Once you enter online forex trading world it demands certain computer knowledge whether you like it or not. As a forex trader you are faced with computer tasks, one of which is installing and using forex trading software.
Many of us just follow the instructions of a forex broker to install and download the trading software without thinking twice, but do we really know what the term software means?
A simple example might help. When you rent another episode of Sopranos on DVD you actually bring home software that is stored on that DVD. Your DVD player, on the other hand, can be called a hardware device which reads the software from your Sopranos DVD and shows it to you via TV screen.
In our case, your computer is the hardware and forex trading software is a program with all kind of trading applications and features. Once the software is downloaded and installed your computer is able to open the program and you can enter the trading market.
Who creates forex trading software and how is it done?
Professional programmers write Forex trading software using programming languages such as Java, C++ or others. Online forex trading platform is designed to meet the needs of forex traders. The platform has all the necessary components, brokerage services and trading features.
One of the widely used forex trading software is called MetaTrader 4.This trading platform is complex enough to have all the broker services in one place and hundreds of forex brokers are using this particular software as their forex trading platform.
Some forex brokers create their own forex trading software. Many have an option of web-based trading platform, meaning that you don’t have to download and install a thing. You just log into your account using your username and password and aula!!
The main features of all forex trading software, whether MetaTrader 4 or “homemade”, are live quotes, graphs and charts, trading tools, technical indicators, profit and loss, margin, open positions, current P&L, trading history and more.
Some of the forex brokers can go even further with their forex trading platform and create all kind of special features for their traders, such as chat rooms, special inside indicators, gaming features and competitions! For example, Easy Forex broker has a very interesting trading feature called “InsideView” – it shows which currency is favored by all the traders of Easy Forex.
You can make your decision based on popularity of selected currency pairs! Another example is eToro with its magnificent game-like trading software. No doubt that we are all very serious and professional forex traders, but a touch of a game, especially when it comes to trading competition makes forex trading much more interesting! What can I say, I am a computer geek!! If you loved “Diablo” or even “Mario”, gaming trading features are very welcomed!
Whether you choose a forex broker with MetaTrader 4 forex platform or a broker that provides his own trading software make sure to check every feature before you make a deposit. The best way to familiarize youself with a particular trading platform is of course try the demo.
Forex Trading Platforms Explained
Currency pairs are priced through the interbank market, a communications system used by big banks and financial institution but without a central exchange like NASDAQ or the New York Stock Exchange. Forex brokers take their cues from those transactions but aren’t required to offer clients the best interbank bid or ask and may intentionally display wider spreads with less favorable prices, adding to profits when they complete those trades through the system.
Prospective clients can check for conflicts of interest by reviewing trade execution procedures at the broker’s website. Specifically, find out if the broker has a dealing desk that makes a market, taking the other side of a client trade. A more reliable broker will post quotes directly from the interbank system through a wholesale liquidity provider or electronic communications network (ECN) that handles the actual buy and sell transactions. These are third party firms with direct connections to the professional system.
Forex traders open and close positions through the broker’s trading software, which should include a mix of stand-alone, web-based and mobile platforms. Metatrader has emerged as the industry standard for stand-alone software in recent years, providing a robust feature set that includes real-time quotes, price charts, news, research and customizable watchlists. Learn more from Investopedia’s MetaTrader 4 guide.
Web-based trading provides an alternative to stand-alone software but often has fewer features, requiring account holders to access other resources to complete their trading strategies. Mobile apps provide the greatest convenience but fewest bells and whistles in a slimmed down design that usually allows one or two click trading. It’s best to use the full-featured stand-alone software whenever possible, saving the mobile experience for those times you’re away from your trading desk.
Most forex brokers offer demo accounts that let prospective clients look at the stand-alone, web interface and mobile platforms, allowing them to trade forex pairs with play money. This software displays the same quotes, charts and watchlists as the real system, so it’s an invaluable resource to examine the quality of the broker’s bid/ask pricing. Be suspicious if the broker doesn’t offer a demo account because it might be using an inferior or outdated platform.
Put several of these accounts side by side with real-time quotes from a large financial site and you’ll quickly find out which forex brokers are offering the best bid and ask prices under normal market conditions. If possible, take a second look just after a Federal Reserve rate decision or other market-moving event to see how the currency pairs move in highly volatile conditions.
The Primary Criteria for Choosing Forex Brokers
Here is a list of twelve important points to consider in order to compare Forex brokers:
- Range of Trading InstrumentsIt is beneficial to be able to invest in several financial markets at the same time. A good choice is to work with a broker that offers a wide variety of markets to trade on, such as CFDs on indices or commodities and cryptocurrencies, stocks, or ETFs.
- Different Types of Trading AccountsA good broker should offer you several types of accounts with different benefits for specific styles of trading, such as those with higher protections, or greater leverage or spreads, or different ranges of instruments.
