What Technology Do the Main Forex Trading Platforms Run On ?
As a trader, you don’t jump into the next available trading floor to buy and sell currency pairs. You need to first understand the software used by the trading platform because this plays a significant role in ordering your trades. For instance, what chart is best represented by the platform? Does it offer dealing desk platform or a non-dealing desk platform?
While demo accounts offer a similar experience to the actual trading platform, the software technology of the main forex trading platform may vary. This means, if you have spent a significant amount of time learning with a different demo account and demo currency, you could be in for a rude awakening when it is time for the real deal. Which is why the experts at Forexadvice.co.uk advice beginners to tiptoe-test the waters during the learning stages.
There is no single ‘main’ software technology used in Forex trading. In fact, there are up to five or more platforms, depending on the broker you trade through. Each one is unique in its right but there is usually a preferred platform.
This article will be analysing the various Forex trading technologies available, and how you can trade with them to your benefit. It is by no means exhaustive but it will be comprehensive. But first, we shall discuss certain preliminary topics.
How to understand the different types of Forex platforms
There are many types of Forex trading platforms, versions and unique variations used by different brokers. It is vital for traders to understand these differences because they will ultimately affect their trading outcomes with the respective brokers.
How do you classify Forex platforms? With the following classifications, you will have an idea of the various types of Forex platforms available.
Classification based on format; Downloadable or Non-downloadable
This system classifies the software on their ability (or not) to be downloaded online. That is, does it exist in a downloadable file format or a non-downloadable file format? With this form of classification, there are:
- Web-based platforms (online)
- Downloadable trading platforms
The first type (web based platform) runs on JAVA and is based online. Traders can access it by simply typing the URL into the Web browser and signing into the trading platform via pre-set log in details. The platform is therefore lighter and can be accessed from any location without carrying the device or computer on which it was downloaded.
Conversely, downloadable platforms are those software that must first be downloaded onto a device. If you intend to trade with your tablet, you will need to download it on the tablet. They exist in executable files which will be unpacked in assembled onto the trading platform.
Classification based on programming language
This is another system of classification that places platforms according to the programming language used to develop them. This is the most common form of classification and includes the following platforms:
- MetaTrader (available in MT4 and MT5), developed with Metaquotes Language (MQL)
- ActTrader, developed with the programming language, ActFX.
- TradeStation (developed with the Lua programming language)
The MetaTrader is a platform for trading Forex, studying financial markets and using professional advisors. Trading Signals, Mobile Trading and the Market are crucial parts of the MetaTrader 4 to improve your Forex trading practice. It is widely available and can be easily downloaded on your laptop or trading device.
Because the MT4 is one of the leading trading platforms used today, in demos and main accounts, we will discuss it more comprehensively. Like a boat or bridge which helps you cross a river, a trading software or platform is your computer’s connection to the trading market.
The MetaTrader platform supports the entire price charting system and all the equipment you will need to analyse the price charts. This involves identifying chart patterns and opportunities for buying and selling (called trade setups).
There are two main versions of the MetaTrader; the MT4 and MT5. The MT5 is developed by MetaQuotes Software Corp., which is the same company that designed the MT4. The MetaTrader 4 is sufficient for trading on Forex platforms. But it must be installed on your computer first.
There are many features and functions on the MT4. You can open the price charts to study the changes in Market prices and analyse the outcome. You can plot chart trendlines, locate trade setups and review the charts. There are options for candlesticks, line and bar charts. MT4 is also compatible with Heikin Ashi candlesticks. For Renko charts, you can choose to add a Renko chart indicator.
Benefits of the MT4 technology
The MT4 enables traders to place orders and fix stop loss and target. Traders can also set trailing stop loss and pending orders as well as follow the news. Some software programs like the Expert Advisor or EA (mention previously) can perform tasks automatically. Traders can even save themselves some time by including small software scripts into their MetaTrader accounts.
It is easy to download many years of historical data for each currency pair, CFD and from the developer company, MetaQuotes Software Corp. This feature is useful for back-testing trading techniques.
Another great benefit of MetaTrader is its ability to create detailed reports from different chosen positions. MetaTrader might not be a 100% perfect trading platform, but it is extremely user-friendly and easy to use. It is also an ideal platform for beginners which is probably why most demo accounts run on MT4 software.
ActTrader is the core software that runs some trading platforms used by traders such as AvaFX. It was developed by ActForex Ltd and the order placing process is different from MT4 or MT5. The platform can be web-based or downloaded onto your device.
The system design is modular; therefore, you will need to add modules to your platform for its functionality and according to what is suitable for your business’ operations. It often takes no longer than 5 business days to get the software up and running on your device. However, it can last as long as 10 days depending of the duration of training and requirements for customization.
ActTrader can accept both currency pairs and commodities; and you can trade all instruments in the same account. Brokers can integrate any newsfeed on their platform, as well as determine which traders can see it.
