What is an electronic trading platform?An electronic trading platform is computer software that gives you access via a broker to the exciting world of forex trading. You can only access the forex market through a broker, preferably one that operates under license by a formal regulatory authority. In South Africa, the FSCA regulates retail forex brokers. Trading platforms can be accessed in different ways; either via the Internet on desktop, via a mobile app or via a standalone programme that can be downloaded on your PC. The forex market is open 24-hours a day/5 days a week so most forex traders use a combination of web-based and mobile apps to trade. Apart from acting as an interface to buy and sell currency pairs, forex trading platforms provide traders with valuable tools to monitor and analyse price movements. These come in the form of technical indicators, real-time charts, fundamental news, economic calendars and ‘copycat’ trading tools. The best trading platform for beginner traders offers a selection of critical trading tools and competitive broker fees. The best forex brokers are regulated entities and offer:
- lower spreads
- a wide range of leverage options
- the choice of demo, mini and real accounts
- extensive tools for fundamental and technical analysis
Why MT4 is best for beginner tradersMetaTrader 4 (MT4) provides beginner traders with direct online access to the forex market. It’s an easy-to-use trading platform that is free to use via a regulated broker. The third-party software allows retail traders to buy and sell currency pairs as well as trade CFDs, futures, indices, commodities and cryptocurrencies. MT4 is a reliable and stable trading platform and trusted by the vast majority of forex traders around the world. MT4 dominates the forex trading market and is considered the gold standard of trading platforms. MT4 is web-based and supported by a powerful mobile app. The state-of-the-art app is available on almost any type of operating system, including Android, iOS and Windows.
MT4 features for beginner tradersThe basic features of MT4 that beginner traders will use include:
- Forex quotes indicate the price of one currency in terms of another currency. Forex is bought and sold as currency pairs where one currency is the base price and one is the quote price.
- A trading quote is represented by two currency symbols (ISO codes) that are separated by a slash (/). Each currency symbol is 3 letters long. The first 2 letters identify the name of the country and the last letter the name of the currency.
- USD/EUR US Dollars/Euro
- AUD/GBP Australian Dollar/Great British Pound
- JPY/ZAR Japanese Yen/South African Rand
- Two ISO codes make a currency pair: USD/EUR. The first currency (USD) is the base currency. The second currency (EUR) is the quote currency.
- Most currencies that beginners trade on the retail spot market will be quoted against the US Dollar (USD). The USD is a safe-haven currency and the safest base currency to trade when new to forex trading.
- The Chart Window is the main component of the MT4 trading platform. It provides a window into the forex market and provides insight into price movements in currency pairs.
- Chart Windows have a black background but you can customise the appearance of your charts on MT4 according to your trading needs.
Technical analysis tools
- MT4 has 30 built-in indicators, over 2 000 free custom indicators and 700 paid indicators. Indicators allow forex traders to analyse the market at any level of complexity.
- Indicators are used to predict future price levels or the overall price direction of a particular financial asset. They do this my looking at past patterns or past market performance.
- MT4 offers 24 analytical objects in the form of lines, channels, shapes, arrows, the Gann and Fibonacci tools.
- The most common forex indicators are:
- Moving Average Convergence Divergence (MACD)
- Relative Strength Index (RSI)
- Money Flow Index
- Bollinger Bands
News feeds and alerts
- The news feed in MT4 registers the date and time of upcoming macro-economic events that are likely to affect the forex market.
- The news indicator highlights the country of the publication which points to the strength or weakness of the currency, and its degree of impact (importance of the news feed).
- News feeds on MT4 allow forex traders to stay abreast of latest market developments and world events which will likely impact price movements of currencies.
- News feeds come from stock exchanges and large financial institutions, central bank rates and shifts in political and economic climates in different countries.
- Alerts are signals that notify you either by sound or email of certain trading conditions, mostly currency prices exceeding bid and ask prices. Alerts are set up in MT4 and they are sent by SMS to your mobile phone or by email to your PC.
- Your account information and buy and sell trade history is stored in the Terminal Window at the bottom of the MT4 screen. It provides traders with a list of all the actions they have taken on the MT4 trading platform, listed by dates and times.
- To view your MT4 trading history, log in to the trading platform and open the Terminal Window. Select the Account History tab and right-click on the dates or times that interest you.
- Trade history reports can be saved to your personal computer.
Trendlines and drawing tools
- Trendlines are the lines that you see on charts and are a visual display of support and resistance in different timeframes. Trendlines show the direction and speed of price movements and trading patterns during times of low and high volatility.
- A trendline is drawn over pivot highs and under pivot lows. They indicate the best fit of trade data, visible either as a single line or curve. Trendlines are designed to look for price action and highlight trading opportunities.
- The trendline is possibly the most important tool available on MT4 and is used extensively for technical analysis. The built-in MT4 drawing tool lets you draw on the trendlines to mark shifts in price movements or price events.
