What Is A Forex Platform And How Does It Enable Seamless Currency Transactions?
Currency transactions were carried out in the early days through dedicated brokerages and exchange houses, where all financial transactions used to be performed manually through clearing centers. However, during the 1970s, the financial markets witnessed an electronic revolution that enabled all market participants to transact currencies, stocks, derivatives, and other financial products through dedicated electronic trading platforms. Initial forms of trading platforms were passive in nature, where prices and order confirmations had a significant lag between the actual and real-time quotes.
Since the invention of the internet and other accompanying devices such as personal computers, financial markets took a turn for the better by including a whole generation of investors that were vying for a chance to get in on the action. Today, the internet and the modern PC, not to forget mobile devices, have paved the way for creating a significantly tight-knit global community of traders that could exchange ideas and trade with or against one another through a global trading platform.
Physical currency transactions are still an integral part of the Forex market. Of the 6 trillion US dollars’ worth of volumes that the FX market witnesses in a single day, only a small percentage of the traded volume comprises of speculators and investors that are looking for a chance to benefit from the price movements. Forex transactions are used for a wide variety of different reasons, such as paying for goods and services, hedging against price fluctuations, stabilizing economic factors, and for the overall development of an economy. In terms of sheer size and volume, the Forex market is indeed the largest and the most volatile markets among all the different financial markets in the world.
Due to the popularity of Forex trading and the incredible amount of volumes, it is necessary for a central repository for tracking financial transactions, especially since the Forex market is the only deregulated market in the world. There isn’t any single authority that is responsible for the fluctuations in currency price, even though the International Monetary Fund and central banks around the world work together for creating harmony in the markets. Therefore, there are different types of Forex trading platforms, each of which is individually designed for multiple purposes such as speculative trading, investing, hedging, and physical currency transactions.
Selecting The Best Forex Platforms For Speculative Trading & Investments
Speculation and investing in the Forex markets have been gaining a tremendous amount of popularity in recent times. More and more traders are investing their money in the FX market in search of consistent profits. Although high leverage and misleading advertisements have led to a negative reputation for the industry as a whole, Forex trading is indeed considered to be one of the best investment opportunities in the financial world.
A Forex platform allows traders to trade different currency pairs, commodities, precious metals, and sometimes, even shares and indices for creating a diversified investment portfolio. Usually, the EUR, the GBP, the USD, the JPY, the AUD, the CHF, and the CAD are considered to be the most popular currency pairs in the market, while leading Forex platforms may also offer access to exotic currency pairs such as the ZAR and the MXN. The best Forex platforms should offer you access to almost all the popularly traded currency pairs without any restrictions and should provide you ample opportunity to invest in the markets according to your preferences. As a trader, you should not feel limited or restricted in your abilities to invest in currency pairs of your choice.
Online Forex trading platforms are designed to connect traders to the market where orders can be transacted at live market prices without any type of manipulation. Of course, brokers are still able to interfere with a trader’s account and the trading terminal, but regulatory organizations have several policies that prevent brokers from indulging in any fraudulent activities. Therefore, it is a trader’s top priority to choose a regulated Forex broker that will always act in the best interest of their clients.
There several top Forex trading platforms in the market, both proprietary trading platforms and third-party trading interfaces, that grants exclusive access to traders to trade the entire list of currency pairs that are available in the Forex markets. Third-party software such as the MetaTrader, the cTrader, and the TradeStation are popular third-party trading interfaces that are offered by more than 90% of Forex brokers. Some brokers have their own dedicated trading platforms that are designed and developed by their in-house programmers, which can provide individualized services according to the broker’s service offerings. Of course, the choice of a trading platform depends on individual trader preferences, which requires you to have a fair understanding of your trading style to be able to find a trading platform that works best according to your personality.
Forex trading platforms also use various market protocols to provide different types of market access. The popular market maker model uses an automated dealing desk that transmits client orders internally, without sending them directly to the market or an interbank liquidity provider. Market maker trading platforms such as the popular MT4 terminal facilitate trading through internal trading protocols, which matches all orders through internal sources. A market maker broker, therefore, can prove to be a risky option for larger traders that transact huge volumes in the financial markets.
In order to prevent any instances of requotes, order cancellations, or the broker’s inability to open large positions, modern Forex trading platforms connect traders to an electronic trading network, known as an Electronic Communications Network (ECN). ECN is a global network of liquidity providers and interbank exchange houses that have a higher amount liquidity and volumes when compared to traditional market maker brokers. ECN accounts are by far, the most attractive option for professional traders and institutional investors. Nevertheless, ECN trading is slowly gaining a significant amount of followers among smaller retail clients, which is helped in part by brokers that offer ECN accounts with a small initial deposit of just $1.
ECN FX trading platforms have some limitations to trading such as the cost of trading, slippages, and direct trading conditions. Therefore, to minimize the burden to traders, brokers may offer a hybrid of the market maker and the ECN platforms to facilitate the best trading conditions. Also known as Straight Through Protocol (STP) platforms, these brokers are free to match orders internally or send them directly to a liquidity provider for matching their clients’ orders at market price. STP trading platforms have significantly reduced conflict of interest, and offer direct market access conditions without the associated drawbacks. STP brokers may also make sense from a cost perspective, as there are no commissions, and the spreads are highly competitive than market maker platforms.
- Licensed by CySEC, ASIC & FCA
- Min Deposit $5
- Offers different MT4 platforms
- Does not accept Paypal
- Does not offer EFTs
The Benefits Of A Modern Online Forex Trading Platform
Traders can enjoy several advantages of trading with modern trading platforms, which are constantly redesigned and developed according to changing market conditions. Platform developers also spend a considerable amount of resources into research and development to create functional Forex platforms that are suited to trader’s requirements. Here are a few reasons why modern Forex trading platforms can offer you the best trading conditions for your investments:
- FX trading platforms provide a fast, secure, and comfortable trading environment that transacts orders at lightning speed. Modern Forex trading software uses advanced encryption technologies and the best market protocols to ensure that traders can always feel secure against any form of attacks on personal information or trading funds.
