What is a Currency Trading Platform?

A currency trading platform is a software interface provided by currency brokers to their customers to give them access as traders in the Forex markets. This may be an online, web-based portal, mobile app, a standalone downloadable program, or any combination of the three. The platform may also provide tools for research in addition to tools for order processing.

Key Takeaways

  • Forex market access has to come through a broker so most platforms are made available from broker firms, but not all.
  • Metatrader 4 (MT4) is nearly a defacto standard among forex trading platforms.
  • Some clients prefer brokerages and platforms that give them access to all asset classes and integrate trading into a single platform.

Understanding Currency Trading Platforms

Currency trading platforms provide tools to traders for executing buy and sell orders in the Forex markets. The platforms are made available by Forex brokers for the use of clients. Some Forex brokers offer their own custom trading platforms for order processing and research, but many provide order access through integrated trading and research programs. By far the most ubiquitous of these is MetaTrader 4 (MT4). MT4 is not opensource software, but is an openly extensible platform that allows trading system developers the ability to create scripts and automated trading algorithms that execute within its framework.

This platform is widely used among retail traders, so much so that many brokers that offer their own platforms also offer MT4 integration so that those retail traders familiar with the platform will have the ability to migrate their own tools to the new brokerage with ease.

Many Brokerages also offer a wide array of currency trading platform solutions for both retail and institutional clients. In the institutional markets, banking or brokerage companies may also build proprietary currency trading platforms to meet their internal needs with trades executed through institutional trading channels.

Foreign Exchange Trading

Foreign exchange (forex) markets have many advantages that appeal to a lot of day traders. The foreign exchange market is the largest in the world. This market focuses exclusively on the trading of currency. Daily forex volume reported tri-annually from the Bank of International Settlement showed $5.1 trillion per day, traded in 2016 (the next update will be published in December 2019). This compares to a 2018 average daily trading volume of 6.6 billion shares or $330.6 billion in the U.S. equity market. Thus, there is a great deal of opportunity for profit in the foreign exchange market. The forex market is also available for trading 24 hours a day, five days a week which adds to its profit bearing potential.

Forex Trading Platform Features and Considerations

Retail forex traders typically look for some popular features when identifying and using a currency trading platform. The availability of currency pairs is one important feature since the trading of foreign exchange currencies is based around the pairing of two global government currencies. Traders look for ease of installation and use which can lead to comparisons of web-based platforms versus downloadable platforms. In this area, traders may have the option to choose a platform from their brokerage directly or go with an independent service.

Fees can be an important consideration as well because the costs can range broadly depending on individual systems. Functionality is a key aspect for most traders since they will typically rely on ingrained charts and order-taking methods built-in from the system. Lastly one key aspect of a forex trading platform will be the brokerage trading platform with which it is integrated.

Brokers such as Interactive Brokers or TD Ameritrade are popular brokerage options because they offer access to all asset classes, but firms such as IG or Oanda are popular among forex traders because of their specialization in that market and their competitive rates.

Most forex platforms will allow a trader to open a demo account prior to funding a full account. Trying out several forex software trading platforms through a trial period can help a trader decide on the best one for their trading needs.