Forex markets have a wide variety of data. As a trader or investor, sieving through this information and analysing it may prove tiresome and may defeat the process if ultimately, the trader makes the decision not to buy the currencies analysed. For this reason, brokers and exchanges include assistive tools and methods such as charts, forex calendars, correlation tools, and time zone converter, among others. The purpose of these tools is to aid the trader in research and decision-making without having to analyse the actual data. Viewing everything at a glance saves time.
The assistive methods include:
- Forex Calendar
- Correlation Tools
- Time Zone Converter
Forex charts display the price movement of two currencies (currency pairs) over a given period. A chart may represent the Euro/Dollar currency pair. They highlight the history of the currencies, thereby enabling traders to understand how they performed in the past. Upon examination of the historical behaviour, the individual can predict future prices. Notably, live FX charts show real-time changes in the prices.
Brokers provide a wide range of FX calendars. Some calendars show important events that are expected to impact the prices of currencies. Others show holidays in important markets. Forex economic calendars show important news releases and updates that impact the forex market. Examples of these calendars include the forex factory calendar which, besides providing the exact date, also contains time-stamps for when an event took place.
Currency correlation refers to the movement of one currency relative to another. For instance, in a currency pair, both may rise or fall while in another case one may rise in value as the other falls. Forex correlation ranges from -100% (negative correlation) to +100% (positive correlation). The former is used when the currencies are moving in the opposite direction while the former relates to when they are following the same trajectory. Brokers and exchanges provide correlation tools that display the historical correlation analysis for different currency pairs. These forex tools are essential for traders who trade multiple pairs. Conducting correlation trading analysis reveals the amount of risk the individual is exposed to.
Time Zone Converter
Forex time zone converters enable traders to convert the trading hours for major markets into their local time zone. The difference in time emanates from the fact that the currency market depends on activities of brokers and financial institutions that have their individual operating hours.
Importance of Trading Tools
Assistive tools are important as they make traders’ and investors’ work seamless and easy. Exchanges and brokers, therefore, strive to make their platforms as attractive to potential customers as possible. They provide assistive tools such as charts, forex calendars, correlation tools, and time zone converters, among others. They aid in decision-making.
First, the trader should identify the type of chart. Line charts only represent the closing price over a period. Bar and candlestick charts represent the opening, closing, high, and low prices. The top horizontal line shows the closing price. The bottom line shows the opening price, the top part of the vertical line shows the high price while the bottom part of the vertical line shows the low price.
The calendar consists of dates and timestamps. The traders click the exact date whose events they want to view and the online calendar automatically lists everything.