Trading involves a considerable amount of technical analysis and professional traders often construct complex strategies that need high quality software to successfully implement.
Traders also require tools to navigate different time zones, analyze charts and volatility, keep trading journals and conduct fundamental analyses.
Most trading platforms offer some of these tools ready to use, but there is no one size fits all solution that can render others obsolete. Therefore, traders need to carefully consider the benefits and drawbacks of each piece of software they use to make the best pick for their trading requirements.
There are many different technical analysis tools on the market, but not all of them are easily accessible for inexperienced traders, who may not have the expertise to fully take advantage of some of the state of the art solutions out there.
Cost is one of the key factors to consider when choosing software for any means. Using multiple different pieces of software can be intimidating to most traders on a limited budget.
If you are weighing your options and are curious about the most useful pieces of software for forex traders and what to consider when making a choice – this guide is for you.
The importance of software in forex trading
Trading can be a highly technical process that requires analyzing charts to identify trends, support, and resistance points in the short and long run, which can be simple in some cases, but more difficult during periods of high volatility.
Having access to proprietary software gives traders the ability to navigate the market with ease using advanced charting to find the direct effects of economic news on exchange rates.
Hundreds of companies offer traders access to their trading platforms that include tools that can make trading more convenient for users.
When picking a currency pair to trade, traders need to gather vital information about the currencies and their relationship, as well as the many factors that affect them.
It is one thing to keep track of the news, and another to gauge their effects on a price chart. The trading and charting tools available to traders can help them identify key points on a chart to decide whether to enter a trade or not.
Types of forex software available to traders
Forex traders can gain access to different software solutions geared towards different requirements. Arguably, the trading and charting software contains a bulk of the features necessary for a successful trading experience.
Having access to a well-equipped trading platform is perhaps the most vital requirement of any forex trader. All brokers offer trading platforms with various features that are essential in not just buying and selling forex, but analyzing charts, aggregating market news, formulating strategies, and conducting a well-functioning trading process overall.
Traders pay attention to the user-friendliness of such platforms, as it is essential to have quick access to their trading accounts to adjust and/or exit their positions if the market makes a sharp turn.
Most forex brokers offer desktop and web platforms, as well as iOS and Android apps for traders to execute trades from anywhere without much hassle.
New traders may wish to try their hand at forex but be reluctant to pledge their capital right away. Trading simulators give them the opportunity to simulate a trading experience without the need to deposit actual funds. Using simulators, traders can try out many different strategies and learn the ropes of how to navigate the market without putting their capital at risk.
Simulators are also useful for existing traders, who may have a track record of using a handful of strategies and may want to try something different. They can make adjustments to their strategy and monitor performance to see if any further changes are necessary or if this new strategy is even consistent with their expectations at all.
Most FX brokers offer trading simulators at no additional cost when opening an account.
Traders can obtain charting software from their brokers or from third-parties that specialize in advanced charting solutions.
Charting is essential in trading, as it involves the analysis of price charts, their makeup, key resistance and support points, etc.
Having access to sophisticated charting software can be crucial for traders and allows them to get a better view of price charts, customize them, mark and compare areas, etc.
Technical analysis is the cornerstone of trading and charting software offers different ways of interpreting real world trading data. Having a solid understanding of price charts can help in finding entry and exit points on the market.
The global forex market is constantly changing. News from around the world can shape the exchange rates of currencies – directly impacting the market.
Factors such as central bank policy, economic forecasts, GDP figures, and CPI data are among the key metrics used in evaluating economies and are incredibly important for the forex market.
Keeping track of all of the news headlines and gauging their degree of influence on prices can be a difficult task. This is why having a fast and reliable news wire is so important for traders.
Being informed is a vital step for making the right calls on the market and constructing profitable trading strategies.
News software can aggregate news pieces regarding a particular currency/pair and create a digest for traders to read and base their decisions on.
Some market participants, especially those with limited prior experience, often choose to mimic the strategies of well-established players. This is called copy trading and involves emulating the strategy of an existing trader to match their performance.
While this may have its obvious drawbacks, copy trading is used by hundreds of thousands of traders worldwide.
Brokers that offer copy trading, do so from a pool of accredited traders/investors with a long track record and users can place alerts on the activity of the trader they are following.
Other useful tools for forex traders
Aside from the more complex and essential software available to traders, other useful tools are also available that can reduce the workload for individual traders. Tools such as volatility calculators, major event calendars and correlation matrices all provide additional flexibility to traders and help them be alert and on top of the news and market trends as they develop.
Trade journals give traders the ability to review their performance on a regular basis. Monitoring performance and analyzing winning and losing positions is important for traders, as it helps them identify the weak points in their strategy.
