As a financial market with the highest liquidity, lowest transaction costs, ease of trading, and many more, the market presents a lucrative environment that anyone can benefit from. However, as much as there is a good chance to make it big, there is also the possibility of losses due to the risks inherent in the market.
To avoid this, it is important for every trader, beginner or not, to have sound knowledge of the market and equip themselves with the best trading tools. These tools help to provide accurate information to make profitable trading decisions and generally make the process of trading easier.
Factors to Consider When Choosing Trading Tools
When selecting trading tools whether free or paid, there are certain characteristics you need to look out for. These characteristics are:
- Reliability: These tools should enable you to trade easily and provide accurate information that will be useful in decision-making.
- Functionality: You need tools that will function properly and not create undue problems when trading. These tools should also be user-friendly and remain consistent.
- Affordability: Fees for paid trading tools, shouldn’t be too high and unaffordable to traders. If you are someone looking to reduce their cost of trading, you can find free tools that can provide you with accurate information and are easy to use.
If you have found tools that you are interested in, make sure to test them out first to ensure that they meet these criteria before settling with them.
Best Trading Tools for Every Trader
There are several trading tools available to traders but it is not every one of these tools that you can use. The tools you use, highly depend on your trading strategy and money management methods.
For instance, a day trader will be more interested in short-term tools like chart patterns and technical indicators because the goal is to make profits within a short period. However, trend traders who are in it for the long haul, are more likely to go for charts and long-term moving averages because it suits their style and strategy.
Therefore before you dive into trading tools, it is necessary to decide what type of trader you are and what your strategy is going to be. Also, you may find that some trading platforms already provide you with some of the tools you need which means you may not have to go around searching for an alternative.
Trading tools that every trader should have include:
Trading calculators are used for risk management as they provide specific answers that traders need to make decisions. There are different trading calculators and most of them are free to use. Some trading calculators include:
This uses past data on a currency to determine how it will move in the future. However, it does not take into consideration sudden factors like geopolitical events or economic policies that can affect the movement of currency pairs.
Trading compounding calculator
It calculator is used to show how a trader’s account can grow by compounding the gains over a specific period with a given percentage per trade.
There are a dozen of calculators out there to use but we recommend using the one from SwitchMarkets.com which is you can see in the image above.
This calculator allows you to notice the potential gains and losses on a trade depending on the currency you are trading with. It also gives insight on where to place your stop-loss order to protect your account from risks.
This helps to determine whether or not a trader is going to lose or gain profits on a trade which provides additional information on what trades to make and which ones a trader should avoid.
As the name implies, this is a tool that helps in calculating the value of a currency in relation to another depending on the current exchange rate.
2. Trading Platforms
Trading platforms can be considered tools since they contain features that are instrumental to the success of any trader. These platforms are customizable which gives you the chance to set your trading preferences and they contain software for technical analysis which enables you to make more accurate trades.
Some of these platforms keep you informed about the events affecting the market thereby enhancing your chances of succeeding. Among the trading platforms available, one of the most popular platforms is MetaTrader 4 and 5. These platforms come with a lot of tools that allow you to automate your trade and you do not have to determine the course of action in every situation.
Using MetaTrader 4 and 5 is a good place to interact with other users as you get access to their knowledge and experience through the articles they post giving you what you need to make successful trades and increase your knowledge of the stock market.
3. Economic Calendar
An economic calendar is a tool that allows you to plan your trades. You can list events that you do not want to forget. It provides traders with data regarding the market, price changes in currency pairs that they wish to look out for, and geopolitical events affecting the trading market such as interest rate statements, inflation, gross domestic product, and policies of the central bank.
This tool is usually provided by trading platforms, brokers, and some financial news sites. Also, creating an economic calendar is easy and all you need to do is list the events you want to remember when they will take place and possible price changes which will help you notice how right your predictions were, increase your understanding of the market, and aid in your trading decisions.
4. Financial News Wire
Several factors can affect prices in the market and it is crucial to keep track of all relevant events and implement them in your trading. Financial news wires provide technical news like monthly interest rates and important geopolitical news. So, whether you are a day trader or trend trader, keeping an eye on the news can determine how you trade and your ability to make profits.
There are several financial news wires and some of the most respected outlets among traders are the UK’s Financial Times, MarketWatch, Reuters, Wall Street Journal, and Bloomberg.
5. Trading Journal
This is a tool used to keep track of all trades. It gives traders a chance to determine their trading habits and remember important details regarding trades. You can include explanations detailing what made you initiate such transactions, how you reacted to sudden price changes, and what ultimately influenced the trade.
By tracking your trading behavior, you get insight into the indicators or signals that made you take action for both your winning and losing trades and what you can do to improve your trading strategy. This way, you get a chance to avoid making the same mistakes and become better with your trades.
Charting software is one of the most important tools needed by all traders. It allows you to analyze market performance, determine the history and notice patterns in currency pairs, and determine the direction that a currency pair is moving.
These charts may contain trading signals and technical indicators which are useful for successful trading. In essence, without charts, you will not get an overall image of how the market is performing.
Some advanced trading platforms give traders access to different charts but you can always find good ones elsewhere.
7. Copy Trading Services
Copy-trading services is a tool that came on the scene in recent years and it would not be farfetched to say that it changed how trading is done. It helps to level the playing field by making the expertise and skills of different traders accessible to all.
In essence, copy trading services allow the portfolio and trading actions of expert traders or any chosen trader to be copied by another. This is highly useful for beginners who do not have much knowledge of the workings of the market as they do not have to make important trade decisions on their own but can copy the trades of other successful traders and use them to make profits.
Some trading platforms that have included copy trading services to their features are Ayondo, ZuluTrade, and eToro. Traders that are copied from are usually chosen based on risk, their followers, and profitability.
8. Time Zone Converter
Certain times and trading sessions are more profitable than others and the periods chosen by a trader can have a huge impact on their success. The world’s major trading centers which are Tokyo, New York, London, and Sydney all have different time zones and even though their trading hours may overlap, having a tool that shows the different opening times of each trading center is important to a trader.
With a time zone converter, a trader can decide the best time to trade based on trading activity, liquidity, and volatility.
These tools fall into two categories: some require you to pay a fee before access and others are completely free to use. When choosing what to use, all that matters is that you select those that suit your trading goals, are easy to use, and provide you with accurate information.