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Forex trading can be demanding for both experienced and novice traders. That’s why forex traders supplement their decision-making skills using several Forex trading tools. These tools help the traders to decide on when they should enter or exit trades.
Some forex brokers or trading platform providers provide these trading tools for free, or you can get them by subscribing to certain premium services.
As a forex trader, it’s essential to know what tools are available to you and which ones you can use to make credible trading decisions.
Just like a fisherman needs bobbers, sinkers, extra lines, plastic worms, a couple of lures, and hooks, you also need tools depending on which markets you trade.
This article will show you some of the tools you need to use to help you win as many trades as possible.
Essential Forex Trading Tools For Beginners
- Financial News-wire – To help you access financial outlets and economic outlets such as Bloomberg and The Wall Street.
- Economic Calendar – It contains critical data, including future market consensus and outcomes
- Calculators – to help you to come up with correct pips, volatility rates, and other vital metrics
- Time Zone Converters – To help you in knowing the best time for trading particular commodities or assets.
- Trade Journal – to document your trading actions that bore fruits so that you can avoid mistakes in the future.
As a forex trader, never overcomplicate things. Never think that a complex trading strategy with several moving parts can be a great option.
Try to keep your trading strategy as simple as possible to enable you to make quick reactions and lower your stress.
Look for the simplest and most effective strategies to identify trades and adhere to that approach.
One of the best ways of simplifying your trading is having trading that involves chart indicators and some rules regarding how to use these chart indicators.
Familiarize yourself with the chart indicators named below and use two or three at a time to determine exit and entry trading points.
- Moving Average
- RSI (Relative Strength Index)
- Slow Stochastic
- MACD
- Fibonacci Retracements
- Bollinger Bands
- MACDs
After starting to trade using a live account, adopt a simple strategy with simple rules, and the chances are that you’ll never go wrong.
How to Trade With Moving Averages
A moving average is a method of untwisting price variations to help you differentiate between the authentic trade direction and the ordinary market noise. Moving averages are top forex indicators for each strategy.
They make it simple for traders to identify trading chances. When the market moves up, use one or several moving averages to notice the trend and the correct time to sell or buy.
In a nutshell, moving averages are plotted lines that gauge the average price of currency pairs over a particular time, for instance, in the last 100 days or years of price action to know the general direction.
How To Use Fibonacci Retracements
Fibonacci retracements are just horizontal lines that show potential resistance and support levels where specific prices could reverse direction. The Fibonacci tool performs best when the market is changing.
The plan is to purchase on a decline at a Fibonacci support level and if the marketing is going up. And sell on a retracement at a Fibonacci resistance level if the market is going down.
Understand that Fibonacci tools are not simple to use. It’ll take you time to master them and never make a trading decision relying on one instrument. Combine two or more to make fruitful trading decisions.
The Fibonacci retracement levels are predictive technical indicators as they try to pinpoint where the prices will be
The basic idea behind Fibonacci tools is that after prices start in a new direction, the prices will go back to where they were before returning in their trend direction.
Trading With Relative Strength Index (RSI)
It’s a simple yet effective tool you can use to help you decide when currencies are oversold or overbought, there could be a possibility of a reversal. If you like to ‘sell high and buy low, ‘this indicator could be suitable for you.
You can use the RSI in ranging or changing markets to identify grand exit and entry prices. If the financial markets have no vivid direction and continue to vary, take either sell or buy signals.
It’s easier to know which way to trade, and you only need to enter the trend direction while the indicator is recuperating from extremes.
Closing Thoughts
Every little thing you learn on forex trading is like adding a valuable tool to your forex trader’s toolbox. The tools you use could make or break your trading skills. Your tools offer you great opportunities of making credible trading decisions when you use the appropriate tools at the correct time.
