Grab Your Toolkit

By: harwich
To be a successful FOREX trader you will need to learn to use the various tools that are available to assist you. Some tools are designed to help you with analyzing the market where as others will assist you in the actual buying and selling. Tools can be used to help automate some of your trading as well as help protect you against loss; these tools are quite necessary due to the volume and volatility of the FOREX market.

Information is the secret to success in the market place and lots of it. For a trader to make informed and intelligent trades they need large quantities of information, the going exchange rate is just the beginning. Many of your FOREX brokers will provide the necessary information on their websites. They provide such information as historical data as well as political and economic news.

Frequently successful trading will depend on being able to accurately predict if a currency is going to react negatively or positively to current economic and political conditions. If the trader can determine whether the currency value will rise or fall then they will be in a position to profit from it.

When you trade you will either be trading reactively or speculatively. If you trade reactively this means you react to the political and economic conditions. The other alternative is speculative which means you attempt to predict the markets reaction in the future. Most of the currency trading is speculative trading, but to perform either method of trading you need to have access to real time information.

When trading you will need to use technical and fundamental analysis. Fundamental analysis includes political conditions, economic conditions, interest rates, and unemployment rates. Technical analysis uses historical data to try to identify trends and patterns. All this information is available in real time via the Internet. Most brokers have news feeds and streaming rates available in real time on their websites so you can be informed of changes in the market as they happen.

While this information can help you decide which currencies to purchase and when there are many more tools available to help you increase your profits and reduce your risk.

You can use the Risk Probability Calculator to find trades that are more likely to increase than decrease. This same tool can be beneficial in determining your entrance and exit points.

You can use Pivot Points to determine which way direction a currency price will move. They can also help you determine if the price is in the normal trading range or not. Calculating an average of the currency's high, low and closing price determine Pivot Points.

PIP value calculators help you determine the actual dollar value of a pip in a certain trade based on the lot size. This allows you to see the actual profit or loss associated with market movement.

Once a trader has decided which currency pair to trade, he logs on to his online brokerage account. The selected currency pair is entered and the current exchange rate appears on the screen. The amount of the currency to purchase is entered. Some brokers will also allow you to specify a risk amount, which will automatically enter a Stop Loss order.

Then you will get a final confirmation screen, once you accept the information on this screen then your trade request is in place.

You can use a Stop Loss Price to limit the amount you can lose but you can also use a Take Profit Price to automatically close your position when the currency reaches a certain price. If you choose not to use these options then you will need to closely watch the price of the currency and close your position to either reduce your lost or take your profit.
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