There are many tools available to the
FOREX trader for analyzing the market as well as for buying and selling
currencies. Software tools are a necessary part of FOREX because of its volume
and volatility. Software can be used to automate some of the trading procedures
and safeguard against losses.
In order to make rational, successful
trades, the FOREX trader needs information – lots of information. Current
exchange rates are the tip of the iceberg – the trader needs historical data as
well as current information about political and economic conditions that could
affect currency prices.
All this information is provided by
many FOREX brokers on their web sites. Successful FOREX trading relies on making
accurate assessments of current political and economic conditions. Being able to
predict whether a currency will fall or rise against another currency allows the
FOREX trader to profit from currency movements.
There are two basic trading methods
for buying and selling currencies. Reactive trading means the trader responds to
changes in the political or economic climate. Speculative trading means the
trader makes buying decisions based on predictions on how the market will
respond to current events. While most FOREX trading is speculative, both types
of trade require up-to-the-minute information and an analysis of current and
historical conditions.
Traders rely on both fundamental and
technical analyses. Fundamental analysis is based on news information about
political conditions, economic policies, trade patterns, interest rates and
unemployment rates.
Technical analysis relies on
historical charting to identify trends and patterns over time. Information
needed for both types of analyses is available in real time on the Internet.
Most online brokers offer live news feeds and streaming rates for observing
minute by minute changes in the market.
All this information can help you
decide which currencies to buy. More tools are available to help you minimize
your risk and maximize your profits.
The Risk Probability Calculator (RPC)
can be used to identify trades that have more potential gain than potential
loss. The RPC can also help you target exit points to end the trade. Pivot
Points can be used to predict movements of currency prices. They are calculated
as an average of the currencies high, low and closing prices. Pivot Point
Calculators tell you whether prices fall in the normal trading range or extreme
trading ranges.
Pip value calculators are used to tell
you the value of each pip (smallest currency unit) according to various sized
lots. Pip calculators can tell you the actual profit or loss that will result
from movements in the FOREX.
Once a trader has decided which
currency pair to trade, they logs on to his online account provided by his
broker. The desired currency pair is entered and the current exchange rate
appears on the screen.
The amount of the trade is entered
(how much currency you wish to buy). Some brokers may give you the option of
specifying the amount you wish to risk. This automatically enters a 'stop loss
rate' into your order.
After the details of the trade are
entered, you will be taken to a confirmation screen where you can accept the
current price on screen.
You may be given the option of
'freezing' the quoted price, meaning the price of your transaction is exactly
what you see on screen without any slippage. Accept the rate and your deal is
running.
Just as you can enter a 'stop loss
rate' to automatically sell the currency if it falls below a certain rate, you
can enter a 'take profit rate' to automatically sell the currency when it
reaches a certain level. If you don't enter a 'take profit rate' you need to
monitor the movement of the currency to decide when to close the deal and take
either your profits or your losses.
In addition to broker tools I have
already mentioned, I have found that the following two sites offer useful tools
to help you make more money:
1.
DashBoard FX
- This is probably one of the the best
FOREX Signals software available today. It offers Real-Time Trade Signals on 5
major currency pairs and a 10 day free trial.
(http://www.free-forex-training-guide.com/DashBoard-FX.html)
2.
NetPicks FOREX Trading System
- They offer great strategies,
tips and advice for making money in the FOREX. Best of all, right now, they are
offering a 2 week free trial.
(http://www.free-forex-training-guide.com/NetPicks.html)
