Top 7 Forex Trading Tools That You Need To Know About

Becoming successful in forex trading is not an easy task for a beginner. The forex market does offer a lot of profitable opportunities to everyone who enters it but only those who have enough expertise and skills will be able to catch these opportunities. The market can move in any direction and a trader attempts to make a profit when the situation looks favourable but the risk of it going against you is always there. You will have to deal with this risk to be rewarded in the end. Making the right decisions at the right time is the essence of trading and a trader will need some powerful tools to rely on for decision making. In this article, I will be talking about the top 7 forex trading tools that you need to know about in detail.

1. Position Size Calculator

A position size calculator is a simple tool that is used for determining the trade size in lots. The size of your trade position eventually decides the amount of money being risked for the trade. You are always exposed to the risk of loss in forex trading but you can limit the potential losses through risk management. Risk management is all about calculations and tools like trading calculators have become an integral part of a trader’s toolkit. Such automated tools can quickly calculate trade related values so that you can enter and exit the trades in the right way. It includes various calculators for determining pip value, the potential outcome of a trade (profit or loss) and also position size calculators.

Using a position size calculator is very easy once you know the data that needs to be entered to get the results. You need to decide the percentage of trading capital that you want to risk for the trade as the position size will be determined based on your risk tolerance. It would be ideal to keep it 2% or less as risking anything more would lead to a higher drawdown if there is a loss. Then, you need to enter the account balance, select the account base currency, and the currency pair being traded along with the entry and exit prices. Your stop loss will be the exit price here. Then, the calculator returns the ideal lot size for your trade.

2. Forex Volatility Calculator

Volatility is the key feature of the global currency market and this volatility can be favourable or unfavourable depending on how we deal with it in trading. The volatility calculator helps you to know about the volatility of different pairs for a specific period by choosing the timeframe. This allows you to make better trading decisions as you know how much movement can be expected in the price of a pair. Being aware of the volatility is important for several reasons. Firstly, high volatility can lead to slippage when there is not enough liquidity which is bothersome for traders.

Volatility also indicates the profit potential and risk of a trade. A pair being highly volatile means that you will be able to catch more pips due to the significant price fluctuations. But trading a highly volatile pair also increases your exposure to risk as your losses can also go higher. At the same time, not having enough volatility will also be a problem. Thus, a volatility calculator is an essential tool for choosing the best currency pairs for yourself.

3. MetaTrader 4

MetaTrader 4 is not just a tool but it is a complete package of all the tools that you would need for trading in the currency market. The MT4 software is one of the most used trading platforms among forex traders. Even though the platform was launched in the year 2005, the classic platform has managed to retain its position as the most popular platform to this date. The developers of MT4 also launched MT5 in later years and the advanced successor was also successful. However, MT4 is still the favourite choice of all types of traders due to its user-friendliness and increased accessibility.

The majority of forex brokers have integrated MT4 into their website and you can start trading after making an account with a broker of your choice. However, the trading experience you get on the MT4 platform will also be dependent on the broker and the trading conditions offered by them. But MT4 is loaded with analytical tools like charts, indicators and graphics objects that are needed for technical analysis. MT4 can be an ideal platform for traders who want to keep things simple and get the required information without any confusion. They can install the app on their respective devices, log into their accounts and start trading.

4. Pivot Point Calculator

Pivot points are being used as a key tool for technical analysis. In simple words, pivot points are used to determine the points at which you can open or close a trade position. It can also help you to find the best price level for placing a stop loss for the trade. Pivot points consider the average of the previous day’s high, low and closing prices. This is the point at which a significant shift in the market sentiment is recorded making it a significant level for traders. You will often see the market going from bullish to bearish or vice versa on pivot point levels.

The calculation of pivot points can be very confusing when done manually. Hence, you can use a pivot point calculator to make the calculation process easier. Pivot points are related to the support and resistance levels. Hence, forex traders find them very helpful for identifying the potential price levels at which the trend can change or reverse. Pivot points can be calculated for a day, week or month depending on the timeframe that you want to focus on.

5. Currency Correlation Matrix

In the forex market, the currency pairs are related to one another as many pairs have the same base currency or quote currency. Another thing that makes forex trading interesting is the correlation between different currency pairs. This correlation makes different currency pairs move in the same or opposite direction to one another. When they move in the same direction, there is a positive correlation and when they move against each other, there is a negative correlation. A currency correlation matrix helps us to understand this correlation better while trading with multiple pairs.

Having an idea about currency correlation is important to open trade positions with different pairs. Otherwise, you may end up losing more by going in the same direction with positively correlated pairs. But if you know about currency correlation, you will be able to choose pairs that are not highly correlated or can even hedge the risk by trading correlated pairs. You can use the currency correlation matrix as a powerful trading tool as it lets you know about the type of correlation between pairs along with the degree of correlation. You can use this information to choose suitable pairs for trading.

6. Time Zone Converter

We all know that the forex market has flexible timing and you can trade anytime from anywhere by choosing any of the 4 major trading sessions. The market is open 24 hours a day and all traders can choose their preferred time to trade based on their time zone. The only time you can’t trade in the forex is weekends when the market is closed. But you still need to make sure that you trade during an active trading session as that time the liquidity tends to be highest.

Having enough liquidity is essential for entering and exiting trades with ease. The time zone converter can convert the timings of major sessions to your local time. This way, you can easily keep track of the session timings and session overlap timing even if you are from a different time zone. This allows you to explore the trading opportunities in different sessions.

7. Forex Calendar

Forex calendar, also known as the economic calendar, is a tool that lets you know about the dates and times of important events that have an impact on the forex market. This includes Central bank meetings, economic data releases and more. The economic calendar also tells about the figures from previous releases and also specifies the currency pairs that will be affected by the news event along with the forecast on whether the impact will be high, medium or low.

This is especially useful for those who follow news trading strategies as they get to find good trading opportunities following a news release. Even those who stick to technical analysis need to keep up with the news to avoid the volatility caused by it. Hence, a forex calendar is a tool that every forex trader needs to use while trading.


To conclude, learning to use the right tools can enhance your skills as a trader. But you also need to apply your own knowledge while relying on any tool and how well you can do this will decide the results you get in trading. The key to mastering any tool or skill is continuous practice. So, take your time to practise and trade with confidence.

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