What is the best trading platform for trading CFDs?
Some brokers build their own platform, but the most popular trading platform is Metatrader 4. Metatrader 4 is considered the gold standard among trading platforms ever since it was developed by Metaquotes in 2005. Metatrader 4 or commonly known as MT4 is a free application. MT4 connects traders to a wide range of markets such as Forex, CFD’s, Indices, Commodities, Cryptocurrencies, and many more.
MT4 is used by more than 300 brokers worldwide. This makes it easy to change brokers without spending too much time adjusting to a new platform.
It is a great platform for beginners and advanced traders. It offers comprehensive charting and technical analysis capabilities. MT4 offers desktop, web and mobile platforms and supports over 30 languages including English, Chinese, Japanese, German, Spanish, and French.
There are lots of resources and tutorials to get started. It has a lot of different order types and advanced charting tools. It also includes its own programming language that allows you to build and load other people’s trading robots to do automated trading.
There is a good reason it is the most widely used trading platforms. Let’s explore the benefits as well as down sides of using MT4 to trade CFDs and Forex.
Online Resources and Tutorials
Beginners will be able to navigate the MT4 interface without much prior knowledge. Ease of use was a primary goal during the MT4 design process. Another advantage of MT4 is the enormous availability of resources and tutorials online. This allows a new trader with no experience to place a trade within minutes. All you have to do is watch a beginner’s tutorial on the brokers website or on YouTube.
Demo accounts are a great environment to get your feet wet before committing to the live markets. All you have to do is visit your brokers website and download a demo account to get started. Once you have set up your demo account you can practice entering and exiting trades without any risk. Once you feel comfortable with the platform and your broker, you can move on to a live account. A live account looks identical to your demo account. The only difference is that you will trade with real money.
Robot and CopyTrading
Advanced traders use MT4 as it allows them to automate their trading strategies and build custom indicators.
But even new traders can take advantage of automated trading strategies with ‘Copy Trading’ or ‘Expert Advisers’.
Expert Advisers are trading robots which can analyse the markets in real time. These robots execute trades as soon as an entry signal presents itself. Expert Advisers or EA’s are free or can be purchased depending on the level of complexity.
Copy trading allows you to copy trades of successful traders for free or for a reasonable fee.
Before subscribing to a robot or CopyTrade you should take a look at the traders/robots trading statistics. This will ensure that you are comfortable with the level of risk.
Data Security and stability
Another important aspect of why most traders choose to trade with MT4 is the level of security. All data exchanged between the client platform and the server is encrypted. It also conforms to the highest security standards. (128-bit data encryption as well as the use of RSA digital signatures). The trader's IP address is also concealed for extra protection.
MT4’s processing speed is another key advantage. The trading platform only uses a small amount of the systems resources which reduces any interruptions to the PC. In other words, the platform is very stable on most PC’s, tablets or mobile phones.
panoramic shot of bi-racial trader in glasses looking at computer
Charting and Indicators
The charting capabilities let you view historical price data across different time intervals. If you are looking to analyse the historical trends of the gold market you can easily select a timeframe such as hourly, daily, weekly or monthly. You can also customize the way you wish to look at the price data. You are able to choose between line graphs, which is the simplest form of viewing the prices over time, or by selecting a candle or bar chart. Candle or bar charts show 4 price points (open, close, high, and low) for a particular time frame.
Once you have customized your charts and quote window you can save the layout for future use. You can even save more than one layout if you wish to analyse markets from a different time frame. Or to keep certain trading products separate from each other (fx, indices, commodities)
MT4 also offers 30 built-in indicators to analyse the markets from every angle. The most popular indicator is the simple moving average. It simply shows the current price trends over time. Another type of indicator is the Oscillator. The most widely used Oscillators are the MACD and RSI. They provide signals to buy when the market is oversold and to sell when the market is overbought.
Most brokers provide news feeds through the MT4 platform. This provides new and advanced traders with updates on the markets from around the world. This is particularly helpful when there is a sharp movement in the price. The ability to check what caused a sudden move in price can help a trader make decisions on the spot.
MT4 also offers traders a wide range of order types which allow you to better manage your entry and exit levels.
There are two main types of orders available in MT4 called Pending and Market orders.
Pending orders allow you to buy or sell currencies (or Indices, Commodities...) once the price reaches a specified level. For example, the current price of Gold is at $1,500 and you wish to buy once the price reaches $1,505. You can simply place a ‘buy stop’ order and MT4 will take care of the rest.
There are four pending order types in MT4:
- Buy Stop: order to buy at market once the price reaches a certain level. (higher than the current market price)
- Sell Stop: order to sell at market once the price reaches a certain level. (lower than the current market price)
- Buy Limit: order to buy at market once the price reaches a certain level below the current market price
- Sell Limit: order to sell at market once the price reaches a certain level above the current market price
Market orders will execute your order at the best possible price available as soon as you click ‘buy’ or ‘sell’ on MT4.
The majority of online fx brokers offer MT4 as it is one of the most popular trading platforms within the trading community. The platform has also had a solid track record of 15 years since its humble beginnings in 2005. Regardless, if you are a new or established trader, you will be able to find a vast amount of information and resources on forums and other websites.
You may have also heard about MT5 which was launched in 2010. This platform is being offered by some forex brokers but is not as popular as MT4. MT5 might look like MT4 but it is not a new version of the popular MT4 platform.
MT4 had a very loyal fan base when MT5 was released in 2010. Yet, from a trader’s point of view it was a simple decision to remain with MT4 – “If it isn’t broke, don’t fix it”.
Meta Quotes released MT5 to offer a platform that could access other markets than FX and CFD's. (Stocks, futures and options through a centralized exchange). Another reason for launching MT5 is that it complies with U.S. FIFO ”no hedging” regulations. (Clients of brokers in the United States have to deal on a “first in, first out” basis)
There are a few other differences between MT4 and MT5:
- MT5 allows for faster back-testing across different strategies
- A new coding language MQL5 (MT4 uses MQL4, MQL4 is not compatible with MQL5 and so you can’t just run your MT4 trading robot on MT5)
- MT5 offers technical support whereas MT4 doesn’t
- 6 pending order types in MT5 vs 4 in MT4
- MT5 includes Depth of Market data (DoM)
- MT5 offers an economic calendar
- MT5’s language is compatible with MT4, but not the other way around
If you’re looking to trade CFD’s/Forex only and live outside of the U.S., then you will find that MT4 will be a reliable platform with a strong track record. Since most brokers offer MT4 it is still the go-to software for most traders at this point. Since most brokers are more familiar with MT4 you may also receive better technical support from your broker.
MT4 is truly built for FX and CFD traders. But if you’re looking for other markets (futures, options and stocks) many brokers can provide you with alternative platforms.
Simply visit the brokers website to see what markets you can trade and what platforms are on offer. Most traders begin their journey in the forex markets, but down the road you may want to trade other markets as well.
The key is to choose a broker that offers a one-stop-shop for all financial markets. This will save you a lot of time and money in the future. And always ensure that you’re dealing with a regulated broker!
Author: Alex Kowalski is the Head of Dealing at Rockfort Markets Limited in New Zealand and has over 10 years of experience in trading and financial markets.