- Forex trading platforms offer access to some of the widest range of financial products, ranging from currency pairs, commodities, stocks, indices, metals, CFDs, and ETFs. A few platforms also offer other exotic financial products such as binary options trading and spread betting, which allows investors to try out different markets according to their risk appetite.
- Forex trading platforms have advanced charting functionalities that enable traders to perform extensive technical and fundamental analysis of the markets. Modern brokers and trading platforms offer different time frames and a large set of indicators that are designed to offer a full suite of tools for Forex trading
- Modern Forex trading platforms can also be customized according to individual preferences. Most modern trading platforms come with customizable layouts and an easy-to-use dashboard that can be tweaked with ease. Open source trading platforms also allow traders to configure their platforms to choose their personalized trading style, thereby offering one of the best customization options in the market.
The Risks Of Not Choosing The Best Online Forex Trading Platform
Apart from the advantages of using modern Forex trading software, traders should also be aware of all the risks associated with dishonest companies that do not provide a reliable trading interface. Here are a few precautions that will help you to conserve your trading capital and minimize your capital outflow:
- Platform Manipulation & Tampering – While several brokers and regulatory agencies have policies that are explicitly developed to prevent any kind of interference with trading; some brokers follow illegal means of tampering with platforms to gain an unfair advantage. Therefore, if you are not proactive in choosing the best online Forex trading platform from a regulated broker, you are bound to see invalid trades and wrong orders in your trading account more often than not.
- Speed, Performance & Safety – Top Forex trading platforms should offer you a safe and secure trading environment, but if you are not careful about choosing a top-quality regulated broker, you may suffer from various issues such as reliability concerns, connectivity issues, and other security aspects of trading.
- Trading Products & Charting Tools – Some brokers look to save costs and resources by limiting the number of financial products offered on their trading platform and the number of technical indicators required for performing extensive market research. Some brokers offer less than 15 different currency pairs, when in fact, traders can choose from more than 150 different currency pairs. However, FX platforms such as the MT4 and the cTrader have indicators built into their interfaces, which helps traders to avoid a majority of platform related issues.
The Concept Of Mobile Forex Trading & Mobile Trading Apps
Mobile Forex trading is the course of trading the FX markets through mobile devices such as smartphones and tablets. Some mobile traders also use remote desktops for mobile trading through mobile trading interfaces, which prevents the need for any dedicated trading terminal. There are different mobile trading apps available in the market according to the operating system and specific trader requirements. Traders can access their accounts remotely using the WebTrader, which is a browser-based trading interface that is compatible with both desktop and mobile devices. The WebTrader has a considerably lower functionality than dedicated desktop terminals, but it may offer all a trader will ever need for investing in the markets. Nowadays, several platform developers and the best Forex brokers are committed to designing advanced WebTrader interfaces to prevent traders from having to download and install dedicated trading software on their personal computer.
Dedicated Forex mobile trading apps are also developed for mobile operating systems such as the iOS, the Android, the Windows, and the Blackberry, which are usually compatible with both smartphone and tablet Forex trading. Due to the rise in popularity of Forex trading among mobile users, almost all the leading platforms and Forex trading companies have dedicated mobile apps that can be downloaded from their respective app stores. Modern mobile apps are indeed feature-packed but don’t expect the dexterity and functionality that you have come to expect from platforms that are designed for desktop devices.
How To Sign Up For A Demo Account For Evaluating The Top Forex Trading Platforms
Inevitably, Forex trading is a business opportunity that has its distinctive pros and cons, which should be carefully scrutinized before making an investment. Unlike other investment opportunities, Forex trading allows traders to open demo accounts to get a first-hand experience of the industry, which is also a great way of testing the different Forex platforms available in the market. Traders should always open and trade with a demo account before moving on to a live trading account with real money. Trading on a demo gives ample opportunity to test out different strategies and learn about the volatility of the markets without actually risking any money. It also provides an opportunity for traders to get familiar with different trading platforms, thereby enabling them to choose a trading interface according to their comfort levels.
Human errors are also a significant part of trading, which is compounded if a trader makes a switch to a new platform. A professional trader understands the benefits of learning all the ins and outs of his trading platform and customizing his trading tools to his advantage. You would be surprised to learn that traders do lose a lot of money in the markets due to errors in trading and not as a direct consequence of their market analysis. Therefore, take demo trading seriously to experiment with different platforms before choosing a platform for your trading needs.
Should I Pay Any Fees For Using A Broker’s Platform & Services?
Under normal circumstances, a trader wouldn’t be required to pay any fees for using a trading platform, but brokers may stipulate various trading conditions. For instance, most brokers spend large amounts of money into developing their proprietary trading platforms or some brokers even pay a handsome sum of money for licensing third-party FX trading software. Therefore, to recover the costs, brokers do stipulate minimum margin requirements and minimum trading requirements to ensure that the broker can earn a significant amount of money to offset the platform costs.
Brokers may charge an inactive account fee if a trader does not trade on their platform for a particular period of time. The inactive account fee may range from $5 per month for small accounts, up to $1000 per month for high-end VIP accounts. On the contrary, some brokers do not charge any fees at all, and offer their platforms free of cost, in a bid to attract more traders into their brokerage. Therefore, before opening an account and downloading the trading platform, make sure that you understand all of the broker’s terms and conditions, so as to prevent any issues in the future.