Benefits of ActTrader
Brokers need not expand their IT department to support the ActTrader platform. This is because ActForex, the developer, provides total tech support and software upgrades. This automatically makes usability easy for traders. The platform is well-managed and high uptime scores are guaranteed. ActForex’s sas-70 certified data centre hosts the trading system and handles of issues with connectivity.
Third-party orders and price feeds are sent through ActForex’s data centre, licensees do not need a separate server or a special IT department.
cTrader is an Electronic Communications Network platform that offers Forex Trading opportunities to traders with direct access to the market. Spotware Systems Ltd. developed the program, and they are specialists at designing trading platforms for the ECN environment. Another platform designed by Spotware Systems is the cAlgo, which enables algorithmic trading on the cTrader platform.
cTrader is a newer trading platform than the MT4 with differences in user interface, detachable charts, advanced take profit and stop loss systems, live sentiment, varying chart time frames and depth of market exhibited by default. Some traders have indicated that the cTrader platform was easier for them to grasp as beginners than the MT4 platform.
The benefits of the cTrader
The platform was built to by brokers running on a non-dealing desk platform, real market trading. This means, when you sell or buy an instrument, you are conducting a trade with a genuine counterparty. To make this possible, the cTrader platform offers a lot of special features that may be unfamiliar to many traders.
For instance, Algos which are available within the platform can be edited into the encoding suite connected the platform. The trading sessions always displays the financial centres whenever they are open in their normal trading hours. The settings in the proxy connection enables easy connectivity regardless of the trader’s location.
Currenex is common brand of Forex platform, and it comes in two versions. They are;
- Currenex Viking platform (ECN platform)
- Current Classic platform (Dealing desk platform that operates under the conditions of the market makers)
The Currenex Viking is ideal for only professional traders because it has an interface that requires some experience to navigate around. Currenex classic is equipped with charts and similar tools that makes trading more convenient. Therefore, the classic platform is a better choice for traders new to the Forex market.
Benefits of Currenex
Currenex has many features that sets it apart from other trading software. For example, users can ask for prices from several liquidity providers, with the executable prices displayed in real time. In addition to this, traders can place several advanced order types. Because of this, the platform is the preferred choice for many institutional traders, especially hedge fund managers who find its advanced features valuable.
Being able to have live streaming prices embedded into an Excel spreadsheet has made it very popular among hedge fund traders. Like other trading platforms that allow multi-dealers, Currenex gives traders a general view of the market at any specific time.
TradeStation is an analytical software and electronic trading platform that caters to mostly institutional traders. It helps traders design, measure, optimise, track and automate their own personalised equities, options and futures trading strategies.
Although equipped with a significant number of pre-set indicators, analysis tools and strategy components, individuals can enhance and personalise current indicators and strategies with TradeStation. Traders may also access hundreds of other products that are compatible with TradeStation, including those created by third-party developers who work through the TradeStation App.
Trading strategies can be back-tested and upgraded against historical data in demo trading before going on a live platform. TradeStation is useful in research as a measuring tool or as a trading platform with IBFX or TradeStation acting as the broker.
Benefits of TradeStation
The add-on features make TradeStation a preferred trading platform by many institutional traders. If a trader has an analysis strategy or potentially profitable technique he would like to develop, he can either write it in EasyLanguage or ask third-party developers to develop his trading system.
They can also benefit by the TradeStation App® store which is a web-based marketplace with several ready-to-use products designed to operate on the TradeStation platform.
Classification based on trading model
This classification is breaks the trading platforms according to the trading model offered by the broker running the platform. This automatically reveals two platforms:
- Dealing desk platforms
- Non-dealing desk/ECN/direct market access platforms
What are dealing desk platforms ?
These are platforms run by the market makers. The system links the trading platform to the broker’s dealing desk, ensuring that all prices must originate from the dealing desk and all orders made by the traders must go through the dealing desk for completion. This classifies platforms such as MetaTrader, TradeStation, Currenex Classic and ActTrader under the dealing desk class.
What is a Non-dealing desk platform ?
A non-dealing desk broker uses the ECN model. Pricing originates from many liquidity providers and are all exhibited on the platform for the trader to decide. This is mainly to determine which pricing model is suitable for their trade goals. A non-dealing desk platform may also be called the direct access trading. Some examples are cTrader, Currenex Viking software, cAlgo and other level II software being used by institutional traders.
As a trader, the trading platform you choose will depend on any of these technologies you are comfortable using, and of course, the type of trading you engage in. As we have learned, traditional traders will use a dealing desk platform while institutional traders (hedge fund traders) will typically work with non-dealing desk platforms.
Brokers are also technology-specific, so if you are hoping to trade on a platform, ensure that your practice account is the same as the technology of the broker’s live trading platform.