List of Best Forex Tools Every Trader Should Know

There are many tools available for Forex traders to utilize and improve the winning ratio of their trades. For example, traders can make use of the economic calendar. It lists all of the major economic announcements during the week.
 
The list includes the date and time of the actual release, the type of economic report, and the currency which will be affected by the announcement. Besides listing the actual outcome of the report, the economic calendar also shows the value of the previous release, as well as analyst consensus. The majority of Forex economic calendars also show the degree of expected volatility after the release of the actual report.
 
This is a very handy tool for market participants. It helps them to identify the events which have the most significant influence on currency pairs. In addition, the Forex economic calendar can also give traders an opportunity to get some idea when to expect an elevated degree of volatility in the market. Finally, this tool can help market participants to come up with potentially lucrative trading ideas.
 
In addition to this one of the best forex fundamental analysis tools, we will discuss 6 additional items, which can be very helpful for improving one's trading performance.

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Forex Economic Calendar

As mentioned above, the Forex economic calendar helps traders to keep track of all important announcements during the week. In order to better visualize this important Forex tool, let us take a look at the sample from the Axiory economic calendar:

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As we can see from the image above, the Axiory brokerage company websites list all of the economic announcements with Greenwich Mean Time (GMT), in order to avoid confusion with different time zones across the world.
 
Next, it shows the flag and currency of the country, which will be most affected by the upcoming announcement. This is followed by the description of the event, such as ‘interest rate decision’, ‘consumer confidence index’, and other types of announcements. This is followed by the expected volatility indicator. If the area is left white, then it means that there is very little expected fluctuation in response to the announcement. The small purple line shows the average expected volatility, while the large purple line denotes the high levels of expected fluctuation.
 
The next section on the calendar shows the actual value of the announcement, followed by analyst consensus and previous release.
 
One thing we can notice here is the fact that the economic calendar also shows national holidays. The reason for this is the fact that during those types of days, the trading is closed in the country. This obviously makes the currency in question less volatile, than under the normal circumstances.
 
We can also take note of the fact that it does not only include quantifiable items, like the interest rate decisions or unemployment, but also the speeches and statements of the central banks and even some government officials. This is because in those speeches those important policymakers express their opinions, which can have a major impact on their future decisions.
 
Therefore, many professional Forex traders and financial commentators do listen to their statements and try to find some clues about the future path of the policy. It goes without saying that the speeches of the chairman of the central bank can have the most significant influence on the exchange rates. However, statements of the council or board members can also affect the Forex market, because they get to vote on interest rate decisions.
 
Finally, we can notice that there are some economic releases for every single business day. However, the majority of those markets have low volatility. Therefore, those events which are followed by the elevated degree of fluctuations are comparably rare, and therefore, their effect on the Forex market can be even more notable.
 
These were just some of the examples from the typical economic calendar. The list of some of the important economic announcements includes such items as:
 
  • Gross Domestic Product (GDP)
  • Interest Rate Decision
  • Consumer Price Index (CPI)
  • Non-Farm Payrolls (NFP)
  • Initial Jobless Claims
  • Trade Balance
  • Consumer Confidence Index (CCI)
 
 
Therefore, at the start of each trading day, traders can take a look at the economic calendar. Here they can observe which currencies will be most affected by the latest announcements and plan their trades accordingly. It is not surprising that some experienced traders consider the economic calendar to be one of the best fundamental analysis tools for Forex trading.
 
Here it is worth mentioning that some experienced traders usually avoid trading such important news releases as interest rate decisions and non-farm payroll (NFP) announcements. The reasoning behind this is the fact that the Forex markets during those times tend to be very volatile and unpredictable.
 
For example, in general, when a central bank cuts rates, theoretically this should be followed by the depreciation of its currency. However, this is not always the case. Sometimes, these decisions might already be priced in and the currency in question might rally considerably against the expectations. Therefore, some professionals prefer to wait, let the market settle down, and then open positions accordingly.


Time Zone Converter

The time zone converter is another one of the best Forex tools free of charge. This can be a very helpful tool for traders in several ways. Firstly, it allows market participants to keep track of opening and closing times of all of the major markets in the world. This can be useful for predicting the volatility of different currency pairs.
 
