Every successful trader has an arsenal of helpful tools for having an edge in the market.
And if you're new to trading, you may not have the same tools in your trading toolkit yet, which is why you probably haven't really maximized your results.
But don't worry because this article will reveal five tools that you should have to gain a leg up in trading.
One of the trading tools that every trader should have is a spreadsheet. But sometimes, it's not just the spreadsheet that matters, but it's the skill of using one. Almost anyone can access Microsoft Excel or Google sheets, but only a few are masterful at using those applications.
Why is a spreadsheet necessary?
Spreadsheets are necessary for calculations. As you know, trading isn't just placing trades at random, so experienced traders account for many things. One of which is leverage and how they use it.
A spreadsheet helps because calculations and formulas can be saved, organized, and contain more data. There are also other things traders can use a spreadsheet for, like building custom calculators and keeping trading journals.
2. Position Size Calculator
Position size calculators help traders pre-calculate proper lot sizes for each trade.
Often, most traders make the crucial mistake of using a lot size based on their desired per pip value.
For example, if they know that a single pip will be worth $10, then that's what they would use for their trade.
But most of the time, their account can't handle such a dollar value per pip. That's why it's crucial for traders to calibrate a lot size that is appropriate to their account size, and position sizing helps in this.
Position size calculators can be built using a trader's knowledge of spreadsheets and trading formulas. It is necessary because it enables a trader to control their risk and predetermine how much to lose per trade.
3. Trading Journal
Trading journals are useful for keeping track of the transactions you've taken so that you can review and assess them later.
The purpose of this is to have a more comprehensive understanding of your trading strategy or even your trading pattern.
When you keep a trading journal, you record all your trades and even note your reasons for taking them. But what's better is if you also record how many pips you lost, your risk per trade, and other helpful trading numbers.
Then, you can create a separate statistics tab to have an overview of your current performance.
Trading journals can also be created using spreadsheets, so it is crucial that you brush up on some Excel ninja tricks to harness the benefits of spreadsheets for your trading.
But to make things simpler, we already have a template that you can download and use as your trading journal. You can check it out here.
4. Backtesting Software
Backtesting software is an application that feeds you past price data where you can apply your trading system to determine how effective or profitable it is.
Some backtesting app can also simulate actual trading like a demo account, but the only difference is that you can wind it up to as far back as 15 to 20 years to test out if your strategy can yield some success.
The benefit of this is that you don't have to trade with real money to determine if your strategy works or not.
The backtesting software can give you the insights you need just from a few concentrated sessions of using it.
Does backtesting really work?
Backtesting is an integral part of trading because it provides you statistics of what your strategy can do.
The data that you can gather from backtesting will help you decide whether you can apply a particular strategy on the current market condition or if you need to apply a different one.
Some great backtesting software that you can use for free is Forex Tester and TradingView. We have an in-depth review of the best backtesting applications here.
5. Great Hardware and Setup
Finally, a trader can't do without an excellent hardware setup. Great hardware is composed of an optimal computer and an uninterrupted internet connection. That's it.
Don't think that you have to have a full four or six screen monitors to trade properly. You can do well with just two monitors to view different charts, especially if you're dealing with more than four pairs. But a wide computer screen is just as good.
The key is knowing their purpose
It's always more important to know those monitors' purpose rather than just have them on for display. In truth, you can even trade with just your mobile phone, but that is not recommended for fully visualizing the charts since the screen is just too small.
What matters here is that you have a functional computer that can handle your trading application, backtesting software, and spreadsheets with adequate memory to store your trading journal files.
So, there you have it. Those are the tools that you need to up your trading game. If you liked our post, you could help us out by sharing our content on social media.