value calculator, you can easily determine the monetary worth of a pip. The calculator often provides pip values for Standard, Mini, and Micro lots. You can quickly calculate the pip value by entering their trade details like currency pair, trade size, account currency, leverage, and direction of the trade. This tool helps keep track of pip values, making it a valuable resource for traders.
Forex Time Zone Converter
The Forex Time Zone Converter is a tool for traders who want to optimise their trading hours in the Forex market. Since major trading centres like New York, Tokyo, London, and Sydney operate in different time zones, knowing when these markets are open can help traders decide when to trade.
The forex time zone converter displays the market hours in different financial centres worldwide within a 24-hour period. It helps traders identify the times when multiple markets overlap. Usually, when two or more markets overlap, the market is the most active and liquid during that time, which is really an important factor in effectively trading. Therefore, by using the time zone converter, you can align your trading activities with the most favourable market conditions and improve your trading performance.
Forex Volatility Calculator
The Forex Volatility Calculator is useful for assessing the volatility of currency pairs. When the market is volatile, you are sure to experience huge price movements, which on the one hand, can give you multiple trading opportunities but, on the other hand, can be risky. This is why traders should measure the volatility before making any trading decisions.
However, it can be difficult and time-consuming to calculate the volatility manually. Fortunately, with a volatility calculator, you can make the task easier. This tool uses past exchange rate data to estimate the implicit volatility of currency pairs. You can also check the volatility breakdowns for different time frames to assess whether a currency pair’s current volatility is high or low compared to its historical levels.
Based on the volatility data, you can focus on the most volatile currency pairs during their peak volatility periods to maximise trading opportunities. Alternatively, you may reduce your trading lot sizes to mitigate the risk. Basically, by using a Forex volatility calculator, you can adapt your trading approach based on market conditions and make more informed trading decisions.
Keeping a Trade Journal
A trade journal is like having a personal diary but not for your day-to-day activities but for your trading experiences. It should ideally document all your trades. You get a sneak peek into your trading habits, mistakes, and strengths by recording important details like why you entered a trade and closed it.
Ultimately, you are able to see why a trade went wrong and what made you win a particular trade so that you can make better decisions in the future. During the process, you might discover patterns or strategies that work well for you and others that don’t. Therefore, you should keep a trade journal. Recording your trades also helps you track your progress over time. It’s satisfying to see how you’ve grown as a trader and the lessons you’ve learned along the way.
All the tools mentioned above can be easily assessed from your broker’s website free of cost. If not, you can easily find a reliable website and use these tools without the need to download them to your device. Using forex trading tools will improve your odds of success by allowing you to make informed decisions.
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