Forex trade journals provide an overview of account performance, average returns, largest winners and losers, etc. This data can help traders clearly visualize their performance and make necessary adjustments to improve it.
Trade journals are useful in identifying certain patterns in the decision making process and prompt traders to adjust in key areas, which may mean trying other currency pairs, order types, or even other classes tied to forex, such as options, CFDs, etc.
Calculators play an integral role in managing a forex trading account and can greatly simplify the more technical aspects of measuring potential outcomes of trades.
Some of the calculators offered to forex traders are:
- Currency converters – show exchange rates in real time (may include prices of precious metals)
- Position size calculators – calculate the required position size based on currency pair and risk level
- Fibonacci calculators – calculate Fibonacci retracement and extension levels
- Pip calculators – calculate pip values based on lot sizes and currency pairs
- Margin calculators – calculate the required margin for a position, based on factors such as: account currency, the currency pair, leverage and trade size.
- Compounding & drawdown calculators – measure the performance of an account based on a fixed gain/loss rate over a specified period of time
- Leverage calculators – calculate the required leverage based on account currency, currency pair and trade size
- Risk of ruin calculators – calculate the probability of the account reaching a drawdown level based on win rate, average trade size, win/loss, risk per trade and number of trades
The economies and countries are related by trade. The currencies of major trading partners are often correlated in how they react to shifting conditions on the market and new economic data.
A correlation matrix shows the degree of correlation between currencies to paint a clear picture of some of the factors that can affect the performance of their pairs.
Having access to this information can help traders identify patterns between different currency pairs and create a shortlist of currencies that are correlated to some extent.
Changing economic conditions can impact forex markets considerably. Most forex brokers offer economic calendars where traders can view the important events that can serve as catalysts on the market and shift prices.
Important factors that can influence the performance of certain currencies on the market include, but are not limited to:
- Central bank policy and important meetings
- CPI data and dates of published reports
- Trade statistics between countries and their periodic updates
- Consumer polls and significant shifts in consumer spending
- Consumer confidence reports and publication dates
- GDP figures and quarterly updates
Keeping track of important events and reports can help traders anticipate the effect of data on the market by researching the subject matter and analyzing its degree of influence on a currency.
Things to consider when choosing forex software
Traders have a wide array of software solutions to choose from. Deciding which ones are best can be a time-consuming process. To narrow down the search, traders can create a shortlist of the features important to them, as well as a threshold for the cost and user-friendliness of software.
Traders need direct access to the market to be fast and reliable. Using different suites of software solutions can slow down the process of rushing into the market and quickly placing/closing a trade. The degree to which a piece of software is easy to access can be very important for traders. Nobody wants to wait too long for their software to boot up while time is of the essence. Some trades can quickly turn from profitable to disastrous, which prompts traders to quickly re-enter the market to make necessary adjustments.
An accessible and safe piece of software is essential for a convenient trading experience.
Cost can be an important consideration when choosing any product/service. Forex traders that are new to the market and have a relatively modest budget might refrain from spending much on auxiliary services. Finding solutions that are cost-effective and functional is key.
Forex trading is characterized by tight margins and adding fixed costs for third-party software can reduce account yields considerably. This is especially true for traders that trade without leverage.
However, many of the aforementioned features are readily available for traders once they open a trading account with a forex broker.
Ease of use
When choosing software, traders have the option of using a trial version of said software to test out features and get acquainted with the layout to see if the software is a good fit for them.
The interface and overall user-friendliness are key components of solid trading software and the more complex and feature-heavy a program is, the longer it takes for new users to get onboard.
Taking advantage of trial runs is advised for traders to make sure they can navigate the software easily and provide valuable feedback to providers.
Main takeaways from the best forex software
- Forex traders have access to a wide variety of software solutions
- Software, such as trading platforms, advanced charting tools and news digests are essential for traders
- Additional software solutions, such as trade journals, calculators and calendars can help traders manage workflow more effectively
- Software solutions differ in terms of accessibility, ease of use and cost, which are important considerations for traders
FAQs on the best forex software
What forex software can I use?
Traders can use essential software, such as trading platforms, news wires and charting solutions, while also having access to valuable third-party software, such as economic calendars, trade journals, correlation matrices, etc.
What is the best forex trading software?
Traders can evaluate trading software based on factors such as cost, features, accessibility and user friendliness. The most widely used forex software is MetaTrader, with millions of traders using MT4 and MT5 on a daily basis.
Can I trade forex without software?
While anyone can participate in currency exchange, trading forex requires a broker that can provide a trading platform with additional features that improve the quality of life of the trading experience.