The forex market is the largest market in the world. The forex has a daily turnover which exceeds $4 trillion. Even then, the forex market is not a regulated one. It has no central exchange. The forex traders rely solely on the brokers to trade in the forex market. This makes it all the more important to have a good broker for yourself as the brokers have their own charges and can be very high for some brokers. Along with a good broker comes the need for the must have tools one must possess when it comes to trading forex.
Trading charts are one of the foremost things that a forex trader would require. An important thing to note is that not all charts would suffice. One would need the correct charts for trading forex. This is an important tool as it would help you to get the most accurate view of what is happening in the forex market.
One should have charts to trade. But with the charts, it is important that you have good charting software. It should also have a number of customization variables available. One should also be able to distinguish good charting software from others. This is because the brokers have some standard tools on their platforms.
To start with, your charting software should include all the necessary and important technical indicators. The important technical indicators include Volume, MACD, RSI, and the Stochastic Oscillator. The software should also have other studies like the moving averages, the standard deviations and the Bollinger band.
This may come as a surprise to many people. However, it is a very essential tool to trading forex. Many people may use their mobile phone for trading, but it is not at all encouraged. This is because the phone view offers chart view which is not accurate and is distorted. You can also have a PC screen. You should, however, check if it comes with a graphics card which would allow multiple monitor setups.
An obvious tool that one should have while trading in the forex market is reliable technology. What this mainly constitutes is constant internet connectivity. Only having an internet connection is not enough, one must have a fast broadband connection as the forex market is highly volatile and there can be big fluctuations even in a millisecond. This would also limit your chances of failed order executions.
The economic calendar is a very important tool that helps a person to plot the market moving news. This is a very important tool as it contains the list of all the important and even the not so important economic announcements and the data releases for a given period of time. To know why this is important, one must understand that all the economies and the currencies of the world are inter-related. And the activities in the countries of the currency pair affect your capital directly.
The forex broker platforms usually don’t provide with the economic calendar, but they are available on a number of websites. A good economic calendar should allow the trader to filter out the data himself according to his needs.
Financial Newswire Access
It is important to follow the respected financial newspapers and not simply any newspaper for that matter. The good ones include Reuters, Bloomberg, and Wall Street Journal. News from each country’s central bank has a huge impact on the forex market. This is because the global economies are now connected more than ever. The interest rates have a huge role to play in the valuation of the currencies. The reports of the speeches and the official conferences are published by these newspapers almost immediately.
Forex Time Zone Converter
It may not affect you which time zone you choose when trading stocks, however, the time zone can have a great impact when trading forex. The major foreign exchange centers of the world are in New York, London, Sydney, and Tokyo. All of these are in different time zones.
Though the forex market is open for 24 hours, the activity is the highest when the markets overlap. This is the time of maximum liquidity. This is why one should have access to this tool to trade the market in a better and more efficient way.
A trader may have all the necessary tools at his disposal. But if he does not know how to use them, and use them in the right combination, then they are all worth only a penny. Therefore, one must have a demo account to practice the trading strategies. The demo account allows the forex trader to hone his trading skills before he goes out to trade his capital in the forex market.
The demo accounts are available for free with most of the brokers. Demo accounts help not only the beginners but also the active traders. They can use the demo accounts to practice when they would want to venture out to trade in new forex pairs or with new strategies.
The Bottom Line
We see that we can obtain almost of the trading tools almost freely on the internet, except for the laptop and the broadband connection, for obvious reasons. It is important for all the forex traders to trade cautiously. This is even important to note for the retail investors as they take the heaviest hits and lose the most in the market. It is difficult to trade consistently in the forex market, and one must always maintain his cool while trading.
It is important to note that forex trading is not for everyone, and it comes with a lot of risks, especially if you are a retail investor. The forex market is highly volatile and you can even lose a fortune within a few seconds. Therefore, one must only invest which he can afford to lose. Another thing to note is that one must never follow the rumors and what some people or sites claim to be good strategies.