Tools for FOREX Trading

Tools for FOREX Trading

Tools for FOREX Trading No matter what you are doing, you always need the right tools for the job. The FOREX market is no different. There are numerous tools that traders use to develop entry and exit strategies. These tools help to analyze the market, and even aid traders in their transactions. Because FOREX moves so rapidly, software is a necessity as it can be used to automate your trading, and help protect you against loss.

Tools for FOREX Trading

Knowledge and information, of course, are the most important tools. Just knowing the current prices and exchange rates isn’t enough to be successful. You also need historical information, and information about current political and economic situations as well, since all of this has a profound affect on currency prices. You can find a great deal of information on your FOREX brokers website.

A FOREX trader may participate in Reactive trading or in Speculative trading. If you are a Reactive trader, your trades are reactions to current economic and political conditions or events. If you are a Speculative trader, you make trades based on what you predict is going to happen. The majority of FOREX trades are Speculative trades, but either way, you need up to the second information, as well as historical and current data.

The FOREX trader uses both technical and fundamental analysis. Technical analysis is based on historical charting. It identifies trends and patterns over a long period of time. On the other hand, fundamental analysis is based on current events and conditions, and may come from news sources, political conditions, trade patters, economic policies, and even interest rates and unemployment rates. Your broker should have live new feeds as well as streaming rates to help keep you up-to-date.

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Of course, once you have information and knowledge, there are other tools that are available to make things a bit easier. You can use a RPC – Risk Probability Calculator – to find trades that have potential gain. Using an RPC, you can also easily find exit points as well.

Use Pivot Points to predict changes in currency prices. Pivot points are determined by adding the currency high, the currency low, and the closing price, and dividing by 3 to get the average. A good pivot point calculator will indicate whether a price falls in extreme ranges or normal ranges. A Pip value calculator can be used to find the value of each pip, with various sized lots. You can also use Pip calculators to find out what the profit or loss would be in the event of certain market movements.

There are other web based tools that are offered by your broker. For instance, when you log in to your account at your brokers site to make a trade, you enter the currency pair, and you will see the exchange rate for those currencies. You enter the amount of your trade in terms of how much currency you want to buy and you get to the confirmation screen.

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Before you are taken to the confirmation screen, however, you may be given the option to state how much of your money you are willing to risk, which in effect places a stop loss order into the transaction automatically. Some brokers will give you the option of freezing the current price. This means that the price of the transaction is what that confirmation page says it is, regardless of slippage.

If you were not given the stop loss rate option during your purchase, you should be able to go in and set a stop loss order after the trade is placed. This will automatically sell the currency if it falls below a certain price. You may also be able to place a limit order, or a ‘take profit rate.’ In this event, the currency will automatically be sold when the price reaches a certain level as well.

Tools for FOREX Trading