Starting out Forex trading for most beginners can be a daunting task. Therefore, newbies need some basic trading tools to help you stay on the same level as other traders.
Starting out Forex trading for most beginners can be a daunting task, especially if you learn by yourself. That's why you'll need some basic trading tools to help you stay on the same level as other traders. However, more often than not, it took quite some time and effort to look for the right trading tools. Need not worry though, I'll save you some trouble by making this complete list of all the tools you need to get, from the mandatory to supplementary ones.
Mandatory Trading Tools
Don't even think that you can just waltz in and hope to make some cash on Forex Market without these trading tools. In short, this is all a must-have!
1. Trading Terminal
A trading terminal basically stores and transmits all your trading orders to the Forex market through an internet connection. Without one, you'll have to do Forex trading the old way (calling out a personal broker to execute your order manually), and that's pretty unpractical and outdated. Secondly, a trading terminal displays an asset's price movement, so you can watch the latest trend while it's happening. On top of that, you can also use built-in indicators to get the best trade signal.
Back in the day, trading terminals are exclusive to institutional traders. However, with the advance in public internet access, those necessary trading tools become more and more available to retail traders. So, let me introduce you to some of the most popular Forex trading terminals you can download right away:
a. MetaTrader (MT4/MT5)
Developed by MetaQuotes, this trading terminal remains the most popular Forex trading terminal. The reason why this streamlined trading terminal is so popular is the fact that many brokers offer it as their featured trading platform. Furthermore, MT4 is also widely used as Forex educational material, which explains why many beginners flock to it.
- Easy to use, streamlined design.
- Highly customizable with addons from MQL plugins, ranging from custom indicators to automated trading robots.
- Available for mobile devices (Android)
- Free to use
- Some features of MT4 may get outdated due to the rising popularity of its successor, MT5.
- MT4 is specifically designed for market maker brokers (Dealing Desk). Therefore, the broker may intervene with requotes.
The main trading tool of STP/ECN brokers, this powerful trading terminal tackles its biggest competitor setback; level 2 market transparency.
Spotware develops this trading terminal from the bottom up to support transparent price feed. In simple English, that means cTrader is best for traders who are looking for fair prices.
- Brokers can't directly manipulate prices; no requotes.
- Free to use
- Available for mobile devices (Android and iOS)
- Fewer customization options than MetaTrader4
- Less EA and indicator options
Tradingview is the biggest web-exclusive trading terminal with so many advanced features you will easily fall in love with. On top of it, it also features "ideas", where traders share their market strategy.
Tradingview is complimented with many built-in indicators, drawing tools, and so many other things that every single trader will be fairly satisfied with.
- Beautiful chart design, easy to navigate and tons of different assets (Forex, stock, indices, commodities, etc) to and display.
- Built-in tools to help technical analysis
- Constant features update, you'll find new things almost every day.
- Only available in web-version. Needless to say, it requires a stable internet connection.
- Complete features access requires PRO accounts. In other words, you'll have to pay for it monthly.
2. Forex Market Hours
Forex market busy hours come in three major different regions; New York, London, and Asian trading sessions. The highest market liquidity usually comes from the former two and may overlap with each other during certain times. Certainly, you need to pay attention to those different trading sessions if you want to make the most out of your trading positions. But of course, keeping tabs with different timezone is a pain in the neck. That's why I recommend you to use Oanda's Forex market hours to track where the overlapping prime time is.
Oanda provides Forex Market Hours as one of their many free trading tools. The interface is simple enough to navigate and you can easily tell which trading session you are in right now.
3. Forex Calendar
During a certain time, you might notice a sharp price movement. That sudden changes were the result of traders reacting to economic report releases. If you didn't get what I meant, you may have to learn the fundamental analysis. In certain cases, some specific news release can lead traders to hike or plunge the price beyond your set Stop Loss. That's why it's so important to use Forex Calendar if you don't want to get nasty surprises every now and then.
