In this article, we will identify three important tools that a trader can use to enhance his forex trading endeavours. If you believe in the saying that the best things in life are free, then these tools fulfill the words of that saying because they are in fact, available for free online. All you need to do is to use the search engines and you will get access to them.
The Candlestick Recognition Tool
Candlesticks are a representation of the price action in the Forex market. Unlike the other representations of price such as the line and bar charts, candlesticks actually tell a trader what other traders are about to do in the market. That is why we have candlestick patterns that indicate price continuation or price reversal. Being able to recognize the various candlestick reversal patterns will help a trader to take the right position in the market for profits, or to exit a position if the candles show that contrarian moves are about to take place.
Many traders will not find it easy to recognize all the candlesticks that there are, but there are tools that will aid a trader’s recognition of important candlestick patterns. Many are using them to trade precious metals and gold stocks. These candlestick recognition tools are available on the internet as custom indicators or trading platform plug-ins. Some are free while others are available for a fee. Now this tool will only highlight the candlesticks for you. You still need to know when to pull the trigger when the candlesticks give you a signal. Generally speaking, bullish reversal candlesticks are used to generate buy signals in oversold market conditions, while bearish reversal candlesticks are used to take positions when the market is overbought.
Pivot Point Calculator
Pivot points are key price levels that indicate when prices may reverse, or stall before continuing their advance. They indicate areas of support and resistance. In the forex market, prices will generally move within the range of the pivot points. As such, knowing the pivot points for a particular currency will serve as a useful visual guide in setting price targets and stops when taking trades.
Pivot points are calculated afresh every day from the previous day’s high, low and closing prices. This makes the job of calculating pivots quite dreary. In addition, the trader is prone to mistakes when calculating pivot points and this can lead to errors in making trading decisions.
This is where the automatic pivot point calculator comes in to save the day. Available as a custom indicator or plug-in, it automatically calculates the pivot points and plots them visually on the chart. Once you have attached this software on the chart, it recalculates the new pivot points for a new trading day and plots them accordingly. This tool is widely available for free on the internet and is a must-have for any trader who is serious about making money in the market.
Fibonacci Retracement Indicator
This is available for free on any MT4 trading platform. This tool is used to show the 5 possible levels of price retracements based on historically calculated number sequences. Retracements and pullbacks always occur in the market as traders take profits. In order to know at which point to re-enter in the direction of the original trend after the pullback, a trader can fall back on the Fibonacci retracement tool for this information. In order to determine which of the Fibo levels prices will most likely retrace to, the Fibo tool can be combined with the Stochastics oscillator to make this determination.