Metatrader 4: How it works

MetaTrader 4 How it works

MetaTrader 4 is the most popular trading platform for worldwide forex traders. Known as MT4, it’s a mobile trading platform used by online retail foreign exchange speculative traders to monitor and chart forex price movements, buy and sell trade orders as well as set indicators, risk management, and navigation tools.

MetaTrader 4 was launched in 2005 by MetaQuotes Software and the software is used under license by global forex brokers. MT4 is the most popular trading software in the company’s stable and remains the trading platform of choice because it’s easy and simple to use and offers forex traders robust and dynamic functionality.

MetaTrader 4 was designed predominantly for forex trading but it is also used to trade CFDs. MT4 was the forerunner to MetaTrader 5 which is not so much an upgrade but a unique trading platform that offers advanced functionality for different trading strategies.

 

What is a trading platform?

Trading platforms offer online retail traders advanced software tools that can be uploaded to mobile devices. They exist to manage and execute market positions.

Position trading in forex trading is a strategy where investors and traders hope to capitalize on currency pair pricing trends. Basically, a trader takes a position on a currency pair to make a profit off the back of a major currency trend.

The best trading platforms offer traders a mix of robust features and low fees, and allows them to open, close, and manage market positions. This is done through an online broker that acts as a financial intermediary.

Most brokerage houses offer online trading platforms such as MetaTrader 4 for free in exchange for maintaining a funded account and making several trades per month for the account holder. Brokers offer free trading platforms that range from basic order entry screens for new traders to advanced and sophisticated software with advanced toolkits with added features such as advanced charts and live streaming quotes.

The basic software enables traders to place trades and monitor accounts and come with a bundle of features that includes real-time quotes, news feeds, charting tools, indicators, and risk management tools.

The advanced trading platforms tend to be tailor-made to a trader’s software needs for trading in a broader range of instruments such as stocks, forex, CFDs, commodities, options, and futures.

There are two types of trading platforms: prop platforms and commercial platforms.

  • Prop platforms are customized platforms developed by large brokerage houses and are tailor-made to their specific requirements and trading needs.
  • Commercial platforms such as MetaTrader 4 are for day traders and retail investors. They are mobile trading platforms that are easy to use and offer an array of helpful features for not only daily trading but also trading education and research.

 

How to open a MetaTrader 4 trading account

You can easily install MetaTrader 4 on your laptop or mobile device and you follow the simple steps to set up a demo account or live trading account. However, you need to connect to a broker’s server to start instantly trading forex. In other words, you need to go through a reputable brokerage house that offers MetaTrader 4 on their server.

MetaTrader 4 is owned by MetaQuotes Software but you cannot access the trading platform directly from their website. The MT4 software is licensed to foreign exchange brokers who provide the software to their clients.

How to get started with MetaTrader 4

If you are new to forex trading, the first step is finding a reputable broker that you want to align yourself with for your forex trading journey. Once you’ve made your pick of the best broker for you, go to the ‘Sign Up’ feature and apply to open an account with them.

Thereafter, sign up and open a free demo account or a live MT4 trading account. Then follow the easy steps to start trading forex with MetaTrader 4:

  1. Open an MT4 trading account
  2. Follow the instructions for the quick installation
  3. Fill in your details
  4. Record and keep a copy of your account login information
  5. Set up your navigation tools and indicators
  6. Deposit funds
  7. Start trading

Why 95% of forex brokers use MetaTrader 4

MetaTrader was launched in 2005 and has a vice-grip on the leaderboard of best forex trading platforms in the world. It is by far the most popular trading platform for forex retail traders where an estimated 90 to 95 percent of forex brokers offer MT4 on their servers.

There are other trading platforms on the market that are well regarded by brokers, including MetaTrader 5 that was launched in 2010 as the next version of MetaQuotes Software’s offering to the market. However, for many reasons, MetaTrader 4’s position as the leading trading software platform remains tight, if anything it continues to get stronger.

The MT4 trading platform that was launched in 2005 has been upgraded on numerous occasions and now offers significantly more features and greater functionality than the first version that came to market. The only trading platforms that outrank MetaTrader 4 within a brokerage house or financial institution are those that are customized by the company’s professional developers for in-house trading.

The core strength of MetaTrader 4 lies in its simplicity and effectiveness. As some say it doesn’t have the prettiest or most sophisticated interface but this doesn’t matter because it’s a robust trading platform that offers all the trading functionalities in a layout that’s simple and easy to customize.