- MT4 offers a simple indicator called the Freehand Drawing Indicator. It allows traders to draw anything on trendlines in charts to mark price events.
- To add the Freehand Drawing indicator to a chart on MT4, either drag it from the Navigator or double-click on it on the Navigator. To mark or highlight events on a chart, you simply hold down a key while you move the mouse over the chart. You can change colours using keyboard shortcuts, and you can quickly undo any drawing.
Buy and sell functionalityLimit order
- A limit order allows traders to buy or sell a currency pair at a specified price or at a better price.
- Buy limit orders are executed at the limit price or a lower one. It provides traders with a guarantee to pay a specific price or less.
- Sell limit orders are executed only at the limit price or a higher one. It provides investors with a guarantee to receive a specific price or more.
- The price of the buy or sell limit order is guaranteed but the filling order is not, meaning the limit orders are not executed until the forex price meets the order qualifications.
- Limit orders are used together with stop orders. The help prevent large losses on downward price movements and allow traders to have more control of the prices that they trade, thereby limiting risk.
- A stop loss order is a type of order that allows forex traders to sell a currency pair when it reaches a specific price. Traders enter a stop loss orders to limit losses on open positions.
- Stop loss orders are used primarily for long positions but they are also commonly used for short positions. Traders enter a stop loss order and take the profit or loss at that price level.
- Stop loss orders specify that an asset will be bought or sold when it reaches a specified price which is the stop price. When the stop price has been met, the stop order becomes a market or pending order and is executed at the next available price.
- The stop loss order depends on the trade type which is either a market order or a pending order.
- When traders wants to buy or sell at the current price, they take out a market order.
- When traders want to buy or sell at a different price, they take out a pending order.
- A stop-limit order is a conditional trade that combines the function of a stop loss order with a limit order.
- Stop-limit orders are used by forex traders to lock in profits or to limit downward price movements. They help to limit the risk of forex trading by allowing traders to control when an order will be filled. However, it’s not guaranteed a stop-limit order will be executed.
- The spread is the difference between the bid (sell) price and the ask (buy) price for a currency pair.
- The bid price is the price at which you can sell the base currency. The ask price is the price at which a trader can buy the base currency. The bid price will always be higher than the sell price quoted and the underlying market price lies somewhere between the two.
- The spread is how brokers make money. Currency pairs are traded without commission but leverage trading brokers include the spread into the cost of placing a trade.
- The size of the spread is influenced by which currency pair is traded, volatility of the currency pair, size of the trade and what the broker is offering traders.
- Forex is traded in specific amounts called lots. This is the number of currency units a trader buys or sells at a time.
- The standard size of a lot is 100 000 units of the base currency.
- You also get mini, micro and nano lot sizes which are 10 000, 1 000 and 100 units, respectively.
Types of accounts
- There are four types of trading accounts offered by MT4. The trading account you use depends on the experience, size of your initial investment, the amount of time you have to trade each day and your appetite for risk.
- It’s highly recommended that beginner forex traders start with a demo account and then progress to a mini or micro account before trading on a standard/real account.
Demo accountA demo account offers all the action and excitement of trading forex in real time but without the risk of losing real money. It’s like trading with fake money and win or lose, you are never out of pocket. Demo accounts are used by beginner traders to finetune their trading strategies and learn how to trade in real time, copy trading strategies and experience forex volatility without the financial risk associated with buying and selling currency pairs.
Standard trading accountThe standard trading account is the most common and basic account available for forex traders who are using real money. It gives traders access to standard lots of currency, each worth US$ 100 000. You don’t need US$100 000 of capital to open trades. With the margin and leverage offered by brokers, you typically only need US$1 000 for one standard lot to be traded. Leverage on a forex standard account is usually 100:1.
Micro trading accountMicro trading accounts are popular among forex traders who want to access the forex market but without the risk of losing too much real money. It’s the smallest account and allows traders to trade in a micro lot. This is set at US$1 000 units of currency.
Mini trading accountA mini trading account allows trader to transact in mini lots. A mini lot is equal to US$10 000 or one-tenth of a standard account. Brokers generally offer both standard and mini accounts, considering mini accounts are best for beginners and a good way to attract new forex trading clients.
Managed trading accountManaged trading accounts are best left to experienced forex investors. This type of account is owned by a single investor with could be an individual or an institution. They are overseen by professional money managers who trades forex on behalf of high net-worth investors.
MetaTrader 4 versus MetaTrader 5MetaTrader 5 is often mistaken as upgrade software to MetaTrader 4. It does build on the speed and functionality that make MT4 the most popular trading platform in the world but it wasn’t designed to replace MT4. MT5 was designed for a more advanced trader with revolutionary features.
5 ways MT5 is better than MT4
- MT5 can handle a larger amount of trading instruments than MT4.
