Forex Analysis Tools

Forex analysis tools will help you make more informed trading decisions, which will ultimately improve your performance as a trader. Today’s market participants have a huge selection of trading tools at their disposal. There are four main categories of analysis tools.

  1. Trend Analysis Tools
  2. Market Analysis Tools
  3. Technical Analysis Tools
  4. Sentiment Analysis Tools

Trend Analysis Tools

Before deciding to buy or to sell a currency pair you need to assess the current market trend and momentum. There are several tools that can help assess the predominant trend, but the simplest is a moving average tool which will give you the historical trend of a pair. The majority of the trading platforms come with built-in technical indicators, and moving average will be one of them.

Moving average example

One of the newest tools out there is PitView. It shows what the liquidity providers (the banks) are doing to manipulate the currency market trends and with this information, traders are better able spot risk and opportunity from market data. There is a free trial of the tool available for 15 days, that you can get by signing up here.

Market Analysis Tools

Forex market analysis tools are standalone tools that assist traders with various calculations and market analysis.

Forex Pair Correlation Tools

Forex Pair Correlation

Forex Pair Correlation

This tool measures the correlation between two or more currency pairs. It will show if the movement of a currency pair is moving in a similar pattern to other pairs, which is helpful for traders because trading correlated pairs can lead to lower profits.

Carry Trade Calculator

Carry Trade Calculator

Carry Trade Calculator

A Carry trade calculator predicts the interest that you will either be paid, or you must pay when holding a trade overnight. These payments will affect your account balance.

Forex Volatility Calculator

The Forex Volatility Calculator predicts you how much a currency is going to move, on average, over any given period. It is calculated by taking the average of the difference between the highest and the lowest price for any time frame. This tool is very useful for determining which currency is most volatile and can give a trader an idea of where stop-loss and take-profit should be placed.

Forex Volatility Calculator

Forex Volatility Calculator

Pivot Point Calculator

Pivot Point Calculator

Pivot Point Calculator

A Pivot Point Calculator is used to calculate pivot points in any trading market, where a market’s trending direction pivots and momentum continues in the opposite direction.

Position Sizing Calculator

Position Sizing Calculator

Position Sizing Calculator

Use a position size calculator to help you quickly calculate the size of your position as having a trading plan and risk management strategy is central to maintaining a healthy portfolio.

Pip Value Calculator

Pip Value Calculator

Pip value varies from one currency to another, so this calculator will help a trader decide how much each pip is worth.

Technical Analysis Tools

Most trading platforms include technical indicators that can be placed on a price chart. They can be broken up into three groups:

  1. Lagging indicators (Example: Moving Averages)
  2. Leading indicators (Example: Stochastic and MACD)
  3. Confirming indicators (Example: On Balance Volume)

RSI indicator

The RSI indicator (Relative Strength Index) is a popular technical tool used to detect overbought and oversold pairs. It is a good indicator of the overall momentum in the market.

RSI Indicator

RSI Indicator

MACD Indicator

The MACD (moving average convergence divergence) is one of the most used momentum indicators as the mechanics behind the tool are quite simple. If the histogram shows a reading above zero, we have bullish momentum and below zero we have bearish momentum. Traders use this indicator to gauge the overall strength of the market.

MACD (moving average convergence divergence)

MACD (moving average convergence divergence)

Bollinger Bands

Bollinger Bands are a technical indicator that is overlayed on price and can be helpful in determining where to take profit, but also where to hide a stop loss order.

Bollinger Bands

Bollinger Bands

Sentiment Analysis Tools

Sentiment analysis tools measure positions of other traders in the market.

Most retail FX brokers will provide you with a short summary of open positions held by their clients. Since 70-95% of traders lose money, this can be a valuable tool to show overcrowded trends. When a majority of traders are in agreement about the current trend, this could be an opportunity to open a position in the opposite direction.

 

Client Open Positions

Client Open Positions

Another great source of sentiment analysis can be obtained from the COT report, contains information about where the big players are placing their money.

Jeffrey Cammack Administrator
Editorial Director at TradeForexSA
Jeff Cammack is the Editorial Director, a Forex trader since 2008, and educator. Always in search of new trading opportunities, Jeff can always be found doing research in the charts or combing through the financial news. When not trading, he is always researching his next article.
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Trading Forex and CFDs is not suitable for all investors and comes with a high risk of losing money rapidly due to leverage. 75-90% of retail investors lose money trading these products. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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