 

Top 5 key features of MT4 that make it so popular

1

MT4 offers multiple charting options and different timeframes. This means the trading platform can be customized to a trader’s needs.

2

MT4 offers an extensive set of built-in indicators, lines, expert advisors (EAs) as well as tools used for additional scripts, robots, indicators, and third-party signals. The latter is used for comprehensive technical and fundamental analysis of the forex market.

3

MT4 is fully customizable, meaning traders and brokers can adapt the platform to suit their trading strategy and instantly create different interfaces. MT4 is an open-source software program that allows for customization.

4

MT4 offers a backtesting tool that allows traders to conduct strategy testing. This means traders using MT4 can test bots, EAs, signal providers, and other trading strategies in real-time under live market conditions.

5

MT4 offers multi-account terminals that allow brokers to control different client accounts on a single platform interface. The multi-terminal feature ensures investors and traders experience a seamless trading environment.

Why MetaTrader 4 is the best trading platform for beginners

If you are new to trading currency pairs on the forex market, you must know that it takes time, practice, and patience to develop a trading strategy and move from the beginner and intermediate level to the advanced trading level.

It’ll take at least 18 months to two years of forex education, coaching, and trading with a demo account and then a mini account before you can start trading at a higher level with your own funds.

MetaTrader 4 has proven itself to be the best trading platform for beginners and the starting point is aligning yourself with a reputable broker who offers MT4 and learning to trade forex with a free demo account.

The risk of losing money with a demo account is zero and MetaTrader 4 offers you a bundle of features that are ideal to get started. From there, you can advance to MetaTrader 5 and trading other financial instruments.

Every retail broker offers its clients an automated MT4 trading platform. This is because MT4 is easy to use and navigate, has a simple interface, and all the features you need to monitor live prices, buy and sell trading options, set indicators, and risk management tools.

MetaTrader 4: MQL4 Features

MetaTrader 4 offers traders the highest security and technology standards. It supports the native MetaQuotes Language 4 (MQL4) programming language which is used to develop various customized trading tools.

MQL4 is based on the popular C++ which is a high-level programming language developed at Bell Labs. It added object-orientated features and is one of the most popular programming languages for graphical applications that are run on applications such as Windows and Macintosh.

C++ is extremely flexible and helped to create the following dynamic features on MetaTrader 4:

Expert Advisors (EAs)

EAs are program applications that make it possible to apply automated trading strategies in the forex market. EAs are basically robots that can do most of the work for you.

Custom Indicators (Cis)

CIs support built-in technical indicators by allowing traders to develop their own customized mathematical tools to perform basic to complex analytical operations within defined conditions.

Scripts

A script is an application that allows a trader to perform any function on the MT4 trading platform. An example of a script in an instruction to close all pending orders or delete all indicators on a chart.

Libraries

Libraries on MT4 are sets of custom functions that allow the trading platform to store and easily distribute parts of custom applications that are commonly used on the MT4 trading platform.

Main Features Of MetaTrader 4

MetaTrader 4 offers traders and brokers a bunch of features for trading forex through the beginner, intermediate and advanced levels. There’s something for everyone with MT4 regardless of whether you are new to forex trading or a professional trader with advanced trading knowledge.

A user-friendly interface and simple design coupled with functionalities such as copy trading, EAs, analysis, and educational resources as well as in-depth guides and trading courses are just some of the reasons the vast majority of brokers offer MetaTrader 4 as their preferred trading platform for clients.

 

Main features of MetaTrader 4

One-click trading

EA functionality

9 timeframes (M1, M5, M15, M30, H1, H4, Daily, Weekly, and Monthly)

3 charts (line, bar, and a candlestick) with direct trading from charts

30 built-in indicators

24 graphical objects

4 pending order types

1 single login for all your trading platforms

Guaranteed full data back-up and security

Trade history information

Micro lots

Internal mailing system

News streaming

Built-in MT4 and MQL4 guides

What is one-click trading?

One-click trading means you can submit or close order with a single click of the BUY or SELL button on the panel attached to a chart. Click on the ‘X’ to immediately close orders from the Trade tab in the MT4 terminal window.

What is EA functionality?

EA functionality is a supplementary program that behaves like a robot that automates the trading process and analysis. EAs on MT4 is used to automatically place and close trades, particularly where a trader has multiple positions open.

What are the time frames on a trading platform?

A time frame refers to the period of time a forex trader chooses to operate in when placing trade orders. The time frames on MT4 can be set in seconds, minutes, hours, days, or months. Forex traders often use multiple time frames to track and analyze a trade.