For example, at times when only Asian markets are open, the Forex market might fluctuate by less, compared to when European markets open as well. The expectation for this is the fact that as more markets are opening, the volume of trades rises, which in turn, makes a higher degree of volatility more likely.
 
Another benefit of having a time zone converter tool is that it makes working with economic calendars much easier. The reason for this is very simple. Some traders might live in different timezones, compared to the one displayed by the economic calendar. Therefore, this tool allows the market participants to convert times between different time zones and keep track of the times of the latest economic news releases much easier.


Trading Journal

Market participants can also keep a trading journal, which can help them to keep a record of their past trades. In fact, one does not need to purchase the best Forex tools software in order to make this happen.
Starting and keeping a trading journal is rather simple. One can do this using excel or even a notebook. The basic principle behind this is that it has to have several columns.
 
It is worth mentioning that the proper trading journal should include the following items:
  • The date at which the trader has executed a given trade.
  • The currency pair or commodity, where the market participant opens the position.
  • Buy or Sell, Information about whether a trader bought or sold the given security.
  • Actual price at which the market participant opened the position.
  • The closing price at which the trader closes its trade.
  • Amount of gains or losses in pips.
  • Amount of gains or losses in dollars, euros or whatever currency trader is using.
  • Additional notes: items such which indicators or strategies were used.
 
This is just the typical trading journal for Forex traders. Obviously, traders can change the order of the displayed items, or add additional sections, according to their preferences. For example, carry traders might decide to add additional columns to the journal, such as:
  • Key interest rates for two currencies, involved in the carry trade.
  • Interest rate differentials between those two currencies.
  • The daily amount of swap.
  • Total swap earnings on a given trade.
  • Changes in interest rates in the duration of the trade.
 
For some traders keeping a trading journal might seem like a rather boring task and unnecessary burden. However, here it is worth remembering that this tool can have some significant tangible benefits to market participants.
 
Firstly, keeping a trading journal allows traders to analyze their trading performance on a regular basis. With this tool, the market participants can work out the average monthly payouts or losses per month. In this way, they can also measure the degree of progress they have made over the months. In order for the trader to keep up with the motivation, it can be very helpful to know how much he or she is earning on average on a monthly basis.
 
This can also be useful for traders in the sense that with this tool they can identify those currency pairs, with whom they have earned the highest payouts and the ones with whom they suffered the most severe losses. Consequently, market participants in the future can focus on trading those currency pairs, where they had the best results.
 
Finally, by writing down indicators and strategies, which traders used with past trades, they can identify and learn from their mistakes. For example, if one particular indicator turns out to be misleading or one strategy seems to be ineffective, market participants can eliminate those and choose the ones which produced the best results.


Trader Sentiment Indicator

Trader sentiment indicator is yet another one of the best tools for Forex trading. It can help traders to make more accurate decisions when trading with currency pairs. The most common trader sentiment indicator displays the percentages of buys and sellers in the market.
 
Obviously there can be several scenarios here. For example, if the trader sentiment is at 50/50, then it shows the indecision in the market and does not give any indication one way or another. On the other hand, if the indicator is at 55/45 or 60/40, this shows that buyers are getting an upper hand and as a result, they might keep pushing prices higher. The opposite is also true with 45/55 or 40/60 because in this case, sellers are gaining momentum.
 
Now considering those cases, mentioned above, one might expect that when the trader sentiment reaches such extreme levels as 75/25 or 80/20, then this might be an even stronger bullish sign. However, this is not necessarily the case. In fact, very often this state of affairs very often might precede the reversal. The reason for this is that as the market reaches extreme levels, there are fewer buyers to join the market. As a result, very often buyers can not push prices even higher and the market changes its direction.
 
Therefore, regular monitoring of trader sentiment can be very handy for traders to identify the latest biases in the market, as well as for finding potential reversal points.


Forex Calculators

Forex Calculators can be one of the best Forex tools for traders. There are different types of those, including ones for calculating swap rates, potential payouts, pips, margins, and currency exchange calculator. Let us go through each of those in greater detail.

Pip Calculator

The pip calculator is a very basic and simple tool to use for traders. Here traders can calculate pip value in terms of dollar amounts for a given currency pair.
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As we can see from the chart above, taken from the Axiory website, the trader here needs to choose the currency of their trading account, the asset class and also specify the currency pair with volume in lots. Once the market participant fills out those details, then he or she can press the green ‘calculate’ bottom, which will then display the results.
 
