If you are a novice trader and you don’t have any idea about the trading indicators and tools of the forex market and their requirements, then you must follow this article, which will elaborate you about some of the authentic and practical tools and Indicators.
The foreign exchange market or the forex market or the FX market is the largest liquid market in the world in terms of liquidity and regular turn over. Every day more than 3 trillion dollar is traded in this market. This market is larger than the stock, commodity or other liquid markets. This highly liquid market is extremely popular amongst traders. Everyone wants to make money in this market but trading forex is not as easy as most think it should be. In order to trade successfully, you must use tools or analysis in one form or another.
As a trader, you can use any tool from the large number of tools that are available in the market. Different types of trading indicators and tools are discussed below.
Different types of indicators-
Trend indicators are usually used to recognise a trend. Some of the trend indicators are- Parabolic SAR and MACD. These indicators take decision on your behalf and tells you which way your trading should be run. All you need to do is to take the decision at what level you want to enter the trade.
These types of trading indicators indicate the volume of trades of any particular price movement. This is extremely advantageous for the traders, as a currency movement based on high volume is much stronger signal than the currency movement that is backed up by low volume. Some of the volume indicators are Forex Index, Chaikin Money Flow, Ease of Movement, Money Flow Index etc.
These trading indicators are basically oscillating indicators. They are used in order to determine whether the positions are oversold or overbought. They also signal when to start a new trend. A few examples of Momentum indicators are- Stochastics, RSI and CCI.
In order to know the behaviour of the currency price and their volume behind any movement, traders use volatility indicators. By providing a good entry signal, they can bring a dramatic change in trading behaviour. Some of the examples of Volatility indicators are- Average True Range, Envelopes and Bollinger Bands.
Different types of forex trading tools-
One of the most important tools in the foreign exchange trading is the forex calendar. It is almost similar to our daily calendar. If you are serious about your trading and want to get success in it, then you must use forex calendar. As a trader, you will be able to forecast the moves and fluctuations of the market. It will also enable you to know how the forex market is moving in a certain way. As daily calendar reminds us about the dates and months, the forex calendar also works as a reminder for the market moving events such as- debt auctions, monthly jobless claims and factory orders. The forex related economic news is also published in this calendar by the forex brokers.
The volatility calculator or the forex calculator is used to measure which currency pair is volatile and what the active trading hours are. This is really helpful for the traders as it is almost impossible for the traders to calculate the volatility of the pair manually, as you can find dozens of currency pairs in the market. The forex calculator can calculate the volatility of more than 30 currency pairs by utilising the historical data. It also enables you to see the change in pips and percentages of every foreign exchange currency pair on a regular basis on a nice table.
Among all the forex trading tools, the forex trading platforms are the most important one. The forex brokers offer different trading platforms to their clients at absolutely free of cost. They mostly offer MetaTrader 4 practice account because it is the most popular one. So, if you are a novice trader, this is really advantageous for you, as you will be offered a demo account to practice on it.
Another important tool is currency correlation. You need to know about this tool in order to trade with more than one pair. Some of the facts that you need to understand about the currency correlation, are-
You should search for a negative correlation in case of hedging function.
In terms of diversifying, you need no correlation.
You should find out a positive correlation, in case of increasing exposure.
When deciding to trade forex you will have to make the logical decisions in order to choose what tools are actually the ones you need for your style of trading.