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.

These platforms may also provide tools for research in addition to tools for order processing.

Key Takeaways

  • A currency trading platform provides forex market access to traders.
  • Some clients prefer brokerages and platforms that give them access to all asset classes and integrate trading into a single platform.
  • MetaTrader 4 (MT4) has become a de facto standard among forex trading platforms.
  • Automated trading via these platforms can remove psychological and emotional factors from trading strategies.
  • Automated trading is not without issues and requires monitoring and consideration to operate successfully.

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.

Many brokerages 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.

Many platforms also offer forex charting packages to determine the likely direction on a given currency pair in conjunction with other technologies such as predictive forecasting software and online trading to get an edge in forex markets.

Choosing the best charting software generally depends on a trader’s personal needs and experience. Considerations include the type of technical analysis they wish to undertake, the volume or duration of their trades, and the kind of device they want to use to view the charts. Knowledgeable traders will make note of the data sources from which charting solutions pull their prices and other information, ensuring that those sources are up to date, reliable, and accurate.

Example of a Currency Trading Platform

By far one of the most popular currency trading platforms is MetaTrader 5 (MT5). MT5 was released in 2010 as an additional platform to MetaTrader 4, which is also one of the most popular currency trading platforms; more popular than MT5.

Both MT4 and MT5 are flexible trading systems that allow for the trading of forex. It's important to note that MT5 is not an update to MT4 but rather a system with a different purpose. MT5, unlike MT4, allows for the trading of stocks, CFDs, and futures in addition to forex. Both provide fundamental and technical analysis to help traders make informed trading decisions.

For brokerages, MetaTrader 4 costs $100,000 per license in upfront fees, as well as costs related to hosting, bridging, and support, which run in the thousands of dollars per month.

Both are not open-source software but are openly extensible and customizable platforms that allow trading system developers the ability to create scripts and automated trading algorithms that execute within their framework.

MT4 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.

Special Considerations

Retail forex traders typically look for some popular features when identifying and using a currency trading platform. 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. A 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.

Automated Forex Trading Platforms

Automated forex trading software runs on a program that analyzes currency price charts and other market activity over multiple timeframes. The software identifies the signals—including spread discrepancies, price trends, and news that may impact the market—to locate potentially profitable currency pair trades.

For example, if a software program using criteria the user sets identifies a currency pair trade that satisfies the predetermined parameters for profitability, it broadcasts a buy or sell alert and automatically makes the trade.

A major advantage of automated forex trading software is the elimination of emotional and psychological influences determining trading decisions in favor of a cold, logical approach to the market.

Beginners and even experienced traders may sometimes make a trade based on some psychological trigger that defies the logic of market conditions. With automated trading, such all-too-human lapses of judgment just don't occur.

That's because automated software is intended to make your trading decisions unemotional and consistent, using the parameters you've pre-established or the settings you've pre-installed.

As with all technology, automated trading platforms are not without issues. If there is a loss of connection to the network, a trade may not go through, resulting in a missed opportunity or certifying a loss. There can also be a discrepancy between the theoretical test trades and the actual trades.

Automated systems also require constant monitoring, due to the aforementioned technical issues, as well as anomalies in the trading platform, such as missed orders or duplicate orders.

Pros
  • Removes emotion from trading

  • Analysis over multiple time frames

  • Trades are made automatically

Cons
  • Network issues

  • Discrepancy between theoretical trades and real trades

  • Requires constant monitoring

Which Is the Best Forex Trading Platform for Beginners?

The best forex trading platform for beginners as determined by ForexBrokers.com is Plus500. Other good forex trading platforms for beginners include IG, eToro, AvaTrade, CMC Markets, XTB, and OANDA.

What Is the Margin on U.S. Forex Trading Platforms?

In the U.S., forex traders are limited to a 50:1 leverage ratio, which is a margin rate of 2%. Depending on the broker, margin rates can be higher, such as 3% or 4%. The 50:1 ratio most often applies to regular currency pairs, whereas for exotic pairs, the leverage ratio is typically 20:1, which is a 5% rate.

How Much Do Forex Trading Platforms Cost?

The cost of forex trading platforms varies greatly depending on the type of platform and the broker offering the platform. Traders typically have to pay a cost for the license to use the platform as well as fees per trade or block of trades. The trader also has to pay commissions on their trading activity.

The Bottom Line

A currency trading platform is a tool that currency brokers offer their clients in order to trade forex. The platforms can be online, web-based portals, mobile apps, downloadable software, or any combination. These tools allow traders to research markets, test strategies, set up buy and sell signals, and execute orders. Currency trading platforms have greatly improved the trading environment for forex traders and today, successful forex trading is almost impossible without them.