Traders Blog

Essential FX Trading Tools for 2019
24/01/2019

The 2019 Trader Tools Kit

Professions and tools go hand in hand — whether you’re a doctor, a builder or a trader, in order to perform your job at the highest level, you’re going to need apparatus that’s specific to your craft. Even though gear alone will never be enough to excel in any walk of life, it’s an unquestionable component for success. Trading is no different to other professions. On the contrary, trading tools might just be as important as experience, knowledge and skill. Forex trading is a highly technical endeavour and the right tools might just be the difference between winning and losing a trade.

Let’s take a look at some of the most essential trading tools for 2019.

Forex Events Calendar

This might seem like an obvious one but so is brushing your teeth in the morning — not everyone is disciplined enough to do the obvious. The Forex events calendar is exactly what is says on the tin, a calendar that showcases the most important events that will move the trading needle. From unemployment rate number surveys and tax reports to interest rate announcements and central bank press conferences, there is a multitude of events that can drive significant movements for currencies, indices, commodities and all other trading instruments.

Some of these events can’t be predicted or scheduled. For example, political unrest can spiral out of control at any time around the globe and that’s why traders need to have a sense of urgency at all times. Taking the unpredictable outside the equation, there are a lot of events that are scheduled on specific times and dates that can prove to be instrumental in how you handle your trades. The Non-Farm Payrolls for example, are announced on a monthly basis and have a big effect on the value of the USD ($).

Broker

This might sound a bit odd as most of you might think of brokers as a service rather than a tool. If you really think of how you’re utilizing the capabilities of a broker though, you’ll soon realize that choosing the right broker is nothing short of adding a powerful trading tool to your tool set. A lot of people throw around the phrase “right broker” but the jury is still out on what the real definition of this expression really is. The reason? Because when it comes to investing, each case is unique and so are the needs and wants of very trader. The right trader to one person might not necessarily be the right trader for another person. In saying that, there some attributes that are applicable to all trading use cases. A brokerage that owns a diversified portfolio of trading options and can provide excellent customer support around the clock are necessary qualities for everyone.

The Aroon indicator

Developed by PhD, MBA Tushar Chande in 1995, Aroon is known as the trend indicator system. Before we explain what it does, here’s a little bit of trivia: “Aroon” means “Dawn’s Early Light” in Sanskrit which translates into the algorithm’s main use. Its main use is to help traders unearth a trend at its infancy, enabling you to either make profits or protect the funds in your account. It basically helps you identify if an instrument is trending and whether that trend will last. For a more detailed analysis on how to actually trade using the Aroon, please read more here.

Correlation Matrix

Before delving into the meaning and use of the matrix, it’s essential to identify the meaning of correlation in currency trading. Correlation refers to the relationship between changes in price from one currency in relation to another. In financial terms, correlation is identified as the numerical measurement between two different values. As Forex trading is by nature the exploration of relationships between currency pairs, the correlation matrix serves as a charting preview of these relationships, notifying traders of the pairs movements. When pairs have a mutual direction, they have a positive correlation and a negative correlation occurs when they move in opposite directions.

On how to actually calculate and prepare the correlation matrix read more here.

Charting

Charts are a trader’s first friend. When you’re new to the trading game you’ll be exposed to a whole lot of charts. If you break down into simple words, Forex trading is essentially interpreting data on a chart, on a screen. With that as our baseline, it only makes sense that a charting software comes into play as one of the most important trading tools for beginners. Most trading platform do offer this tool as free, featuring functionalities such as research, stock screening, and analysis. Despite that, there is always the temptation to want to go beyond and acquire a plugin that’s independent and more specific to your trading tactics.

Should you go for it? Yes and no. When you’re just starting a new endeavour, whatever the context, you should employ a trial and error tactic. See what works and what doesn’t work before you make any serious moves. Think of it this way, you’re not buying a Harley Davidson after your first bike-driving lesson. Same with charting software, before making a move to buy one, see how well the free version serves you or even take up a free trial of the independent ones.

Fibonacci Retracement

Don’t let the name scare you. Fibonacci retracement is actually a very common tool used by a lot of traders in order to identify transactions and trades at strategic spots, targeting specific prices or stop losses. You essentially a recent trough and peak and you divide what separates them by the key Fibonacci ratios. This technical analysis technique is used by investors to see if an instrument will touch upon an area of support (stops going lower) or resistance (stops going higher). Fibonacci retracement price levels can be used as triggers to buy or establish a new position.

Conclusion

The list of potential trading tools is endless and our list is by no means suggesting these are the only tools available. Our list just gives you a very strong combination of tools that can help your trading journey in 2019. An arsenal of trading tools that is versatile as much as it is essential.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances or needs.
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