Learn Forex Trading for Beginners

Beginner
Trading101
20 Lessons
20 Hours

Best Trading Platforms to Use When Trading Forex

Trading has evolved together with technology. When the ticker tape appeared for the first time on the U.S. stock market, it revolutionized the industry.

Up until its appearance, traders didn’t have access to such information. To have an idea, traders waited for the newspaper to find out the changes in price on the stocks traded the previous day.

At the start of 1900’s, charting belonged to a different era. An era when visionary minds looked at patterns and traced the prices made in the market.

The ticker tape changed everything. Suddenly, there was no need to wait for the next day to find out the prices.

Moreover, no need to own a seat on the major stock exchanges in the United States. And so, speculation began.

To some extent, what happened with the Personal Computer and the Internet is similar. Their appearance revolutionized the industry in such a way that new products appeared.

Progress and technology changed the way we, as traders, looked at the market. But also changed markets.

Execution improved beyond their wildest imagination. If before, clerks executed trades with hours of delay; nowadays some milliseconds will do the same job.

Current trading platforms are the by-product of such developments. Depending on the trading account, they give access to instruments and markets around the world, even if Forex trading implies only buying and selling currencies.

Trading Platforms in Forex Trading

Forex brokers offer the access to a trading platform to anyone who opens a trading account.

Most brokers offer demo trading too, not only the real one. The idea is to allow the trader to test the conditions before taking the plunge.

Contrary to the general belief, a trading platform doesn’t offer only technical tools. Everyone thinks of charting and technical indicators, but a trading platform has multiple features to note.

News trading or fundamental analysis is possible too. Usually, every trading platform comes with a news feed.

Major financial news outlets post snippets throughout the trading day. Either economic data or parts of some speech from a central banker somewhere around the world, such snippets keep traders informed about everything that might matter.

Because financial markets are interconnected, news from other markets influences Forex trading too.

As a Forex trader, if anyone asks you if you trade oil for example, even thought you never traded it directly it is possible that your funds may have a connection to the buying in selling of oil halfway across the world. How come?

Perhaps you have traded the Canadian Dollar (CAD). The USDCAD as a primary currency pair is a popular choice for retail traders.

But, the Canadian Dollar enjoys a direct correlation with the price of oil. Effectively, it means that when the price of oil falls, the CAD falls too. Or, when the price of oil rises, the CAD increases also.

Therefore, the price of oil has an indirect relationship with the USDCAD pair. Hence, when someone trades the USDCAD, oil-related news is almost guaranteed to move the pair.

Trading Platforms for the Retail Trader

The MetaTrader4 and 5 are the first choice for any retail trader. The simplicity and easy-to-use features make them the number one trading platform for this segment.

However, it isn’t like retail traders have multiple options to chose from. Forex brokers have a choice when setting up their business.

Besides deciding the type of brokerage house and the services to put on offer (e.g., trading account types, etc.), the broker must decide on the trading platform. Here, there are two choices:

  • Build a dedicated trading platform. In this case, it involves developing costs, time to build and test, plus ongoing maintenance and support costs. Most brokers don’t have either.
  • Opt for a free trading platform that already exists. The MetaTrader4 or 5 editions come with branding possibilities and all kinds of integrations with a brokerage business.

Plus, retail traders already know the platform, so there’s no need to invest in education, promotion, and tutorials to use the platform.

Due to stiff competition, brokers don’t only offer the classic trading platform designed for desktop trading. Instead, they provide a variety of ways to use the platform that gives traders different ways to access the trading account:

  • Web-based platform. Traders use the login data to login to the trading account on a web-based application. A simple Internet connection does the trick, without the need to download the trading platform. On the negative side, the quality of the Internet connection may result in malfunctions. As such, when the market moves quickly, and the Internet lags, proper execution may be a problem
  • Mobile platform. In today’s interconnected world, everyone owns a smartphone. Or, at least, every trader does. As such, brokers spotted the opportunity and gave traders the possibility to trade “on the go.” After all, the more active the trader is, the more money the broker will make. Hence, brokers merely make sure to offer access to the trading account anytime and anywhere. It definitely has its advantages. The biggest one is that traders gain mobility. Forex trading doesn’t require to sit in front of the screen all day anymore. Especially when the right information is available anytime and anywhere.
  • -Dedicated platforms. Although the most popular, the MetaTrader4 and 5 aren’t the only ones that exist. CTrader, for example, is a different platform to choose. And, like it, some other ones come to complement the offering. All offer most of the same features, some with a better design, others with more indicators in the default settings, and so on.

Professional Forex trading done by large institutions, big investment firms, treasury departments and so on, have dedicated terminals with history in the industry. I won’t name any here, but a simple Internet search reveals the most relevant ones.

The advantage of using professional terminals comes from the abundance of data offered. Do you want to know the change in price for the Thailand bonds? You have it with a few mouse clicks.

Moreover, you can trade it.

Plus, financial information from all over the world comes to complete the service. However, for the retail trader, such terminals are prohibitive. They come at an extremely high cost, and the retail trader typically doesn’t know how to use all features available.

Conclusion

The trading platform plays a vital role in Forex trading. Some traders may refuse to open a trading account with a broker if the trading platform doesn’t have specific features.

For example, consider the Elliott Waves Theory. Under the theory rules, traders label waves, which involves using the text tool available in any trading platform.

However, some trading platforms don’t allow for text to stick when changing the time frame. Hence, the entire work on a top/down analysis becomes worthless if waves on the monthly chart don’t appear correctly on the daily.

In time, some traders have replaced the role of the trading platform. It isn’t mandatory to do the charting with the platform you have a trading account with.

Just do the charting on your old trading account, using a trading platform that you know, and take the trades on the new platform.

The idea of this article is to point out the advantages and disadvantages of different trading platforms. But the actual use of them isn’t mandatory.

Later in this Trading Academy, we’ll cover the MetaTrader4 and 5 in depth, talking about their features and explaining some tips and tricks to make retail traders’ life more easier.

Until then, keep in mind that the trading platforms that exist now are amazing in defining technical analysis when compared with how technical analyses was done back when trading started.