The foreign exchange market, also known as Forex, is the most liquid market in the world, generating a staggering $5 trillion in transactions each day. It enables market participants to purchase, sell, and speculate on different currency pairs. The market comprises many different participants including the countries’ central banks, various commercial firms, investment companies, and hedge funds.
The market is open to everyone including retail investors with more limited experience. However, retail traders must first find a broker with decent enough trading software before they can start trading because the foreign exchange markets lack a central marketplace.
Different trading platforms are available on the web. Some are created by third-party companies like MetaQuotes while others are developed in-house by the online brokerages themselves. Furthermore, such platforms enable you to trade in different instruments, including currency pairs, stocks, soft and hard commodities, and bonds. Here are some of the aspects that bear consideration when selecting a good trading platform.
Reliability and Security
Security is of utmost importance and should be a great priority of all retail investors who take trading seriously. The safety of your money and payments are crucial if you want to even stand a chance of becoming a successful trader.
Also worth checking is the licensing of the platform. The platform needs to have received authorization from a financial authority that enforces adequate regulations. Using a faulty, unregulated platform is more likely to result in huge losses when trading the markets.
Supported Financial Instruments
When choosing a platform, you must ensure it supports the financial instruments you are looking to invest in. Some platforms, such as MetaTrader 5, are more suitable for people who are looking to trade currency pairs on the foreign exchange markets.
Others support a broader spectrum of market options including commodities, futures, bonds, stocks, and options. Such platforms are considered a better fit for people who are seeking to diversify their trading portfolios. Those interested in algorithmic trading should ensure their software of choice supports this option, to begin with.
Functionality and Available Features
Another important thing to take into account when choosing a platform is the type of order execution as well as the execution speed. The latter is particularly important when one trades on the foreign exchange markets because the prices of the currency pairs can change in a split second. Even a small movement in terms of pips can lead to hefty losses, especially when one trades with significant volumes.
Another essential thing is to check the features the platform supports. It is always a good thing to have a broad enough choice of technical indicators, timeframes, and graphical objects. A good trading platform would also enable traders to test new trading strategies before putting them to use. The interface should be user-friendly, especially if you are new to trading and are just beginning to learn.
The Platform’s Price
The price and any potential charges for using it are worth checking out in advance. If a given software is associated with higher costs, these can quickly eat into the earnings you generate while trading the markets. This is especially valid for people who adopt the scalping approach where multiple short-term positions are opened and settled within a single trading day.
Such people will never generate sufficient earnings if the costs associated with using the trading software are too high. With that said, some of the most popular and broadly implemented trading platforms can be downloaded for free, with MetaTrader 4 and MetaTrader 5 being two of the prime examples.
Your Experience as a Trader Also Matters
Your level of knowledge and experience should also impact your choice of trading software. If you are a complete beginner, you should find a platform that enables you to practice in a demo format until you build sufficient experience and confidence to invest real money.
Also essential is to consider whether the software is proprietary or is available for commercial use. Many online brokerages develop their own platforms while others use platforms created by companies that specialize exclusively in the development of online trading software. They lease their creations to the online brokers.
People who are new to trading are better off picking a commercial platform. If their first trading experience is built by using proprietary software, they will most probably face difficulties when changing brokerages in the future. On the other hand, if you use a commercial platform, you will be able to find your way around in all trading sites that implement it.