Forex Risk Calculator & 10 Best Forex Trading Tools For 2023

Whenever we hear about forex trading or trading in general, the first word that comes to our mind is ‘risk’. Trading in any financial market is subject to market risk and the case is not any different for forex as the market is huge and volatility is high. The world’s largest trading market offers a lot of opportunities to profit but the amount of risk also goes up. Hence, making profits from the forex market is possible only when the trader has a solid strategy and takes calculated risks. So, with this article you will learn more about a forex risk calculator and will also get to know about the 10 best forex trading tools for 2023 to take your trading to the next level.

Forex Risk Calculator Meaning and Formula  

The forex risk calculator we are referring to is not a particular calculator but a formula that can be used to calculate and manage the risk for each trade. But to apply this formula you will have to do some basic calculations which can be done using the standard forex calculators that can be found online for free. Most forex trading platforms provide forex traders calculator as a part of the trader’s toolkit. So, these simple forex calculators can also function as a forex risk calculator or forex risk management calculator when you apply this formula.

Calculating the risk is all about determining how much you are actually risking in a particular trade. And managing this risk will become easier when you decide upon the maximum amount you are willing to lose while trading and plan your trades around that figure. Taking a bigger position would mean bigger risk and a smaller position would naturally result in less risk. In other words, calculating the risk and managing the risk in forex is easy when you are paying attention to position sizing. So, the formula for risk calculation is actually the formula used for position sizing. Optimal position sizing would eventually help you to manage the risk and maximise returns in a trade. And this can be easily accomplished using the forex tools available on your platform.

So, let’s have a look at the formula for calculating position size.

Position size = Amount you are risking / Value per pip * Stop loss

Here the amount you are risking needs to be calculated based on the risk percentage you stick to while trading. The general rule is to never risk more than 2% of trading capital in a single trade. You can even take it as 1% risk or less based on your preference. Then, you can multiply your account balance with the percentage you are willing to risk to arrive at the amount to be risked in a trade. Calculating the value per pip is easy when you have a pip calculator that tells you the value of a pip in the currency you want to trade in. Because the value per pip is different for different currency pairs. Stop loss is the exit point when a particular trade goes against you. Just as the name suggests a stop loss will minimise the loss by automatically closing a position at the specified price. So that’s how you calculate the perfect position size for your trade to manage the risk with each trade. The online forex calculators are quite useful as they perform these calculations with greater speed and accuracy.

10 Best Forex Trading Tools for 2023

1. Forex Trading Platform: A trading platform is a sophisticated software that brings all the essential trading tools to one place. This software interface functions as a connecting link between the traders and the forex market so that they can easily engage in trading with currency pairs of their choice. Hence, a feature-rich and fully functional platform is the first and foremost thing that you would need for forex trading which makes it an essential tool for every trader.

2. Charting Software: Charts are visual tools that facilitate technical analysis of the market situation. So, a user-friendly charting software is one of the most important forex trading tools when you rely on technical analysis for trading.

3. Forex Calculators: We already mentioned forex calculators in the previous section but it is a very basic and essential tool without which you will have to perform all calculations manually that takes a lot of time and increases the chances of errors as well. Hence, the best thing to do here is using the online forex calculators that are available on the platform to save time and get accurate results with minimal effort.

4. Economic Calendar: Staying updated with current affairs and international events are very important for every trader. Even if you don’t use fundamental analysis, keeping track of the important economic events will be useful so that you don’t get caught up in the sudden volatility caused by a news release. So, most forex trading platforms will provide a free economic calendar and new updates to their users. This is another important forex trading tool that we all need. You can also use filters to only see the news that is relevant to the pair you are trading with.

5. Forex Trading Indicators: Indicators can also be added to the essential tools kit of a forex trader. There are some traders who prefer to trade naked charts. But most of us do need some simple or complex indicator to decide on entry and exit points. A perfect combination of lagging and leading indicators can speed up the decision making process. But we should not completely depend on an indicator as no indicator can be 100% accurate all the time.

6. Forex Tools for Backtesting: Backtesting of a new forex strategy is a must before going live. You can backtest your strategies manually but automated backtesting is also an option when you don’t want to spend too much time and effort.

7. Tools for Automated Trading: A traditional trader will be more dependent on manual trading. But a modern trader will be interested in using advanced forex trading tools such as trading bots and automated systems. So, a platform that supports automated trading using algorithms would be a must have tool for such a trader.

8. Trading Journal: A trading journal is more like a diary for a trader but it also keeps records of all their trades which is useful in tracking their progress. So, make sure to maintain a journal for your trades and update it on a daily basis. You can either use an online trading journal or go for the old school method by using a pen and paper. But having a trading journal is a must for every beginner as it is a good tool for learning.

9. Social Trader Tools: Becoming a profitable trader is a time consuming process and this stops a beginner from earning much profit in their initial period. But social trader tools provide us an opportunity to earn more profits irrespective of our knowledge and experience. Here, you get to follow and copy the strategy and trade positions of an experienced trader by joining a social or copy trading platform. So, you can skip the learning part of forex by making use of the social trader tools.

10. Community: Trading platforms will also have a community section where traders can chat and interact with each other. This will be helpful in getting some moral support and will also give us a sense of belongingness as trading often turns out to be a lonely business. So, having a place to share your thoughts with people who have similar goals will help a lot in relieving the stress that we often go through while trading.

So, with that we have come to the end of the list of 10 best forex trading tools. To conclude, I would like to quote this proverb, “It is not the tools we use that make us good, but rather how we employ them.” This is very much true for forex trading as well. These forex tools are just designed to assist you in your journey but the thing that determines your success is your ability to use them well. So, spend more time on research and expand your knowledge as that can truly help in making the best use of these tools for forex trading.