A trading platform is an interface between the trader, broker, and the interbank market. If you come to think of trading and what it represents, then there are two parts that need to be partners in this process: the broker and the trader.
The retail trader wants to buy or sell a currency to speculate on its movements. This can be done if the retail trader would have access to the interbank market.
Unfortunately, this is an expensive process. To access the interbank market and place trades requires a big bank account. Most of the retail traders do not have something like this.
This is where the Forex broker intervenes. In exchange for some commissions and some fees, the broker is the middle man or the intermediary between the retail trader and the interbank market.
It even lends money to the retail trader, in the form of a leverage. The bigger the leverage, the bigger the amount that can be moved on the interbank market. However, the bigger the risk too.
Describing a Trading Platform
As it can be seen from the things mentioned above, traders and brokers should have their interests aligned: one wants to make a profit on a market that cannot be taped without a broker, and the other one makes a profit by charging traders for accessing the interbank market.
Therefore, the trading platform is the one thing that connects all three parts: the retail trader, the Forex broker, and the interbank market. There are multiple types of trading platforms dedicated to the retail traders, and, depending on the broker, the size, and resources dedicated to research and development, trading platforms can take various shapes.
A web-based trading platform implies a simple Internet connection is enough to access it. Only the login data is needed for accessing the trading account.
The problem with this platform is that it is slow and besides placing some trading indicators on a chart, there’s not much use for it with technical analysis. Therefore, it is used mostly for execution reasons, but, being dependent on a strong Internet connection, execution fails most of the times.
Thus, slippage is significant and entry and exit levels differ as well. On top of this, web-based platforms are expensive to be developed, so the costs for building and maintaining one is a supplementary cost for the broker.
The same is valid if the trading platform is an in-house built one. If this is the case, costs are even bigger.
The most common, simple and straightforward solution is to use a trading platform that already exists: the MetaTrader. It comes in two versions, the MetaTrader 4 and MetaTrader 5 options, and it is widely used by retail traders around the world.
Any trading strategy can be used on the MetaTrader platforms: scalping or swing trading, investing or auto-trading, no matter the strategy, the MetaTrader delivers a good interface for them all.
The trading platform is important for traders, both new and experienced ones. The ones used with one type of trading platform, will most likely choose a broker that offers the same trading conditions.
To give an example, if a trader is switching brokers and used the MetaTrader for his/her analysis, it is most likely to choose a Forex broker that offers the same trading platform. This way, integration is easier and faster and the trader won’t need to learn the way to use a new one.
Brokers are offering multiple solutions to attract as many traders as possible.