Personally, I'd recommend you to use these trading tools as Forex calendar:
a. Investing Economic Calendar
Investing pretty much packs each important piece of global economic news every day (24/5) in a sleek, easy-to-use table. So far, I've used their economic calendar widget the most.
In the table, the "bull-heads" represent the level of importance for each new release. For instance, a single bull-head represents low impact news, two bull-heads for medium impact, while three heads represent high/important news release.
b. DailyFX Forex Calendar
If you are looking for an alternative Forex calendar with a countdown and detailed analysis for pertaining market events, the DailyFX economic calendar may suit you just well.
c. ForexFactory Economic Calendar
ForexFactory economic calendar has become one popular choice for traders. That's because their forum members openly exchange ideas and trading strategies when important economic events occur.
As usual, the importance of each economic event release is color-coded; yellow means medium importance, while red represents high importance.
4. Pip Calculator
Simply put, the pip calculator helps you calculate how much money each time the price moves in a single pip for your ed pair. These tools are very easy to use and your best alternative if you're too lazy calculating pips manually. In case you didn't know, a pip is the smallest unit of price movement. The catch is, it can move in two different possible scenarios; in favor or against your position(s). The former is when you start making profits, and the latter is when you start accruing losses. Here are my personal favorites:
a. Investing Pip Calculator
Investing.com provides a pip calculator widget as one of their free trading tools. Definitely reliable and very practical to use. Simply enter your trading account currency and the trading size (trading lot or volume, 1 standard lot is equal to 100,000 units).
b. Babypips Pip Calculator
Babypips also provides a simple and easy-to-use pip calculator to help traders find the most profitable currency pairs. All you need to do is simply input trading lots, currency pairs, and ask price (current Sell price).
5. Currency Converter
We will need a currency converter for the following situations:
- To deposit money to brokers
- When we want to withdraw our equity from brokers
- To count how much should we get from rebates or general bonuses denominated in foreign currency.
- To compare the price quote of our broker to the standard interbank price quote.
There are already a lot of these basic trading tools you can find on your browser. Personally, I'm fairly contending with Google's currency converter widget.
Alternatively, if you prefer more accurate (6 decimals) and customizable currency converter, the XE currency converter is more than up to par with (from price alert to money transfer).
Supplementary Trading Tools
As it says on the tin, these following trading tools are less necessary than the previous "must-have" lists. However, it can greatly increase your profitability when you use it at the right time.
1. Trade Signal Scanner
These trading tools scan trading signals on various currency pairs whenever a price pattern is forming. Do note though, that the accuracy of given trade signals may vary depending on platforms' technical limitations or market conditions. So, let me tell you my best findings:
If you are looking for trading tools that can help you to find the best trade signal over hundreds of different currency pairs 24/7, Autochartist is your best buddy.
However, Autochartist is a third-party plugin which means that it can't stand on its own. Instead, you'll need to find brokers that provide this plugin for their trading terminal. Some of those brokers are:
- OANDA and so on
Once you trade with Autochartist, you won't ever miss any trading opportunity anymore. Anytime, in any currency pair, these trading tools will identify and show you the best price pattern that you can open a position for.
2. Forex Volatility Calculator
The forex market is ripe with sudden price movements compared to other financial assets. Furthermore, some economic fundamentals may boost and then plunge price (not exclusively in that order) in a short span of time. If you opened a position blindly without knowing how volatile your target pair is, each losing position can drain your deposit quickly. Secondly, you will also need a Forex volatility calculator to plan how much pip you want to turn into profit according to your trading style.
For instance, if you are a scalper you'd be looking for a pair with pip movements above 10 pips or so in a short time frame (below H1). Without further ado, here are some of them:
a. Myfxbook Forex Volatility Calculator
Myfxbook provides this calculator as one of their free trading tools.
b. Oanda Forex Volatility Calculator
Once again, Oanda presents us with many trading tools, and this volatility calculator is just one of them. To be honest, this calculator seems less appealing than its competitor but actually packs more details and utility.
c. Investing Forex Volatility Calculator
If you prefer simplicity, investing.com doled out their Forex volatility calculator just the way you want it. Basically, you only need to input how far back you want to check the target Forex pair volatility.