There’s nothing wrong about searching for a broker with the lowest spreads, but watch out for marketing techniques. A lower spread advertised on the website does not necessarily mean that you will continuously have the spread. Looking for a competitive broker by focusing on offerings of low spreads is not necessarily the best idea, as a displayed average spread does not guarantee that it applies to your specific type of order.
- Optional Leverage
Forex is a market that is often traded with leverage. To manage a trading position and account, being aware of your leverage allowance is very important.
- Order Execution Quality and Slippage
Having low spreads is a good start, but having orders executed at the asking price is an even more useful offer.
- Allows for Scalping
If you are looking for high-frequency day trading, make sure there are no limits on trading styles. A scalping broker has no minimum period of time to wait between the market price, the stop-loss, and the take-profit.
- Trading Platform
A trading platform that you are comfortable with and that fits your individual needs is essential. For example, Admiral Markets offers several options including MetaTrader 4 (MT4), MetaTrader 5 (MT5), MetaTrader WebTrader, and the MetaTrader Supreme Edition plugin for MT4 and MT5.
- Custom Tools and add-ons – Good brokers should offer valuable support for their traders. For instance, Admiral Markets created both the MT4 and MT5 Supreme Edition add-ons and made them available for its live Forex and CFD trading account, and its demo trading account. These tools aim to help Forex and CFD traders make more money, with less effort.
- Forex Broker Regulation – It is important to open an account with a regulated broker.
- Fund Security – Choose a Forex broker with bank accounts in Europe, in particular, with diversified bank accounts.
- Customer Service – Having a FX broker that is dedicated to its customers is much more practical and reliable for traders.
- Education – Forex brokers offer training sessions and education. For beginners in trading, it is essential to understand the trading terminology, so a broker with proper training tools is always a better choice. Admiral Markets offers several courses, including Forex 101, Zero to Hero, and a whole library of articles on Forex, trading CFDs, and trading in general.
Useful Trading Platform Features
When assessing a trading platform, you will want to look for useful features that can help enhance your trading experience. These might include the following:
- Accurate Forex Quotes – You will want a trading platform that has accurate trading quotes for all of the currency pairs you are interested in trading. You want to avoid the risk of requotes and not knowing when the market has changed so that you can initiate trades in a timely way and monitor your risk adequately. Most forex trading platforms available to personal traders operate via the Internet, so you will also want to have a stable and reliable high speed Internet connection to assure the fastest possible transmission of pricing data.
- Reliable Deal Execution – Any trading platform should execute deals quickly and reliably without the need for potentially costly requotes.
- Good Order Placement – The platform should allow the quick entry of all of the types of orders that you think you might need. This would typically include take profits, stop losses and trailing stops at a minimum, with an OCO or “One Cancels the Other” feature as an added benefit to avoid the execution of multiple orders for the same position.
- Manage Accounts – It can save you considerable time if a trading platform allows you to manage you trading account directly. Once you have established a forex trading position, you will probably need to manage it and keep track of your account balance and trading profits on a real time basis as the market moves. An ideal forex trading platform will therefore offer suitable account management functions for you to watch over your trading portfolio with.
- Technical Analysis Tools – Many good trading platforms will provide a full featured set of technical analysis tools that should include charting and a good range of popular indicators for the currency pairs that you are thinking of trading. Charts should be updated on a real time basis for a variety of time frames, and a useful additional feature is to be able to trade directly from your charts.
- Fundamental Analysis Tools – Traders using fundamental analysis usually need to have access to a quality live news feed from a reputable news wire like Reuters or AP/Dow Jones via their platform. It also helps to have access to an accurate economic data release calendar to know when key fundamental information is due out.
- Strong Data Security – Those using live trading accounts should be concerned about the safety of their personal data and account login information. Make sure the platform operates under appropriate Internet security protocols and that your account information is backed up for additional security in case of data loss.
- Minimal System Downtime – Trading platforms should not be taken down during market trading hours due to the risk that you will not be able to close out a trading position at the appropriate time. Look for a trading platform that operates with minimal downtime. Any good trading platform needs to have an up time record during forex trading hours that approaches one hundred percent
- Support for Trading Strategy Automation – Some trading platforms allow traders to program their trading strategies into the platform for automatic execution of transactions. If you plan on automating your existing forex trade plan or using off the shelf forex trading robot software, you will want to be sure that any forex trading platform supports your intentions in this regard to the fullest extent possible.Also, most automated trading software programs tend to work best if they are run on a virtual private server or VPS. Installing the software on a remote server like this helps automated traders to minimize down time due to dropped or unstable Internet connections.
5 steps to choose the right trading platform
1. Don’t imitate others. Don’t choose a platform only because it is recommended by others. Always choose a platform basing on your personal needs. Evaluate the information, talk to your broker, consider his/her experience, and pick the most suitable for you platform.
