Trading is not an easy task, especially for new traders. It seems like an easy way to make money when new traders look at how professional traders are expanding their accounts. However, those who are actually trying out a tradable market would know that the learning curve is not that easy. New traders would find out how difficult it is to deal with the psychological and emotional stress of trading, as well as the subtleties of any type of trading strategy, if we were to find out which approach was best for us.
This applies in particular to currency trading. Unlike other types of tradable instruments, the forex market has the greatest noise that can confuse new traders. They are multiple currencies that are correlated and can push and pull supply and demand for each forex pair. Basic press releases often cause disruption in an otherwise stable and predictable market.
Therefore, forex traders need all the tools they can get to find their groove in the forex market. Fortunately, there are several resources on the Internet that are free and surprisingly useful. Gone are the days when information was only available for the elite.
One of the most popular websites that can provide such tools is www.ForexFactory.com. It offers a variety of tools and information that can help both prospective and professional traders make smart and informed trading decisions. Here we will go into depth about how these Forex Factory trading tools work and how they can help us with our trading.
Forex Factory homepage
The Forex Factory homepage contains a lot of information where traders can get an overview of the developments in the forex market.
Below is an example of what the Forex Factory homepage looks like.
By default, the Forex Factory homepage includes the scanner, a weekly schedule with scheduled basic press releases, forums, news, live account positions, and time meetings of major markets.
Forex Factory Scanner
The first tool that we can examine on the homepage is the scanner.
By default, we find the eight currency pairs with details such as the current bid, the chart for the last six hours, the total pip change for the last six hours, and the percentage change for the last 24 hours. All of this is useful information. This gives us an overview of what the major currency pairs have been doing in terms of price movements over the past few hours, which direction they are moving, and which major currency pair has moved the most in a particular direction.
In this scanner snapshot, we found that the recent price movement of four of the eight main pairs was bearish, three bullish and one, particularly the GBP / JPY pair, choppy. We also found that based on the percentage pair displayed, the AUD / USD pair was the weakest, followed by the NZD / USD pair and the GBP / USD pair. We also found that the pairs where the USD was the term currency or currency to the left of the pair are bullish the forex pair, while whenever the USD was the commodity currency or currency to the right of the pair the forex pair is bearish. Traders who understand an inverse correlation based on the reversal of futures and commodity currencies might find that this snapshot shows a strong USD market, with the USD driving this dynamic for most pairs. Smart traders would avoid trading against USD strength and would rather trade in the direction of their momentum. This is a good trading technique in itself.
If the scanner shows us another story in which the USD is not the driver of strength or weakness, we can pair the strongest currency with the weakest currency to get a trading configuration with high probability.
We can also click any tab in the scanner window to choose what information to display. For example, if you click on the "Bid" tab, you can use "Ask", "Bid / Ask", "Midpoint", "Chart", "Pip Change", "Percentage Change", "High / Low" and " Pip Spread ".
In this way, we can customize which four information should be displayed in which order.
Some traders may prefer the ask price or both. When using the bid / ask option, note that the ask price is displayed with the last three digits of the price and the last digit is a “pipette” or a fraction of the base unit (pips) of the number of a currency pair.
The "Center" option is basically just the center of the bid and ask prices.
The "Chart" selection contains several modifications from which traders can choose. Traders can choose the number of hours and candle periods to display, from the last five minutes that appear as a 1-minute candle, which is useful for scalpers, to the last 48 hours, as 4 hours -Candle display is useful for day traders and swing traders. There is also a drop-down option for the type of chart to use. Options include a candle chart, an open-high-low-close chart, more commonly known as a bar chart, a line chart, a dotted line chart, and an area chart. Traders can also change the color of the chart to their liking.
Pip Change shows the number of pips the price has moved from its starting point since the last n hours set by the trader. As such, it includes a drop-down option where traders can choose whether the pip should change within the past five minutes to the past 48 hours.
Pip Change is somewhat similar to the Average True Range (ATR). However, there is still a big difference in what it indicates and how it could be interpreted. The ATR shows the number of pips that the price has shifted from the high of the period to the low of the period. Forex Factory Pip Change, on the other hand, shows the number of pips that the price has shifted from opening the preset number of hours to the current price. The ATR provides information on the market's volatility based on pips, while Pip Change provides information on the direction of a forex pair's price and the strength of the dynamics of the price change. Traders can use this information to identify which direction the pair is moving in and whether or not they are moving with strong momentum.
Percentage change takes the information from the pip change and converts it to percent. It shows the percentage of pip change from its base area based on a specified number of hours. Therefore, traders also have the option to change the period of time after which the tool would make its percentage change, just as with the Pip Change drop-down option.
