Forex Trading Platforms – Metatrader 4 and 5
The most popular trading platform is the Metatrader and there is simply no trader in this world that didn’t hear about it or traded just once with it. Not all brokers are offering the possibility to trade with it though as some are having their own inbuilt trading platforms. Metatrader is a common trading platform that any broker can use, has its own app for mobile trading and in that app, one can choose the broker, type in the account number and password, and access to the trading account is granted.
Metatrader 4 and 5
Metatrader comes in two versions, 4 and 5, and by far the Metatrader 4 is more widely used than Metatrader 5. There are multiple reasons for that, but the most important one is that on the Metatrader 5 it is not possible to hedge a position. For example, it is not possible to open an EUR/USD long trade and then at the same time a short trade for the same currency pair.
This is a major drawdown as it simply means that hedging strategies cannot be pursued and there are many traders that use them. Just to give here an example of how a hedging strategy works, imagine the following. Traders have a specific trading system (a moving averages cross, or some oscillators offering divergences area, etc.) and that system is being applied on multiple time frames, starting with the five-minute chart and continuing with the hourly, four hours, daily and even weekly charts. On the same currency pair!Using this kind of strategy, many times the five minutes chart for example gives a bullish sign, while other time frames may show the opposite direction and traders simply follow the strategy and take all the trades. It is very possible that at one moment of time the account is fully hedged or partially hedged until stop loss or take profit order is being reached on one of the time frames. This kind of trading is extremely popular especially with algorithmic trading but the Metatrader 5 platform is not allowing it.
RECOMMENDED FOREX BROKERS
|Broker||Min Deposit||Regulation||Bonus||Read More||Visit Site|
|XTrade||$100||CySEC||60%||Read Review||Visit Broker|
|XM||$5||CySec||100%||Read Review||Visit Broker|
|HYCM||$50||FSA||$5000||Read Review||Visit Broker|
FIFO Rule Mandatory
Another thing that makes traders avoid the Metatrader 5 platform is the fact that it is based on the FIFO (First in First Out) system. It means that positions can only be closed in the order of their opening, and it is not possible to close a profitable one in order to free some margin until you close a losing one that was opened earlier. Some traders in different parts of the world, like the US traders, are forced to respect this system as brokers are obligated by the financial regulators to obey the FIFO rules. From this perspective, I guess the Metatrader 5 is more popular in the United States than in other parts of the world.
Metatrader 4 Basics
Enough about the Metatrader 5 though, how about the Metatrader 4? Well, this is a real beauty when it comes to charting and trade execution as there is simply anything one can dream to have on a trading platform. By the time you have opened a trading account with a broker that offers the Metatrader 4, you have to download it. After that, login with the account number and password the broker provided and the connection is made in a blink of an eye. Currency pairs and other financial products the broker is offering are listed on the left side of the screen by clicking the Market Watch tab on the top left of the screen. If the forex market is open, all those currency pairs will move in a frenzy and the trading platform looks lively. Right click on any currency pair on that list and a list of things to be done with that currency pair appears: you can open a chart for it, place a pending order, etc. On the other hand, a double click on any currency pair will open a pop-up window that allows a trade at the market to be done. All you have to do is to set the target and the stop loss, as well as the trading volume. Metatrader 4 is a great platform to use for technical analysis purposes, meaning its charting tools are simply great. The tools offered in the default version are enough for charting a currency pair, but one can always look on the mql.com community (the Metatrader developer) and find there many other indicators and tools that can be imported to the trading platform either for free or against a small fee.The classical Fibonacci and Pitchfork tools, together with a great variety of both trend indicators and oscillators are well represented on the Metatrader 4 as well.
Perhaps the most important function of the Metatrader 4 and 5 though is the one dedicated to strategy testing and expert advisor building and programming. Assuming one has a trading system that can be automated, the Metatrader platforms allows to open the MetaEditor and simply code that robot. Upon completion, the Strategy Tester function of the trading platform allows seeing how the newly built trading algorithm performed in the past and if it is profitable. Applying an expert advisor on a currency pair and running it is fairly easy, but this would be the subject of another article here on our Forex Trading Academy. Any chart made on the Metatrader platforms can be saved on the PC as well with a simple Save As function and the History Center allows you to find if there is more historical data on a currency pair than the one offered as a default. Moreover, one can import his/her own data into the trading platform, providing the type of the file matches the one Metatrader uses. To sum up, both Metrader is a great trading platform and depending on the way you use it, both 4 and 5 offer great incentives. One thing is sure though: by the time one gets used to trading and charting with Metatrader, it is very difficult to switch to other web-based or new trading platforms other brokers offer.
Other educational materials
- What is a Margin Call?
- Setting Up a Chart in Metatrader 4
- Forex Trading Accounts and the Value of a Pip
- The Importance of Swap and Spreads
- How to Enter/Exit a Trade
- How Do I Make a Profit from Forex Trading?
Recommended further readings
- Forex Trading using MetaTrader 4 with the Fractal Market Hypothesis. Blackledge, J. and Murphy, K., 2011.
- “Technical analysis of Forex by MACD Indicator.” Yazdi, Seyed Hadi Mir, and Ziba Habibi Lashkari. International Journal of Humanities and Management Sciences (IJHMS) 1, no. 2 (2013): 159-165.