2. User-friendly interface. Find out if a chosen platform is comfortable enough to work with it daily. All features and functions must be easy and understandable for you.
For example, look at the platform and decide whether you like it at the first sight or not. If the answer is «No», then definitely check something else. Of course, in the future, you will have to learn the details of any platform to work with it professionally. But basic buttons and options should be understandable for you immediately after opening a board. Don’t forget to check the graphics too.
3. Basic functionalities and additional features. A platform should correspond to your trading situation at the moment. You don’t need to care about additional features, which you are not going to use for trading now.
If you are going to upgrade it in the future, you will be able to do it anytime. A sophisticated platform is a good choice for those traders, who use all the features of that platform in real time.
Otherwise, it will only complicate your trading experience. If you are not sure whether a chosen platform is too sophisticated or not, test how many functions you are going to use daily. The answer should be 80% at least.
For beginners, it is always better to start with something more simple to learn faster. Thus, you will show better progress in less time.
4. Stability of performance. Make sure that a platform corresponds to your software. You have to be sure that a performance of a platform will be stable and smooth. This is one of the most important things in trading.
5. Support. Your broker should be equipped to work with a platform which you are going to choose. Not only you but also the team should know the platform too. Now you’re ready to pick a new trading platform.
Do your homework and forex trading will be like spreading butter on a piece of bread!
Broker’s Business Model to Consider
In the course of your search for a broker, you will come across terms like “STP”, “ECN”, “NDD” and “Market Maker”. All these terms are in fact used to describe the business model which the broker is operating by. So what do they all mean?
There are two major types of broker – Dealing Desk and Non Dealing Desk.
Forex dealer or Market Maker processes their clients trading instructions through a dealing desk within their company. A dealing desk broker takes the other side of the trade to you, meaning when you open a position like the EUR/USD the trade will be executed by the broker and they are then exposed to that trade.
A Non-Dealing Desk (NDD) broker passes the trade straight through to a third party. There are two kinds of NDD broker (ECN and STP). They are both essentially the conduit between you the trader and the market maker or dealer.
With the first type (ECN) when you press “Buy” on your trading platform, your trade orders will be processed on the broker’s computer trading system automatically and transmitted through the Electronic Communications Network (ECN) without a dealing desk (This is where the term “Non Dealing Desk” (NDD) comes from).
What is ECN Trading and What are its Advantages?
With the second type of NDD broker, upon receiving your trade orders they will pass the trade orders directly to another party to be executed by the market maker’s dealing desk. In this instance, the broker is known as a Straight Through Processing (STP) broker.
Both the Forex ECN and STP brokers are intermediaries to several dealing desks or market makers in the global Forex market. Market makers or dealers will transmit their pricing to the ECN or third party liquidity provider together with the volume which the quote is valid for. The ECN/STP will in turn distribute the pricing to traders/market makers linked to the system. It should be noted that the ECN/STP does not execute trades but rather acts as the conduit for transmitting the trade orders from the trader to the dealing desk where the trader took the price from.
Why is this important?
The business model of the broker is important as this will affect the kind of spreads that you will receive and whether the spread will be fixed or variable.
Security of Data
Last but not least comes the security issue. The most important thing you need to consider is not allowing your personal data to be compromised, therefore the trading platform you want to use should be as secure as possible. You need to check the type of data encryption your platform of choice uses, which will give you some insight of how well your data will be protected as it gets transferred over the internet. Reputable trading platforms use firewalls both on server and application level. They also employ the use of two separate synced servers on which the data is stored, allowing any lost information from one of the servers to be recovered by the other.
Is it possible to start forex trading with $10?
Yes, you can. A few platforms allow minimum deposits as low as $10. However, the usual starting deposit is usually around $100 or $200 but can be as much as $500. However, if you are a forex beginner, you needn’t ever risk $10 if you open a demo account first. These are free and allow you to learn the platform and get you up to speed with forex trading. Demo accounts are risk-free as you are trading with virtual cash to learn the ropes. Some demo accounts are good for 30 days; a few are unlimited.
Is forex just another form of gambling?
Not in the sense of a casino or horse race track, no. Unlike horses or blackjack, the odds are tipped in favor of the trader who knows the forex market and how to trade.
Which factors are important to choose a reliable forex trading platform in 2022?
As professional traders, we know what to look for when choosing a good forex trading platform. It is important to check the broker by certain criteria. First of all, you should have a look at the regulation of the broker. There are some scam websites that are unregulated and trying to rob the customers of money. So be very careful and only trade with platforms that are fully regulated.
Then it is important to check the trading conditions and offers of the forex platform. Most brokers are offering a free demo account so you can test it by yourself. The support for customers should also be checked. No one wants a forex broker who is not answering important questions or helping his own customers.