Here one can see the current conversion rate and pip value. The latter indicator shows the amount of gains or losses per pip change for a trader in dollar amounts. It goes without saying that pip value can vary greatly, depending on the currency exchange rates.


Margin Calculator

The margin calculator can be very helpful for planning leveraged trades. Here traders should specify the specific currency pair they wish to trade, the currency of the trading account, the level of leverage used, and volume in lots.
 
The displayed results will show the amount of required margin for the opening of that particular position. The exact sum, which the brokerage company will require depends upon the amount of leverage and the current exchange rates. Therefore, this tool can help traders to make necessary calculations, before opening trades.


Profit Calculator

The profit calculator can be very useful for forecasting possible gains and losses with one particular currency pair. Here traders need to specify the currency of their trading account, volume in lots, buy or sell and the opening price. Finally, traders can also fill the stop-loss and take profit fields, where they can write the price levels for those orders.
 
The results will show the amount of potential winnings or losses in the case of triggering stop-loss or take profit orders. Therefore, this tool can be especially useful for choosing a proper risk/reward ratio.
 

Currency Conversion Calculator

The next tool in our list is just a simple currency exchange calculator. Here the trader only needs to identify two currencies in question and enter the amount for conversion. The results will display the current exchange rate, as well as the equivalent of the amount, specified by the trader in another currency.
 
Here it is worth noting that those types of calculators are not only useful for Forex traders, but also for investors interested in investing in foreign bonds or stocks. This tool can also be very useful for people transferring money or traveling abroad since this helps them to make the necessary calculations easily.


Swap Calculator

The swap calculator is indeed among one of the best tools for Forex traders. This can be especially useful for those market participants who are often engaged in carry trading.
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As we can see from the above image, also taken from the Axiory website, traders need to choose the currency of their trading account. After taking this step, the market participants must specify the asset class, the currency pair, and the volume in lots. After filling out all those details, the trader can click on the green ‘calculate’ bottom and see the results.
 
The calculator will display the current exchange rate, as well as the amount of swaps in case of long and short positions. In our example, the calculator shows that for opening and holding a short AUD/CHF position a trader must pay a daily $4.14 rollover fee as long as the trade remains open. On the other hand, if a trader opens and keeps a long AUD/CHF position, he or she will receive a daily interest swap, worth $1.05 per day.
 
This tool can be very helpful for planning potential carry trades in advance. Here traders can calculate the amount of their monthly earnings from each carry trade. Consequently, traders can choose those currency pairs and positions which offer the highest returns.


Heat map

Another one of the best Forex trading tools, the Forex heatmap helps traders to visualize the scale of movements by different currency pairs. The basic principle here is very simple. The chart displays currency pairs in the Forex market. The pairs which have risen significantly in percentage terms are displayed in full green color. At the same time, the securities which have risen slightly are usually shown in a very light green color.
 
On the opposite side of the spectrum, the currency pairs which fell dramatically in percentage terms are displayed in full red color. On the other hand, those securities, which only fell slightly, are shown in a light red color.
 
This might seem a very simple Forex tool. However, it is worth mentioning that heat maps can have a significant practical value. Looking at normal price quotes, traders might search for dozens of currency pairs, before they could identify any significant move at the market.
 
In sharp contrast, by looking at the heat map, traders can immediately identify those currency pairs which experienced the most amount of fluctuations during the day or other specified period of time. Consequently, this tool can be a very handy item for quickly analyzing the latest trend in the market. As a result, this in turn, makes it much easier for market participants to come up with new trading ideas.


Currency Correlation Matrix

Finally, the currency correlation matrix is indeed one of the tools needed for Forex trading. This allows traders to identify the degree of positive or negative correlation between different currency pairs and make more informed trading decisions.
 
This can help traders in several ways. Firstly, this is a useful tool for risk management. The fact of the matter is that if a trader opens the same position with two highly positively correlated currencies, then instead of diversifying, one increases the risk level.
 
This is because positively correlated currencies tend to move in the same direction. Therefore, by knowing which pairs have such a relationship, traders can avoid making this mistake and consequently reduce their risk exposure.
 
