These days, everyone with an internet connection can easily access the dynamic forex market and tap into lucrative trading opportunities. However, becoming profitable as a forex trader requires a sound trading plan and only a small percentage of traders are skilled enough to attain long-term success. The trading results you get in the end greatly depend on the overall trading experience and carrying out the trading process with precision is important to ensure a seamless trading experience. Finding a stable and feature-rich trading platform with the right set of tools is just as important for trading with ease.
In this article, you will learn about the role of forex trading platforms and the tools they provide to users so that you know how to use the forex trading tools for an advanced trading experience.
The Role of Online Forex Trading Platforms
Online trading platforms and forex brokers play a key role in the trading process as one cannot get started with trading if these platforms don’t exist. You cannot access the decentralised currency market on your own and will need a forex broker functioning as a connecting link between you and the market by offering a trading platform. You will have to open a trading account on these platforms to get access to real-time market data and also to place buy/sell orders for opening trades.
These orders will get executed by the broker you have signed up with and they are also responsible for helping you to place bigger-sized trades by providing leverage or margin trading facility. The online trading platforms and brokerage platforms will also provide a margin calculator so that you can easily figure out margin requirements based on leverage and trade size.
Many such tools have to be used in the trading process. Let’s have a look at a few of these tools and the functions they perform.
1. Advanced Charting Tools
The trading platforms come with advanced charting tools that are essential for technical analysis of the market. Trading platforms mostly offer Japanese Candlestick price charts with customisable charting options and different timeframes for analysis. They also come with indicator packages for a detailed analysis of the market situation. You can also use sophisticated charting softwares which comes with additional features and options which are suitable for modern traders.
2. Risk Management Tools
One thing that every trader needs to be careful about is the risk that comes with trading in the volatile currency market. Hence, trading platforms do offer a bunch of risk management tools to help users in dealing with the risk. This includes different order types such as stop loss, take profit and trailing stop loss that can be used for automating the exit of a trade. Tools like pip calculators are also essential for risk management as knowing the value of pips allows you to precisely determine the take profit level based on the number of pips you want to catch.
3. Automated Trading Tools
Automated trading or Algorithmic trading has become a popular solution among forex traders who want to automate the trading process using EAs or trading bots. Using these automated trading systems is best for eliminating emotional bias and manual errors in trading and they can also run on their own with little to no manual intervention. This makes the trading process faster, easier and more efficient.
4. Economic Calendars
Economic calendars are another built-in tool that you can find in all trading platforms. These calendars notify you about the date and time of important economic data releases or events that can impact the forex market. You can apply filters to get updates related to your chosen currency pairs or trading sessions and it even gives a forecast and possible impact of the news or event beforehand, so that you can plan your trades based on this information.
Using Forex Trading Tools for Executing Different Types of Strategies
1. Technical Analysis
As I stated earlier, advanced charting tools that are offered by trading platforms are used for technical analysis which is done by using price data in a visual format making it more comprehensive and detail-oriented. Technical analysts use historical and real-time price data to recognise repetitive patterns in price movements and they find ideal trade setups based on the potential fluctuations in prices based on the ongoing or upcoming market trend. Technical analysis is especially essential for executing price action strategies as they are entirely focused on the price movements.
2. Fundamental Analysis
Fundamental analysis is done by keeping an eye on the fundamental factors such as economic indicators and news events that cause price fluctuations in the forex market. Economic calendars offered by trading platforms are powerful tools that help in fundamental analysis as they make sure that traders don’t miss out on any event or news that can cause volatility in the prices of the currency pairs that they are trading with. Traders who follow strategies like news trading rely on fundamental analysis for making trading decisions.
3. Risk Management
The success rate of any strategy depends on two things. First is the market situation and 2nd is the trader’s ability or skills to deal with the risk that they are exposed to while implementing a strategy. Just having a sound strategy and a favourable market situation does not mean that you will end up making profits as the risk of loss is still there due to the unpredictable nature of the currency market. Hence, risk management is vital for securing your trading capital.
2. Trading Automation
While we talk about trading automation, we tend to think about trading robots and Expert Advisors used for running fully automated trading systems. But many manual traders can also rely on semi-automation which is a flexible approach to incorporate some automated techniques in your trading process. Even the usage of automated tools like trading calculators is a kind of automation as you get instant and accurate results with minimal effort allowing you to make informed decisions.
5. Scalping and Day Trading
When it comes to fast-paced trading styles like scalping and day trading, timing and speed are crucial. Hence, forex trading platforms have added features like one-click trading as this saves the time and effort that is required for placing and executing orders. Besides this, many shortcut keys can be used to minimise the time that will be needed for accessing different tools and features during the trading process. Learning about such functions and features is essential to improve your speed and timing as a scalper or day trader in the forex market.
6. Swing Trading
Swing trading is a medium-term strategy and involves using longer timeframes for analysis. The trades will be kept open for a longer duration which can range from a few days to a few weeks. However, swing traders also need advanced trading tools and charting tools for spotting trade setups and managing their trade positions. Swing trading is not as intense as scalping or day trading and it is an ideal strategy for beginners as trading longer timeframes is considered to be easier than shorter timeframes.
Choosing A Suitable Forex Broker
Choosing the right broker is important to ensure the availability of advanced trading tools and the functionality of your trading platforms also depends on the broker that you rely on for executing the orders. Not to mention that fact the trading results will also be impacted by the trading conditions that are offered by your broker. So, let’s have a look at some factors that need to be considered while choosing your first forex broker.
- Regulatory status- Trading with a regulated broker promises the safety of your funds along with a hassle-free and secure trading experience. Hence, you need to look for regulated brokers and brokers that are regulated by trusted authorities like FCA, CySEC, FCA or ASIC are preferred by many traders based on the jurisdiction they belong to.
- Compatibility – The broker you choose should be compatible with your trading style or strategy and the compatibility is decided by the platform features and trading conditions that are offered by them. For instance, if you want to trade on a specific type of account, then you need to find a broker that provides such an account.
- Available Tools – As a trader, you will be depending on the broker and trading platforms for all the tools that you would need for the trading process. Hence, you need to ensure that the tools that you are looking for are available on their platform before signing up.
- User Experience – You should also sign up for a demo account first before opening a live account as the demo account allows you to check the platform functionality and user experience in a risk-free environment. So, you should finalise your broker or trading platform after testing and comparing the demo accounts of different brokers.
Conclusion
In a nutshell, even if two traders are using the very same broker, trading platform and tools, their trading experience can be very different based on their skill level and strategy. However, those who are knowledgeable enough to utilise the available features and tools in the best possible manner will be able to get the desired results irrespective of their trading style or strategy. You may not get it right in the first attempt itself but you need to keep learning and practising for mastering the trading techniques over time.