Before we jump into what tools might be suited or not for your trading style, let’s first determine which is the largest investment market in the world.
Contrary to the most inexperienced beliefs, today’s largest investment market isn’t the Tokyo Stock Enhance or the New York Stock Exchange, nor the Shanghai Stock Exchange. Meet the Foreign Exchange market or Forex, and currently one of the largest investment markets in the world with an average turnover of more than 5 trillion US dollars.
Millions of traders worldwide use the Foreign Exchange market night and day to trade currencies. If you also want to try your fortune in this market, you must use the best strategies and invest in the right tools. As an early-stage trader, it will be difficult to unravel everything on your own, but as you continue, you will realize how the best tools may contribute to your day and swing Forex trading strategies. Before we start listing the latest trading tools, let’s discuss the difference between day and swing Forex trading.
Day trading is the process of buying and selling different financial instruments. These can be stocks, bonds, futures, or commodities that generate profit from the price change within a single trading day.
Different trading positions are held from minutes to hours during a day but then are closed in the end to avoid exposure of risk. Day trading usually takes place within the trading hours, but it requires time and effort to monitor different positions and technical indicators and decide when they exit the market.
Swing trading isn’t much different from day trading. It involves the same financial instruments, but instead of holding positions for several hours, traders have the option to spend days or weeks on the same trade for the opportunity of gaining profit. Swing Forex traders open and close positions by relying on the market volatility and liquidity – they have a fewer opening positions but greater profits.
Taking advantage of the market volatility require day and swing trader to use the following Best Forex Trading Tools:
Charting Software is one of the most frequently used trading tools, and almost any trader you know relies on it. Charting Software features a detailed visual depiction of market performance, allowing traders to market conditions in real-time and look at the previous market price behaviour.
Also, there are multiple Charting Software packages that include different technical indicators that allow you to test your trading methods with the benefit of hindsight. Charting Software offers traders a detailed representation of how they would have performed in real-time.
This tool has no equal being one of the most popular online Forex trading platforms. Meta Trader is a complete trading platform with a number of features that are indispensable for the serious day and swing Forex trader.
Meta Trader features a comprehensive technical analysis functionality that lets you chart currencies in real-time and apply a number of different technical oscillators and other indicators to them. What’s more, the platform has a fully integrated function which allows trading pairs directly from the charts.
Another remarkable advantage of Meta Trader is that you can use it to trade with the lowest spread Forex brokers and network with a wide community of traders. Expert advisors and automated trading software are also supported by Meta Trader. What’s more, it enables users to employ their own parameters for custom and premade indicators.
The best part about MetaTrader is that you can open a demo account so you can live test and back-test your strategies on previous data through the platform’s historical testing functionality.
Because the Forex market is made up of multiple pairs of currencies, known and calculable correlations exist between these currencies. Some correlations are more prominent than others, which is why having a currency correlation tool is a must. For instance, the Swiss Franc usually has a positive correlation with the Euro. That means the USD/CHF will have an inverse or negative correlation to EUR/USD most of the time.
Two pairs that have traditionally had a positive correlation are the GBP/USD and EUR/USD. Prior to Brexit, these two currency pairs had a very positive correlation, but now they have a less positive correlation.
Tools like Metaf is a currency tool popular among swing and day traders worldwide. You can find it on different broker platforms, and it is typically offered without charge. It allows traders to list correlations intervals from -1.0 or +1.0.
4.Forex time zone convertors
The time period you chose to be active in the Foreign Exchange market can be a significant difference to your bottom line. The most important trading centres are Tokyo, New York, Sydney, which all operate in different time zones.
However, the working hours of these major trading centre also relate to some degree which is why you will need to learn how to read the graphs. A graphic that displays the exact time at which the Foreign Exchange market is opening during a 24 hours period in the different financial centres worldwide is a necessary tool for a trader.
This is especially relevant since the times that the markets intersect often seem to be when the market is most liquid, and the Foreign Exchange is most active.
Ultimately, most of the trading tools listed in this post can be freely obtained online, some of them through Forex brokers and news outlets platforms, while others can be obtained directly from a developer’s website.
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