The currency correlation matrix is also helpful for the planning and execution of some hedging strategies. For example, traders can identify two highly negatively correlated currency pairs and open long or short positions with them. In this way, market participants can hedge against potential risks of unpredictable currency fluctuations.

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Best Forex Trading Tools - Key Takeaways

  • At brokerage companies and Forex news websites, there are some of the best free Forex tools available for traders. They can use those to improve their trading results and make more informed decisions. One of the most famous tools traders can make use of is the Forex economic calendar. It lists all of the important announcements during the week and currencies, which are most likely to be affected by those. It can be a handy tool for coming up with some trading ideas.
  • The Forex calculators can be one of the best free FX tools one can find online. For example, traders can utilize profit calculators to not only plan future trades but also to make sure that the risk/reward ratio is appropriate. At the same time, the swap calculator can be a very handy tool for carry traders. This allows market participants to calculate and compare the daily interest income they would receive from different currency pairs.
  • The heat map is indeed one of the best Forex tools 2020 traders can use. Instead of going through dozens of currency pairs, it allows market participants to quickly get a general idea about the latest developments in the market. All traders need to do is to look at fully-colored currency pairs to identify those securities which made some significant gains or suffered some serious losses. Therefore it can be a useful tool to analyze the situation at the market.


FAQ: Best Forex Analysis Tools

Can the same type of economic events have different expected volatility in the economic calendar?

In some cases, for example, interest rate decisions always have a major impact on the Forex market, regardless of the currency in question. This is because those types of decisions determine how much return one can receive from fixed income instruments in a given currency. Interest rate decisions have a decisive effect on the potential payouts traders can earn from carry trades.
 
On the other hand, there are some items on the economic calendar which can have different levels of significance in the case of two currencies. For example, the unemployment rate in the US is a very important indicator and its release can trigger a significant degree of volatility.
 
This is because the US Federal Reserve has a dual mandate of price stability and full employment. Therefore the latest unemployment rate announcement can have a significant impact on the decisions of US policymakers and can trigger a period of higher volatility for USD-based pairs.
 
At the same time, this news item might have much less impact on the Euro. Here it is worth noting that the European Central Bank has a single mandate of price stability. Therefore the latest release of the Eurozone unemployment rate might not have a significant impact on the decision-making process of the ECB council members.


Is there any alternative way of keeping the trading journal?

For those traders looking for more convenience and analytical value, there are also paid trading journal programs one can use. Those types of software allow traders to import their trades from the brokerage accounts.
 
Some of them also have analytical tools, which help market participants analyze the latest dynamics of their gains and losses. In fact, some people consider that trading journal software is some of the best tools for Forex 2020 traders to use.
 
However, it is worth noting that traders do not necessarily have to pay money in order to keep a trading journal. They can do this for free, by updating their excel or notebook journal on a regular basis.


Is the trader sentiment reaching an extreme level is always a sign of reversal?

The trader sentiment reaching extreme levels is indeed often a sign of upcoming reversal. However, it is worth noting that this is not always necessarily the case. There are several scenarios, where the high proportions of buyers or sellers might be caused by an interest rate decision, major geopolitical event, or some other reason, which makes selling or buying the currency a logical decision.
 
Therefore, making conclusions about the viability of a given trade, solely based on trader sentiment can be very misleading. Instead, it is always a good idea to check several other indicators as well, before making a trading decision.


Can the Forex swap calculators be inaccurate in some cases?

In general, if there is no technical fault, Forex swap calculators tend to be accurate. However, one thing to keep in mind here is that the swap rates themselves are constantly changing.
 
Changes in central bank interest rates, Libor rates, and some other indicators can all have a significant impact on the latest rollover rates. Therefore, it is best to use Forex swap calculators as estimators, rather than exact predictors of future earnings.


Why does the Currency Correlation Matrix need to be updated regularly?

In many cases, the relationship between two highly correlated currencies can last for years. However, sometimes due to several economic reasons, they might start to diverge. The last example of this was the relationship between the Australian dollar and the gold price. For at least 2 decades they moved in the same direction.
 
However, as the Reserve Bank of Australia started reducing rates gradually from 1.50%  to 0.25%, those two assets diverged from each other. During the late spring of 2020, the old relationship was restored. So this shows that traders should use the updated currency correlation matrix in order to come up with correct conclusions.

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