What is a Forex Trading Platform, and what are some of its types?
Forex trading is a method of trading investments and making profits from them. However, the investments in Forex trading are in the form of exchanging foreign currency pairs. For instance, when one trades with foreign currency pairs – like the U.S. Dollars (USD) and Australian Dollars (AUD) – the trader will be able to make a profit from the frequent fluctuations between the two currencies. Nevertheless, it is important to know that whenever a trader invests in a foreign currency pair, they can only profit by selling the same currency pair.
So, to complete the exchange of foreign currency pairs, traders need to have financial intermediary bodies that will provide them with safe and secure trading conditions. The financial intermediary bodies are known as the Forex trading platforms; these platforms are required to follow certain rules put forth by regulatory bodies in the Forex industry.
Some of the most commonly used Forex trading platforms are MetaTrader 4 (MT4), MetaTrader 5 (MT5), eToro, Trading View, cTrader, and others. However, individuals cannot use these platforms separately; instead, a broker with permission to use the platform will provide its services to traders. For instance, when a trader wants to trade using MT4, they need to create an account on a Forex Broker’s website that has access to MT4 – here you can find top MT4 Forex brokers.
However, not all trading platforms provide the same features to traders, and it is important to understand these differences to understand which platform is the most suited.
Why is it important to understand the differences between trading platforms
There are many Forex trading platforms available in the market, and each one is different when compared to the others. The main difference between these platforms is that each of them has their own unique value proposition to offer to their customers.
Some offer more enhanced statistical data, and others offer lower fees and commission rates. On the other hand, there are trading platforms that offer better customer support to clients – by offering 24/7 and multilingual support – or others provide fast request and transactions.
So, the tools and features offered by a trading platform play a crucial role in determining how satisfied a trader will be with their trading experience.
As a start, here are some of the differences between MT4 and MT5.
1- Programming Language Used to Create the Platforms
First of all, the most basic difference between the two platforms is that each is designed and created using different programming languages.
For developing MT4, the programming language of MQL4 is used, which allows traders to test their strategies before actually using them to trade foreign currency pairs. On the other hand, MQL5 is used to develop MT5, which is considered faster and more user-friendly when compared to MQL4.
2- Availability of Hedging Options
Using MT5 over the MT4 trading platform, traders will have the opportunity of taking advantage of the hedging option offered by MT5. The hedging option allows users to own two opposite currency accounts at the same time. In other words, a trader will be able to have an account where they can trade USD for EUR and another where they can trade EUR for USD at the same time.
3- Markets Available on Each Platform
MT4 was generally created to allow traders to trade with foreign currencies. So, the market available on the MT4 platform only consists of Forex trading. However, when using MT5, traders have the opportunity to trade with Forex and, in addition to that, trade with stocks, cryptocurrencies, futures, etc.
4- Ability to Test Before Trading
Both MT4 and MT5 offer testing options for their clients – such as demo accounts. However, the difference is in the methods used to deliver the tests. For instance, when MT5 is used, people can trade using different currency pairs simultaneously, allowing them to see which currency pair is the most profitable based on their location. However, when using MT4, people can only try trading using a single currency pair – which does not allow them to comprehend which is most profitable.
5- Different Timeframe Analysis Offered
Lastly, the timeframe in the Forex trading industry is important as most foreign currencies fluctuate during nighttime; thus, getting as much data of the timeframes available can play a crucial role in trading decisions. While MT4 offers 9 different timeframes for clients, MT5 offers 21.
In conclusion, most Forex trading platforms offer different features and tools for traders, and understanding what each has to offer can make the process of choosing a Forex Broker easier. However, when it comes to choosing a Forex trading platform, there is no right and wrong answer as each trader needs to choose the platform based on their personal preferences.