3. Pairs Correlation Table
The forex market offers many currency pairs that may correlate to each other. For instance, EUR/USD oftentimes goes in the same direction as GBP/USD (positive correlation), so when one pair is appreciated, another will follow suit. On the other hand, negative correlation pairs move against each other. So, when one is moving up, its opposite pair is likely moving down. These trading tools will come in handy under these situations:
- Avoiding the same pitfall; you wouldn't want to open the same losing position in two different but highly correlated currency pairs. Intuitively, you should only trade on only one pair and avoid its "siblings".
- Double it down or nothing; like a double-edged sword, highly correlated pairs can also potentially turn into twin profiting positions. In a nutshell, it's double the fun, double the risk.
- Spread out the risk; to reduce the risk of losses from opening many positions in single or multiple pairs, you can pick weakly correlated pairs. So. when you lose on a pair, you can still break even from others. Furthermore, you can also use a hedging strategy in opposite pairs.
From my finding, the Myfxbook pair correlations table is most preferable:
4. Online Trading Journal
The practice of routinely updating trading journals can bring many benefits to disciplined traders. Most notably, it can help traders to track and improve their trading decisions. However, the chore of doing so on traditional paper and pen media left it much less desirable, especially if you are rather unorganized. Alternatively, you can use an online trading journal to help you organize your trading plans. The following list presents my best-recommended trading tools:
Tradebench offers many trading journal functionalities, such as; keeping a record of your position sizing, money management, comparing past to present realized positions, and so on. On top of it, it's totally free!
When it comes to providing an edge, Edgewonk (no pun intended) is one of the top online trading journals you can pick up with pride. But of course, that pride comes with a price tag.
5. Social Trading App
Assuming you aren't that introvert trader who wants to be left alone, social trading apps may give you quick and valuable market insights from other professional traders. To do so, expert traders can share their trading decisions and get some fees or commissions from their peers (or followers). With that said, a secure and reliable social trading network requires a well-established platform, such as:
eToro may not be the original gangster of social trading, but their trademarks are easily recognizable. That's because they are currently the largest network of social traders everyone can join. Also, they promise an easy-to-use platform where you can interact with and copy-trade from the best traders.
My only concern with this massive social trading platform is ironically its rapid expansion. Arguably, new traders will get overwhelmed by thousands of new trader portfolios. So, if you don't quite understand what you're doing (with whom you copy-trade from), it's very likely that you'll suffer losses.
This alternative social trading platform is preferable if you're already a member of a brokerage. For instance, you have been trading with an xxx brokerage but recently took interest in social trading. So, instead of moving your whole equity, you can still trade with your former broker as long as they are affiliated with Zulutrade.
Liteforex is a brokerage firm that offers a proprietary social trading platform, which means that it is exclusively linked to its own network of traders. That's only a little setback compared to what it can fully benefit you with.
Myfxbook is mostly known as an online automated analytical tool that traders use to track and compare their trading performance across different pairs and accounts. However, they also develop social trading platforms to connect investors with fund managers.
In that case, the fund manager will publish their account statement via Myfxbook as a resume of their trading skills. Next, Myfxbook will connect him/her with an investor(s) that took an interest in his/her posted trading resume.
Trading tools come in many forms and utility. Some of them can actually boost your profitability while most others are mostly valued for their novelty (i.e., flashy swags without any real uses). Researching the whole internet to filter those actually good trading tools takes time and effort (and probably money as well). That's why save your time by using all the mandatory trading tools listed above while considering adding some of the supplementary ones.
P.S.: If you find other useful trading tools, let me know! I'll study those trading tools and if it's as useful as you claim it to be, I'll post it here so others will discover it as well.