Metatrader 5 or MT5
Metatrader 5 (MT5) is finally upon us! What does this mean for brokers and clients?
This is the first article in a series that we will run over the coming weeks and attempts to introduce a different perspective on the history and context of MT4 and what MT5 means for clients and brokers.
As most of you will know, Metatrader 4 (MT4) is the most widely used "off the shelf" platform in the Forex and CFD markets. It is expected therefore that when MT5 takes over from MT4 it will be as widely used.
Metaquotes, the owners and developers of MT4 claim to have 100s of brokerage companies around the world utilizing their MT4 platform. Most major brokers now offer MT4 either as their core platform offering or alongside their in house proprietary platform. The reality is, that these brokers don’t want to offer MT4 – it is a very difficult platform from the dealing and "back end" side.
If you want to know which available rebate brokers currently offer MT4, take a look at our rebate brokers comparison table.
The complaint often heard is that MT4 was built by programmers not traders. Certainly it was built with a focus on the front end and "client side" rather than the brokers back office side. The platform itself evolved from a price and data delivery terminal that became very popular with traders. Users then started to ask whether trading functions could be built into it. Metaquotes used the same architecture and added trading functionality to it, resulting in some to argue MT4 was a Frankenstein creation.
You may find MT4 a joy to use, are looking forward to the release of MT5, and think the usage difficulty for brokers is not your problem, but it is. Restrictions placed in the MT4 back office mean a broker needs to make sacrifices as to the products it offers, the flexibility it offers with regards to spreads and any number of other product specification related issues.
It is also difficult for them to run proper hedging strategies, using MT4, meaning it may take them longer to process a trade, which results in a delay in your execution. Sometimes, (but certainly not always) a broker who is criticized for poor practice with a client is actually trying to do his best but is hampered by the inadequacies of the MT4 system itself. We need these issues addressed in MT5.
They offer MT4 because their clients demand it. Their clients demand MT4 for three key reasons:
1) They are used to the MT4 platform. They have often "grown up" with this platform and don’t wish to change. As many have grown up with it;
2) There is a massive community of traders that use MT4, sharing ideas, information, tips etc and most importantly;
3) Expert Advisors. An expert advisor, or EA, is a trading program built in Metatrader’s proprietary language, MQL, which can be plugged into a user’s platform to provide automated trading. A trader can set up a trading strategy based on just about any parameter he can think of including arbitrages, breakouts, moving average cross overs etc. There is a significant market for the resale of successful (and not so successful) EAs. These trading programs can be sold on for significant sums of money.
Back to the brokers. Brokers don’t like EAs. The concept and action of automated trading is often acceptable to them. The problem is that such automated, or "robotic" trading encourages scalping and arbitrage or any number of trading actions that are frowned upon by market makers and brokers, mainly due to the fact that they can’t hedge their exposure.
Now Metaquotes have launched the Beta testing of their latest platform, Metatrader 5 (MT5). This has been some 4 years in the development and promises to improve many of the inadequacies experienced in MT4.
MT5 has been totally written from scratch and offers many new features, including:
1) Access to more asset classes – including options, futures and stocks (exchange based rather than via a CFD as with MT4).
2) Access to market depth, or order ladders/trees.
3) New order types.
4) Easier programming language for EAs. Some suspect that MT5 also makes it easier for a broker to view the EAs parameters via a "back window". If so, MT5 improves dramatically the ability for a broker to run a hedging strategy against the clients EA trades. This could be seen as an advantage for both sides, as "legitimate" EAs will be more readily acceptable by brokers.
Even though beta testing has only just begun on MT5, there are already many comments and posts already written about the functionality, advantages and disadvantages of the platform which you can read about on various forums.