- MT5 users can view 21 timeframes, compared to MT4 which has 9 timeframes. This includes 11 types of minute charts and 7 types of hourly charts as well as daily, weekly and monthly charts.
- MT5 has 6 types of pending orders, compared to MT4 which has 4 types of pending orders. This includes buy-stop, sell-stop, buy-limit, sell-limit, buy-stop-limit and sell-stop-limit orders.
- MT5 allows users to switch between hedging mode and netting mode. With the hedging mode, users can take trades in opposing positions.
- MT5’s Depth of Market (DOM) tool allows traders to monitor bids and offers at different prices on multiple assets.
Other popular electronic trading platforms on the marketThe forex trading world is dominated by software developed by MetaQuotes Corp. As discussed, the most well-known MetaQuotes software and the most popular trading platform on the market is MT4. Nine out of 10 forex brokers offer their clients MT4 to buy and sell currency pairs on the global forex market. There are other competitive trading platforms on the market but they haven’t quite achieved the heights of MetaTrader’s popularity. You also find trading platforms on the market that are proprietory software, developed specifically for a forex broker or a financial institutional. Do your homework both on which forex broker to use and which trading platform is best before signing up to start trading forex.
MT5MetaTrader 5 is the follow-up trading platform from MetaQuotes, although it offers different functionality for traders. It’s a multi-asset trading platform and offers superior tools for trading, comprehensive price analysis, algorithmic trading applications (Expert Advisors) and copy trading (Trading Signals). MT4 was designed to trade forex while MT5 was designed to trade a wider range of assets. This includes stocks, commodities, futures and indices. Some traders use MT4 for non-forex instruments but it’s primary purpose is seamless forex trading. MT5 offers additional features such as double the timeframes, two extra pending order, eight additional indicators, depth of market and an economic calendar. It also accommodates the netting system as well as the hedging system while MT4 only offers hedging.
cTradercTrader offers advanced charting and forex trading features and has proven itself to be a robust trading platform. However, it does have its limitations when compared to MT4. These include:
- cTrader does not allow its users to customise indicators where MT4 is fully customisable.
- cTrader’s online community is limited to auto-trading capabilities. MT4 is the best known forex trading platform and has a large online community. The benefit is you have access to a variety of custom-built indicators and successful trading strategies that are shared by experts.
- cTrader lacks certain features that are important for forex trading. These include an economic calendar, signal trading functionality and real-time market news. These features are available on MT4.
- cTrader is available in a web browser and is only supplied for Android and iOS devices. It is not supplied for a Windows phone.
Ninja TraderNinja Trader is a popular trading platform and suited to active forex trading as well as trading CFDs, futures and stock traders. It offers advanced charting, automated strategy development and trade simulation. Ninja Trader falls short when compared to MT4 on the following:
- Ninja Trading can be leased on a quarterly or annual basis or purchased on a lifetime license. MT4 is free to use via a regulated broker. Advanced trading tools such as MetaTrader Supreme Edition plugin are available at no additional cost.
- Ninja Trader is primarily an auto-trading platform and does not provide users with real-time market data. Users need to connect to a market provider such as Google Finance or Kinetick to receive end-of-day or real-time market data.
eSignaleSignal is designed for advanced traders who require fully-customised features. It offers the standard features of an advanced trading platform with the added benefit that forex traders can create their own trading strategies or market screeners through the coding language. Advanced drawing tools available on eSignal include time and price squares and Gann boxes. Users are able to view up to 500 symbols at one time. To access streaming and real-time data feeds, users connect their platform to one of eSignal’s supported brokers. Traders lease the eSignal platform for a monthly or annual fee.
ProRealTimeProRealTime is technical analysis web-based software that is backed up on IT-Finance’s cloud network. The trading platform offers advanced charting and analytical tools. It allows users to create customised market scanners and trading strategies using the ProRealCode language. Users are required to pay a software license to use ProRealTime and there are additional fees for access to real-time market data.
IN SUMMARYMetaTrader 4 (MT4) is a world-leading trading platform that is free to use via a broker. More than 95% of forex brokers offer MT4 and despite others – including MT5 – competing for market share, it remains the most popular and widely used forex trading platform. Why is MT4 the best trading platform for beginners? For starters, it’s widely available and free to use. If you’re dipping your toe into the world of forex trading, this means you don’t have to outlay money in the beginning. More importantly, MT4 is the most complete trading platform on the market. It offers a comprehensive range of features including charts, indicators, drawing tools, trading history, alerts and news feeds as well as access to education and research content. Choose a forex broker that offers competitive fees and spreads and then sign up for a free demo account on MT4. There’s no risk because you’re trading with ‘fake’ money. Once you’re an accomplished forex trader and have finetuned your trading strategy, you can advance to a micro, mini or standard account.
DISCLAIMERTrading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. Forex trading involves a high degree of leverage which increases the risk associated with forex trading.
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