The forex market has become a favorite spot of millions of traders all over the world. Thanks to the lucrative nature and increased accessibility of the currency market, it ended up attracting a lot of newbies to this forex space. The number of new traders who enter the forex world is increasing at a rapid rate over the past few years. But when you are going through the beginner phase in the forex market, unleashing your true potential as a trader is a prolonged process. But having access to the right forex tools can speed up the learning process and make you more knowledgeable and skilled as a trader.
Hence, today we will be talking about some beginner-friendly forex tools and how you can use them to unleash your true potential as a new forex trader.
A Few Words About Forex Trading
Before we get into the best forex tools you need as a beginner, you may need some surface-level information to start your trading journey easily. Firstly forex trading is all about making profits from favourable exchange rate fluctuations happening in international currencies. The currencies are paired together, and the price of a currency pair actually states the value of one currency compared to the value of the second currency. The first currency is called the base currency, and the second one against which its value is quoted is called quote currency.
There are many currency pairs in the forex market, but the most liquid and popularly traded pairs are major pairs, including USD. Major pairs are perfect for starting with a beginner, as they are easier to trade with. Another fact about forex trading that you should know is its decentralised nature. The Forex market does not have a centralised market, but trading is conducted online by opening a trading account with a Forex broker of your choice. There are also some reputed regulatory bodies that oversee the operations of these brokers. Trading with a broker regulated by such authorities allows you to trade in a safe zone.
What Kind of Forex Trading Tools Would You Need as a Newbie?
Now let’s dive into the most popular and essential forex trading tools you need to use as a newbie in the volatile currency market.
Trading software/ Forex Trading Platform- Almost all of the trading activities in the forex market take place online, for which you will need to use trading software with an internet connection. This software interface functions as your platform for trading, as all the basic to advanced trading tools can be accessed on this platform. This platform can either be installable desktop software or a mobile application used for trading on your smartphone.
The most widely used forex trading platform is MetaTrader 4 or MT4, without a doubt. This is the first-ever standard trading platform specially designed to meet the requirements of forex traders. You can easily start trading on this platform by signing up with a forex broker who offers MT4 trading. Finding a suitable broker is easy, as every forex broker offers MT4 as a trading platform.
The advanced version of MT4 was named MT5, a modern multi-asset trading platform launched later by the same developers, which is also becoming a popular platform among forex traders. Few brokers offer MT5, as it is still not that popular among traders due to the complexity that comes with the advanced tools added to the platform. Still, beginners can explore this updated platform and see if it can be a better choice due to the superior trading experience.
Demo Trading Account- The second forex tool that gives great power to a newbie trader is a forex demo trading account that allows you to practise trading in a simulated space without risk. If a beginner tries to trade with real money without enough knowledge or practice, they are at a higher risk of losing a lot of money in the process. The learning part of trading will be incomplete without gaining practical knowledge. And demo accounts are the perfect place for gaining practical knowledge and experience without being worried about market risk.
Demo accounts replicate the exact functions and tools found in a real or live trading account, and you get to trade in real-time market conditions using fake money or virtual funds. This also gives you a place to test your strategies as well as get familiar with the platform provided by your broker. In fact, all traders should check the demo accounts provided by their broker first before signing up for a live trading account.
System or Devices- The system and hardware must-have equipment for online trading. This system can be your personal computer or tablet, and it can even be a smartphone. These days many traders rely on smartphones for trading on the go. But in any case, you will have to ensure fast and stable internet connectivity, as that is mandatory for a smooth trading experience. Make sure the system and devices you choose are fully compatible with the trading software or platform you plan to use for trading.
Trading Strategy or Trading Plan- The greatest and most powerful tool that helps you to accomplish your trading goals is the strategy you follow for spotting ideal trade setups and executing trades. You must devise a solid trading plan that aligns with your trading goals and risk profile. Your trading strategy should define all the aspects that need to be considered while carrying out trades.
This covers everything from the method of analysis, the perfect trade scenario, entry point and exit points for your trade, risk/reward ratio, take profit and stop loss levels and any other measures that you take for minimising the risk and maximising profits. A solid risk management plan goes hand in hand with a sound trading plan. But the actual results of trading will depend on how well you can execute the strategy while trading for real.
Trading Calculators- Trading calculators are another simple yet essential set of trading tools that each and every forex beginner should use. Because trade related calculations can take up a lot of time when you are new to the forex space. Manually calculating trade-related metrics also has a higher possibility of errors which again leads to mistakes in trading, and this can cost you a lot when it happens on a live account.
You can surely take the help of online trading calculators, which easily calculate pip value, potential trading results, position size, margin levels and many more aspects of trading that play a key role in your trading decisions. You can easily find such tools on leading broker platforms and trading platforms. This includes different types of trading calculators, which perform different functions. So, make sure you add these automated tools to your toolkit to speed up the calculation process and get accurate results without any effort.
Economic Calendar and News Feeds – Being updated about key economic events and other global news is crucial when you trade in the volatile currency market. Even small events can greatly impact the forex market and currency pairs you trade with. In fact, traders relying on fundamental analysis should add an economic calendar to their toolkits. News feeds are also useful for catching up with any news that may be relevant for the currency pairs that you have chosen for trading. You can find many online news portals that publish forex-related news, and these days, the majority of brokers and trading platforms have also added economic calendars as a part of their toolkits.
A Trading Journal- A trading journal is a tool that helps you keep track of your trades and identify mistakes in time. This way, you will be able to improve your performance as a trader by not repeating the same mistakes again.
Time Zone Converter- This is another simple forex tool which can come in handy for trading major trading sessions conveniently. A time zone converter simply gives updates about different trading sessions in your local time so that you don’t have to calculate the time zone differences manually.
Which Tools Are Best for You?
Now, we have covered all the necessary tools that you need to use as a beginner in the forex market. But you get a lot of options for these tools as well, and choosing the best ones for yourself is important to get desired results. You need to try and test different tools from various sources in order to find the most suitable ones for yourself. You can also check online reviews and ratings, but hands-on experience is the best for selecting the right set of trading tools.