The High / Low option gives us information about the highest and lowest price within the preset range chosen by the dealer. This also has the same dropdown option as the Pip Change dropdown menu. Traders can use this information to get an estimate of whether the price is already near the low or high of their range, which in many cases is also support or resistance levels.
Pip Spread shows the difference between the bid and ask prices, also known as the spread. This information is a very useful piece of information for scalpers as it represents the most basic trading cost traders should overcome. This is particularly useful for scalpers because spreads can be one of the main reasons scalpers lose more money than they should, as scalping brings lower returns per pip while maintaining the same spread costs.
Traders can also choose to have more than four metrics for each major currency pair. In this case, traders can click the settings button in the upper right corner of the window and select the number of metrics they want.
Traders can also choose the currency pair they would rather see than the main Forex pairs. To do this, click on the name of the forex pair in the top line, enter the name of the preferred forex pair and click on "Save".
An option to view live price feeds is also available. This is very useful because we can make informed decisions in good time based on the scanner. This option is also in the upper corner of the window.
Traders can also quickly view a larger selection of a forex pair's chart by clicking a chart in the scanner window.
Clicking on one of these charts will take you to the chart window of the selected forex pair.
Forex Factory Chart window
The Forex Factory Chart is another useful tool that traders can use. Traders can make informed decisions using this window even without using a chargeable chart tool.
Below is an example of a Forex Factory Chart showing the EUR / USD pair.
The forex pair shown on the chart can be changed quickly. To do this, click on the forex pair in the upper left corner of the window, enter the preferred forex pair and click on "Save".
Next to the name of the forex pair, the period intervals that traders can choose from are displayed, from the 1-minute chart used by Scalper to the daily and monthly charts by swing traders and position traders be used.
This list can be changed by clicking on the settings window and selecting the desired "Displayed intervals" in the options and clicking on "Apply settings".
The Lines button is a tool that we can use to draw diagonal, horizontal, and vertical lines. To do this, select the desired line type and click on the diagram to draw the two end points of the line. For horizontal and vertical lines, click once directly on the diagram. The color of the lines can also be changed according to the wishes of the dealer.
On the “Indicators” tab we can select options, e.g. For example, displaying current news and its actual impact, the expected event calendar and its impact, and sessions below the timeline of the graph. We can also choose an option to highlight the time period as we scroll through the graph. The session row shades the time that a particular important market is in a session. Sessions are displayed in the following order: Sydney, Tokyo, London, and New York. The "Messages" and "Calendar" lines have colored tabs to show the effects of a message. Red indicates high impact messages, orange indicates moderate impact messages, and yellow indicates low impact messages.
We can use the "Live" button to display live price feeds from a partner broker.
The Settings tab gives you options such as selecting the time zone in which the price feed is displayed, the height and width of the graph displayed, the type of bars displayed in the graph, the interval options displayed, the cursor type, the color, and the Option to zoom in and out by scrolling with the mouse wheel.
The bar at the bottom of the diagram allows you to quickly navigate through the displayed diagram by dragging the entire bar or one end of the bar. This will quickly change the range of bars shown in the graph based on the selected period on the bar.
The up and down arrow buttons in the lower right corner allow you to change the height of the graph simply by dragging the button up or down.
Although the forex market is open 24 hours a day, this does not necessarily mean that traders should trade 24 hours a day. This would be disadvantageous for a dealer. It is not beneficial for a trader to risk health to earn a few pips every now and then. Traders should learn to time the forex market.
Certain forex pairs move with high volatility at certain times of the day. This is mainly because one of the currencies in the forex pair is actively traded by a large market. This increase in activity is due to the fact that the main market using the currency is open and active.
For example, the AUD and NZD are most likely active when the Sydney market is in session, the JPY is active when Tokyo and the Asian market are in session, the EUR and GBP are active when Frankfurt and London are in session, and the USD is active when the New York market is in session.
Therefore, it is advisable for traders to only trade when the main markets are active. With a tool that allows us to quickly see which markets are open, we can schedule our personal trading sessions. We can also isolate which currencies are more active and focus on those active currency pairs instead of spreading our focus across multiple currencies.
The Forex Factory Sessions Tool allows us to do this. It is quickly displayed which market is currently open, which market will be opened next and which market is closed or on public holidays.
Below is an example of what the session window looks like.
It displays the timeline based on the retailer's preferred time zone. The bars are then plotted to show the sessions in Sydney, Tokyo, London and New York. The local time is also displayed in the time zone of the market. The open time zone is also highlighted. The session tool also conveniently displays which market is closed for a holiday, which would normally explain an unusually low volatility market condition.
The calendar window is also displayed on the Forex Factory homepage. This window provides a snapshot of past and upcoming events of the day that may affect certain currencies and the corresponding forex pairs.
