Basic Tools for Working in Forex
For those who want to do forex trading, there are some essential and cheap tools that allow traders to be always updated and aware of what is happening on the market, but also of the evolution of the invested capital.
For the trader who needs a steady flow of information to support his operations, it is essential to get among his forex tools, a complete calendar of events and macroeconomic data.
The volatility in the forex is something always present, but it is often generated by surprises on an economic data or statements from some central bankers. Having a reliable forex tool on the monitor can provide us with a constant stream of information and is therefore essential.
When we start trading on the forex, we can see there are some recurring terms, such as the pip, or the smallest unit of measure of an exchange rate. Many traders, however, even knowing superficially the meaning of a pip, do not know how to calculate the potential profit or loss of an operation through the use of the pip.
And here comes another indispensable tool to the daily forex operations: the pip calculator. The value of each pip is not fixed, but it is variable depending on the size of the open operation. If we go long on EurUsd buying 100.000 Eur ( and selling Usd ), and considering that each pip is worth 10 units of the secondary currency, then we can deduce that each pip has a value of $10. Just to give an example: if we go long on EurUsd at 1.3600 with 100.000 and the currency pair rises up to 1.3700 (+100 pips), then we will get a profit of $1000. This calculation cannot obviously be done every single time manually, but most of all the rules could change basing on the pair used in the trade. For example, on UsdJpy, where Jpy is the secondary currency, we have a different scale on which to work with 1 pip that applies in this case to 100 Jpy.
For this reason, it is good practice to have on our desktop or between the bookmarks of our browser, a pip calculator.
A third and crucial tool to use when doing forex trading is the margin calculator.
Margin and leverage are two terms widely used by traders and this happens because it is possible to move much more money with a trade respect to the amount on the forex account with the broker. In fact, with a 100 leverage, we can control 100.000 Usd with just 100 Usd. This is positive if we correctly interpret the direction of the trend, but it is terribly wrong when there is a mistake, as the whole capital can be lost in a few minutes.
The broker allows us to operate in this way, provided we have a necessary margin to operate and when this is missing, the broker starts the so-called “margin call” to force the trader to place money on the account or to close the position.
For this reason, the margin calculator forex tool is essential to manage our money wisely and avoiding the exposure of all the misfortunes in the market.