What are built-in indicators?

Built-in indicators are used by forex traders for on-chart analysis to find possible trading opportunities. MT4 indicators are powerful technical analysis tools that help investors and traders identify market trends and they provide evidence for predictions of future price movements.

What are graphical objects?

MT4’s graphical objects are geometrical shapes that are imposed manually into a chart for analytical purposes. In other words, it’s an image in the symbol window that can be selected, moved, modified, and deleted. MT4s graphical objects include horizontal and vertical lines, linear regression channels, Fibonacci levels, rectangles, and text marks.

What are pending order types?

Pending orders allow a trader to set orders that are opened once the price reaches a specific level which is chosen by the trader or broker.

What are micro-lots?

MT4’s micro lots allow forex traders to trade in small increments. You get micro-lots and standard lots. A micro lot is 1 000 units of the base currency in a forex trade. The base currency is the first currency in a currency pair.

MetaTrader 4: THE BASICS FOR BEGINNERS

Our advice is to invest in a forex trading course to learn how to trade forex and start off trading with a free demo account. Only advance to a mini account and real account when you have developed the skills and confidence to trade with your own money.

Investing in your forex education and taking the time required to develop a solid trading strategy is the best investment you can make in the forex market.

Set up your MetaTrader account through a broker’s server

  1. Open an account with a reputable broker: should be 100% free
  • Demo account: Enables a trader to simulate a live trading environment without putting any real money at risk. Start trading forex online for free and practice trading with virtual money before you start using your own money.
  • Mini account: Advance from a demo account to a mini forex trading account that uses a trading lot that is one-tenth the size of the standard lot of 100 000 units. In a mini lot, one pip of a currency pair based in US Dollars is equal to US$1, compared to US$10 for a standard-lot trade.
  • Real account: Start trading forex with your own money. With a live account, profits and losses are real.
  1. Fill in your account details and credentials.
  1. Record and keep a copy of your account login information before exiting the registration process.
  1. Once registered and approved, deposit the minimum fund required to enter the markets.
  1. Download MetaTrader 4 and log in your details.

Set up your trading orders

Once you have set up your MT4 account and opened your free demo account, it’s time to start learning how to trade forex in real-time. The first step is to organize your platform interface. When you open it up for the first time, it can be very confusing and intimidating.

No problem, start with setting up orders. These are your choices:

  1. Buy or sell via market executions
  2. Buy or sell via pending orders
  3. Modify a trade after it has been entered

Install an EA

Remember, Expert Advisors (EAs) are like a personal robot in your trading platform that does a lot of the work for you. EAs are a program you install on your trading platform that automatically follows your trading instructions that you have pre-determined according to your trading strategy.

Once you’ve set up an EA, it can be replicated to automatically trade on future orders. This means you don’t have to set in front of the computer 24/7 and aren’t tempted to change orders if you get twitchy on price movements.

MT4 has the most reliable EAs which are trusted by hundreds of thousands of traders and brokers worldwide.

The different EAs use the following:

 

Moving averages

Moving averages are one of the most common technical indicators and are used to smooth out price fluctuations. They help a trader distinguish between market noise and actual trend reversals. A moving average takes the average closing price of a currency pair over a period of time.

 

Stochastic oscillators

The Stochastic oscillator is also a very commonly-used technical indicator. It helps a trader determine where an uptrend or downtrend might be ending.

This indicator works on the theory that during an uptrend, prices will remain equal to or above the previous period of closing time; and during a downtrend, prices will remain equal to or below the previous closing price.

Set up your forex trading charts

The appearance and functionality of your trading platform are set up based on how you want it to look and your trading strategy. Commands managing the chart and technical indicators are collected in the “Charts” menu in MetaTrader 4.

Set up the following:

  • Background color
  • Foreground color
  • Grid color
  • Bar Up and Bar Down shades and fringing
  • Bull Candle color
  • Chart type: line, bar, or candlestick
  • Volumes and levels of open positions
  • Ask Line color
  • Stop Order levels (Stop Loss and Take Profit)

Set up your risk management indicators

Learning how to manage risk is the most important thing you can do as a beginner forex trader. Forex trading is risky and complicated. You can lose a lot of money trading currency pairs so start with a discipline of risk management from the very beginning.

MT4 offers a bundle of risk management features. They significantly improve your trading experience and help to prevent you from losing a lot of your own money when you start trading with real funds.

MT4’s risk management indicators impose vital constraints on your trading account by monitoring all trading positions, absolute exposure, the account floating-point, and leverage currently in use. They come in different color codes to make them easy to interpret and implement.

