Tools You Need to Begin Trading Forex

Tools You Need to Begin Trading Forex

Reading time: 6 minutes

Forex, or ‘foreign exchange’, involves the buying and selling of foreign currencies, arranged through what’s known as ‘currency pairs’, such as the EUR/USD (euro versus the US dollar) and USD/JPY (US dollar versus the Japanese yen). Interestingly, the Forex market is the largest and most liquid market globally, with a daily turnover of over 7 trillion dollars.

Currency pairs are grouped into three primary categories: Major currency pairs, Minor currency pairs and Exotic currency pairs.

• ‘Majors’ include the US dollar and are generally traded against other liquid currencies, such as the British pound (GBP) and the euro (EUR).
• ‘Minors’, which can also be termed as ‘Crosses’, are less liquid and do not include the US dollar; so, think of the EUR/GBP currency pair as an example.
• ‘Exotics’ can include the US dollar but are traded against illiquid currencies from developing and emerging markets—think Hungarian forint, for instance.

Forex Trading Tools for Beginners

• Forex Trading Platforms

The first tool to begin trading in the Forex market is the need for a trading platform, usually provided by your chosen brokerage. Without this tool, you will, quite clearly, find it challenging to start trading. Among other things, a trading platform facilitates the buying and selling in your chosen market; it also provides charting solutions to help conduct analysis.

The most widely used trading platforms among retail traders are Metatrader 4 (MT4), MetaTrader 5 (MT5) and cTrader. All three platforms offer numerous features, including built-in technical indicators, real-time market conditions, and access to demo Trading Accounts at most Forex brokers.

• Social Trading Platform

With FP Markets, new traders can find, follow and mimic successful traders with the FP Markets Social Trading platform. Social trading provides beginner traders with the ability to invest in the markets, knowing they’re investing alongside traders who have proven they can trade the markets consistently.

With social trading, the user has the freedom to pick and choose Strategy Providers based on their data. Once a Strategy Provider is selected, their trades will be mimicked on your Trading Account (settings can be changed for things like risk and markets traded).

• Forex Calculators

While it is recommended to understand the manual calculation of, say, pip values, position size and margin, Forex calculators can provide an easy-to-use method of accurately measuring the aforesaid values for new traders who are just getting their feet wet.

The FP Markets dedicated Forex Calculator delivers the complete package, from currency conversion to position size calculation.

• Economic Calendar

Whether you employ technical analysis or fundamental analysis to assess the FX market, having access to an economic calendar is imperative. An economic calendar will detail macroeconomic events, like central bank rate announcements, central bank speeches and economic data (think growth [GDP] and inflation [CPI]).

As you can see, each economic event is labelled to reflect its potential impact (High, Medium and Low); some economic events will have more influence on the financial markets than others at different times. High-impact data are often referred to as tier-1 risk events.

• Time Zone Converter

The Forex market is divided into trading sessions, largely separated through the Asian session (Sydney and Tokyo), the London session and the US (New York) trading session. While it can be confusing at first with all the different cash market opening hours to include, most FX trading begins at 8 am until 5 pm in each country.

However, there is no need to work this out manually; several free Forex market converters are available that can help.

Which Forex Trading Tools Are Right for You?

It would be surprising if new traders did not employ all the above-noted trading tools. In fact, many of the tools highlighted in this post are regularly used by professional traders.

To help familiarise yourself with the available trading platforms, consider opening a demo Trading Account with FP Markets. In addition to this, you can also explore the Forex calculator and the dedicated Economic Calendar with FP Markets as you test-drive the platforms.