Regardless of one’s level of experience, trading on the forex market can be quite challenging in some cases.

The slightest turn of events – whether it is of a technical or fundamental nature – can render even the most well-thought-out strategy obsolete. This is why all forex traders will augment their efforts by using a number of forex trading tools. If you are unsure what exactly to choose, we have compiled a short list of tools that we believe are reliable enough to actually have a positive impact on your trading efforts. Here are the five tools that all skilled traders use.

Pip Calculator Tool

In short, a pip is the lowest possible trading unit for a given currency pair. Its value is highly dependant on the base currency and the counter currency that form the pair. In most cases, currency pairs are listed to four decimal places – 0,0001. In our example, the ‘’1’’ at the end is the pip. Add the fact that traders work with foreign currencies, and you can probably understand why many traders will feel overwhelmed.

To relieve some of the pressure of working with foreign currencies and decimals, you can use a currency pip calculator. This tool allows traders to calculate how much a pip is worth based on certain factors, such as the size of their position in the local currency.

Broker Spread Comparison Tool

To understand the core of forex, one has to be familiarized with the concept of spread. All forex trades are conducted through a middleman – a broker. The difference between the bidding price and the asking price is called ‘’the spread’’. This is how brokers put bread on the table – by calculating and charging that spread.

Ideally, the tighter the spread, the more money the trader will make. This is simply because exiting and entering positions can cost less money on the long term if the trader is capable of executing trades at the better exchange rates usually provided by a tight spread.

If that sounds convoluted, do not worry – this is why spread comparison tools exist. They show the spreads brokers quote on major currency pairs. Furthermore, these tools also let traders filter by currency pair, time frame, trade zone, session, and other relevant criteria that reveal if the broker is offering a competitive spread deal.

Use Charting Software

Forex traders need reliable charting software like people need air – there is simply no way around it. Everything related to forex (including the hidden, more subtle aspects) are visually represented through the software’s indicators. Indicators are either statistics or simply visual cues that reveal the current and future state of the market.

To give you an idea of what we are talking about, here are some of the more common indicators that traders use:

Bollinger Bands – used by traders to spot overbought or oversold securities.
The Fibonacci sequence – an ancient mathematical formula that traders use to spot trends and market shifts.
The Stochastic RSI – series of lines that spot and evaluate entry and exit points.

Note Your Strategies in a Trading Journal

One that forgets history tends to repeat it, and while forex is mainly about spotting patterns and exploiting them to your advantage, this does not mean repeating the same failed strategies ensures success.

This is why the journal is one of the most valuable tools a forex trader can use. By journaling every pair you have identified, successful and failed strategies and other relevant information, you can keep a historical perspective of your trading activity and grow as an investor.

You do not necessarily need to keep a digital record of your activity – simply taking handwritten notes can be a huge help. In fact, research shows that handwritten notes are much more effective for memorizing things than shooting a Word document.

MetaTrader 4 – Trading Platform

If you are having trouble juggling with so many forex tools at once, you might want to give MetaTrader 4 a shot. This is a trading platform designed to accommodate a wide variety of tools and trading styles, as well as offering a few features that will become indispensable once you learn how to use them.

One could consider the MetaTrader 4 as being the ultimate forex tool of the technical analyzer. The platform comes with a comprehensive functionality that provides traders with all the things necessary to chart currency evolutions in real time.

Other useful features involve the ability to trade directly through the platform, automated trading and an ‘’expert advisor’’ plugin that offers tips if you get lost. Furthermore, it is supported by the majority of online forex brokers. For more information about the platform and how to get started with a forex demo account, make sure to check out the linked article.

Conclusion

In the age of online forex trading, it is nearly impossible to be effective without using at least a couple of reliable tools. The tools highlighted in this article will help you not only hone your strategies, but also turn forex trading from a hobby to a sustainable source of revenue.