Types of Forex Platforms
October 11, 2013 by Adam posted in • No Comments
Traders cannot hop onto any trading floor to buy and sell currencies; of course there are none as the online spot forex market is strictly virtual in nature. The only way trading access can be obtained is by opening an account, receiving login details with which the trader can login to the trading platform, where orders can be executed on the traded currency pairs.
There are several types of platforms, several versions and some peculiar variations that trading platforms have from one broker to the other.
It is important for traders to know these differences as they will ultimately have a bearing on the trading outcomes experienced.
Understanding the Different Types of Forex Platforms
How are forex platforms classified?
The following systems of forex classification will give us a clue as to the types of forex platforms we have.
Classification According to Format: Downloadable or Non-Downloadable
One system of classification divides trading platforms on the basis of whether the software exists in a downloadable file format or in an online, no-download format.
On this basis, we therefore have:
a) Web-based (online) platforms
b) Downloadable trading platforms
The web-based platforms run on JAVA, are online-based are accessed by the trader typing the URL into the web browser, from where the login details are used to access the trading platform.
This makes the platform lighter and accessible from anywhere, without the need to carry around the computer or hand-held device where a downloadable platform is stored.
The downloadable platforms are software which must be downloaded onto the trading device. They come in form of executable files which must then be unpacked and compiled into the trading platform.
Classification According to Programming Language
Another system classifies platforms according to the programming language used in the design.
Thus we have the following platforms:
a) MetaTrader (MT4 and MT5), designed with the Metaquotes Language (MQL)
b) ActTrader, designed with the ActFX programming language
e) TradeStation, designed with the Lua programming language
The MetaTrader4 platform and its MetaTrader 5 successor are both products designed Metaquotes Inc.
The MT4 is easily the most widely used trading platform. Indeed it is so popular that even brokers that never offered the MT4 have been forced to make radical decisions to include this software in their product suites. The ease of use and user-friendliness of these platforms have made them a trader’s staple.
ActTrader is the forex platform produce of ActForex Ltd. This is the platform used by brokers such as AvaFX.
The layout of the platform and the process of placing orders is different from that of the MT4 or MT5. This platform has both web-based and downloadable versions.
TradeStation Technologies Inc developed the TradeStation forex platform which runs on the Lua programming language.
This platform is used by Forex Capital Markets Ltd and Interbank FX as part of their trading suites.
cTrader is an example of an Electronic Communications Network platform, providing traders with direct market access forex trading. It is manufactured by Spotware Systems Ltd, a company which specializes in making trading platforms for the ECN environment.
cAlgo, which allows algorithmic trading on the cTrader platform, is another ECN platform manufactured by this company.
Currenex is another brand of forex platforms which comes in two versions. There is the Currenex Viking platform which is the ECN platform and the Currenex Classic platform which is the dealing desk platform that operates under market maker conditions.
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The Currenex Viking is suited only for professional traders as it has an interface that is a bit difficult to navigate around. Currenex classic comes with charts and other tools that make the trading platform a bit easier to use, making this platform suited for beginners and those without much experience.
Classification According to Trading Model
This classification divides trading platforms on the basis of the trading model on which the broker supplying the trading platform operates.
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We therefore have:
a) Dealing Desk Platforms
b) Non-dealing desk/direct market access/ECN platforms
Dealing desk platforms are operated by market makers. This system connects the trading platform to the broker’s dealing desk so that all pricing must emanate from the dealing desk and all traders’ orders pass through the dealing desk for execution.
This puts platforms such as the MetaTrader, Currenex Classic, TradeStation and ActTrader platforms under the dealing desk category.
Non-dealing desk (NDD) brokers use the ECN model. Pricing comes straight from several liquidity providers and these are all displayed on the platform so that the trader can make a choice as to which pricing model better suits his trade objectives.
This is also called direct access trading. Examples are cTrader, cAlgo and the Currenex Viking software, and all other Level II software used by institutional traders.