Forex - Introduction to tools of trade

Forex - Introduction to tools of trade

There are various tools available to the Forex trader that can be used for the analysis of currency markets and buying and selling currencies. Indeed, software tools are not just available to traders, but the form is absolutely essential part of the trading market and high volume and volatility. Software not only automates many procedures of trading today, but also to protect merchants against large losses.

Successful trading relies on information that should be up-to-date and accurate. Such information will include historical data (and not just currency movements, but also the political and economic events that affect the foreign exchange markets) and current information on currency rates and trade, political and economic developments.

The ability to view this data on screen and in real time and access to historical data quickly and easily allows the Forex trader to make an accurate assessment of the current political and economic conditions and to predict the likely ups and downs of currencies against one another.

Basically there are two commercial methods that are used for buying and selling of currencies - reactive trade and speculative trading. In reactive trading Forex trader buys and sells in response to political and economic events. The speculative trading (which is part of currency trading) Forex trader to make trading decisions based on the prediction of how the market is likely to respond to current political and economic developments. In both forms of trade-date accurate information is essential, as is the analysis of both historical and current conditions.

Traders use both fundamental and technical analysis. Fundamental analysis is based on news about such things as political conditions, economic policies, trade patterns, interest rates and unemployment rates. Technical analysis relies on tracing the historical data to indicate patterns and trends that develop over time. In both cases, traders rely heavily on information, which means the use of live news and streaming rates provide minute by minute changes in the market.

In addition to these general tools for creating a number of other specific tools are also commonly used.

Risk Probability Calculator (RPC) is a tool used to identify those trades that are considered to have greater potential for profit than loss. The risk probability calculator can also be useful in identifying the best exit points for trade.

Pivot points are used to predict movements of currency prices. Pivot points are calculated as the average high, low and closing prices of currencies and you can tell retailers whether or not prices are within the normal trading range.

Pip value calculators are used to tell retailers the value of each PIP (smallest currency) according to many different sizes. Pip calculators can be used to show the true profit or loss resulting from movements in the market.

Information is the key to success in forex trading, but this information is of little use without the means to analyze quickly and in real time so that trading decisions can be made volatile and fast moving market. Mastering the different tools used in trade is essential to success for any Forex trader is.