The following risk management indicators are available on the MetaTrader 4 platform:

Stop Loss

Stop Loss is the most common risk management tool used by forex traders that protect your trades from unexpected price movements in the forex market. It sets a predefined price at which your trade will automatically be closed.

A trade will be closed when your currency pair hits your stop-loss price. So, if you opened a trade hoping that a currency will increase in value but it decreases, the Stop Loss feature will close the trade and prevent you from losing money.

Trading Calculator

Forex traders use the trading calculator feature to calculate the risk on an open position. It should be used before you start trading because, if the chances of profit are lower than the profit you hope to make, you will know not to trade that asset.

Stop out Plugin

A Stop out Plugin is a solution application on MetaTrader 4 that prevents you from incurring significant losses during periods of high volatility on the forex market. It closes all trade orders on that account and makes an account a ‘Read Only’ account.

A Stop out Plugins is different from the standard Stop Loss functionality on MT4 because it filters by accounts, not only groups. When a certain level of equity is reached, all orders in a trading account are automatically closed. The critical level of equity is either defined as an exact value or as a percentage of equity loss on the day.

Dynamic Leverage Changer

Dynamic Leverage Changer is a plugin that changes the margin rate of trading positions and automatically modifies the leverage of accounts depending on which positions are open.

Leverage Controller Application

Leverage Controller Application is an application that protects forex traders and brokers from risks associated with orders opened with large volumes. It changes leverage on an account once the account reaches the equity value specified and supports both netting and hedging systems.

Limited Risk Account Plugin

Limited Risk Account Plugin is a plugin that restricts opening orders with no Stop Loss level. It calculates and sets up a Stop Loss for the trading account automatically. The trader can only change the Stop Loss set by the Limited Risk Account Plugin for risks that are decreasing and this can only be done once the trade position is opened.

Margin Notification and Stop Out (MNSO)

Margin Notification and Stop Out is a plugin that notifies a trader on three types of margin levels:

  • Margin Call
  • Pre-Stop Out
  • Stop Out

MNSO also closes the positions of stopped-out accounts. It’s designed to monitor and control a trader’s margin levels and help a trader stay updated on the current condition of his or her trading account. MNO’s are extremely valuable as they inform traders on time that they are reaching certain margin levels.

Quotes Watcher

Quotes Watcher is a plugin that protects traders and investors from the after-effects of possible quote timeouts. It monitors quotes for each indicator and disables a trade position if prices are not updated for the period of time specified in the trade plan.

Quotes Watcher provides traders with the option to set an individual timeout for an asset and prevents any prohibited activities on inactive symbols. Traders receive timeous email notifications on timed-out positions.

Swap Changer

Swap Changer is a plug-in that automatically updates swaps for Short and Long positions and prevents the broker’s server from freezing during bulk swap updates.

Negative Balance Protection

Negative Balance Protection is a MetaTrader 4 customized plugin that prevents the broker from the after-affects of situations when the trader’s balance drops below zero. The protection application returns the trading account’s negative balance to zero and withdraws all credit available on that account.

IN SUMMARY

MetaTrader 4 is a powerful trading platform with impressive functionality. It was created by MetaQuotes Software primarily for retail forex trading but it can also be used to trade CFDs. For a broader range of assets, consider MetaTrader 5 as a better alternative for a trading platform.

MT4 is a flexible mobile trading system that is constantly being upgraded. Nine out of 10 brokers offer MetaTrader 4 as their preferred trading platform for several reasons but simplicity and ease of use are top of the list.

Forex trading is not easy. In fact, it’s very risky and you stand the chance of losing all of your capital investment on a trade position that goes wrong. MT4 offers forex traders advanced functionality with high-security levels and proven risk management tools to protect traders and improve the forex trading experience.

 

WANT TO KNOW MORE ABOUT MetaTrader 4

If you learning to trade forex and would like to know more about how MetaTrader 4 works, you have access to an abundance of professional video tutorials online.

AvaTrade produces quality video tutorials for traders moving from the beginner and intermediate levels to advanced trading. Investing in your forex trading education is the best investment you can make, read up more about the following subjects:

MetaTrader 4 Video Tutorials

MetaTrader 4 for Beginners

How to download MetaTrader 4

Forex Trading Africa Disclaimer

Trading foreign exchange on margin is risky. Forex trading is not suitable for all investors and traders and a high degree of leverage can result in significant financial losses. With forex trading, there is the possibility that you could sustain a loss of some or all of your initial investment.

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