Below is a snapshot of the Forex Factory Calendar window on the home page.
Here you can find the dates and schedules of each upcoming news event, the currency pair likely to be affected, the severity of the likely impact, which is indicated by the color of the tab, the name of the news event, the details, etc. the actual, forecast and previous data, as well as the option to open the graph of past economic data.
The effects of an upcoming message are shown by the color of the tab. Red indicates messages with high impact, orange indicates messages with medium impact, while yellow indicates messages with low impact. Smart traders would always consider the likely impact of a message that has a high impact on their trades. They would either avoid trading during such press releases, wait for the press release to end and currency volatility to decrease, or reduce their stop losses before a press release in an open profitable trade.
The figures for the actual economic data also have an impact in comparison to the forecast economic data. Some economic data may have an inverse correlation with a currency strength, while others may have a direct correlation. Directly correlated economic data would make a currency stronger if the actual number was higher than the forecast number, while conversely correlated data would make a currency weaker if the actual number was lower than the forecast number.
The Details button also contains detailed information about the press release, including how and why it affects the currency, historical numbers, and related press releases. This window is very informative and could be a source of good education for fundamental analysis.
With the Graph button we can view the historical comparison of the actual, forecast and previous economic data. This allows us to estimate how accurate the forecasts are for certain economic data and how much they affect a currency pair.
The position tool provided by Forex Factory is an excellent tool for market sentiment. It gives us an overview of whether traders are bullish or bearish on a particular pair based on the number of traders associated with Forex Factory and entering into a short or long trade.
Forex Factory has a database of trades from traders linked to their Trade Explorer tool. This is an analysis tool that collects data on a trader's historical trades and analyzes the trader's statistics.
The same information that comes from trading decisions made by live account traders is also fed into the position tool. Below is an example of the Forex Factory Position window.
In diesem Fenster sehen wir eine Spalte, die das Währungspaar oder -instrument, den Prozentsatz und die Anzahl der Händler mit einer Long-Position sowie den Prozentsatz und die Anzahl der Händler mit einer Short-Position angibt.
Dieses Tool kann auch geändert werden, um die Anzahl und den Prozentsatz der Händler sowie die Anzahl der Lose anzuzeigen.
Die Anzahl der Händler könnte bereits sehr nützlich sein. Die Ermittlung der Anzahl der gehandelten Lose wäre jedoch auch eine willkommene Information, da dies uns einen Einblick in die Überzeugung der Händler geben würde. Händler tendieren dazu, mit höheren Lots zu handeln, wenn sie davon überzeugt sind, dass sich der Preis in eine bestimmte Richtung bewegt, und tendieren dazu, kleinere Größen zu handeln, wenn sie sich ihrer Position nicht sicher sind.
Wenn wir herausfinden, auf welcher Position sich die meisten Händler bei Forex Factory befinden, können wir uns einen Überblick über die Marktstimmung verschaffen. Obwohl die Stichprobengröße möglicherweise nicht groß genug ist, um endgültig zu sein, sind die angegebenen Informationen bereits hilfreich.
Als Händler würden wir definitiv lieber in die Richtung handeln, die die meisten Händler gewählt haben. Dies ermöglicht es uns, in Richtung der Marktstimmung zu fließen.
Wenn zum Beispiel 60% der Händler Long-Positionen eingehen, wäre es für uns ratsam, in die gleiche Richtung zu handeln. Wenn andererseits 60% der Händler eine Short-Position einnehmen, wäre es ratsam, eine Short-Position einzunehmen.
Die von Forex Factory bereitgestellten Handelstools sind sehr nützliche Informationen, die Händler nutzen können. In der Tat können Händler bereits fundierte Handelsentscheidungen auf der Grundlage der von diesen Tools bereitgestellten Informationen treffen.
Das News-Kalender-Tool allein kann uns helfen, Entscheidungen zu treffen, ob wir handeln oder nicht, und sogar eine News-Handelsstrategie implementieren, die ein sehr hohes Gewinnpotenzial aufweist.
Das Scanner-Tool gibt uns einen Überblick darüber, welche Währungen und Paare sich in welche Richtung bewegen. Dies allein kann bereits eine Grundlage für eine Handelsentscheidung sein.
Wenn Sie mit diesen Informationen nicht zufrieden sind, können Sie auch ein Forex-Diagramm anzeigen, um weitere Informationen zu erhalten.
Darüber hinaus können wir mithilfe des Positions-Tools auch die Marktstimmung in unsere Handelsentscheidung einbeziehen.
Alle Informationen aus den Forex Factory-Tools zu kombinieren und alles zu verstehen, wäre auf jeden Fall eine große Hilfe für Anfänger und professionelle Trader.