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Trading platforms

MT4 and MT5

Trading in the foreign exchange market requires a trading platform where you can place your orders. The most common platforms are Metatrader 4 and Metatrader 5. 

The Metatrader 4 trading platform is very well known and one can definitely say that it has set the industry standard. It is rare if not never that a Forex broker either offers trading directly through the platform or via an internal integration to the platform, although this may be at the cost of slightly higher spreads and/or commissions. The Metatrader 5 trading platform produced by the same company (Cyprus-based MetaQuotes Ltd). and was for a long time somewhat less common among forex brokers. However, we are now starting to see Metatrader 4 being phased out in favour of Metatrader 5 as support for MT4 is increasingly limited. 

Background on MT4 and MT5

Because Metatrader 5 was released in 2010, five years after the launch of Metatrader 4 and at a time when Metatrader 4 was already very popular, and because of the number sequence in the platform names, there is a common misconception that Metatrader 5 was a new improved version of Metatrader 4, designed to do the same job but better. This is not true at all, although it is a trading platform and backtesting machine just like Metatrader 4 is, and the graphical user interfaces look and feel quite similar. Any adequate Metatrader review should point this out.

Metatrader 5 was actually designed to do certain things that Metatrader 4 could not do. Basically, it was aimed at a different market, and therefore there is really very little reason to get into a discussion about "MT4 vs. MT5".

Basically, Metatrader 5 was designed to be able to trade markets other than Forex, such as stocks and commodities, mainly because it is better to connect to a centralised trading exchange. Forex is a completely decentralised market, with a number of major players providing liquidity to this huge market at slightly different prices. Stocks and commodities, the latter of which is largely traded as a futures contract (actually multiple contracts with different expiry dates), usually have to be traded through a centralised process before ownership can change hands with full legal effect. At the time of the MT5 development and launch, it can be assumed that MetaQuotes foresaw a trading in stocks and commodities and designed the software to suit that market.

The difference between Metatrader 4 and Metatrader 5

The single biggest difference has already been covered, but there are a number of others worth mentioning in any MT4 and MT5 comparison.

Metatrader 5 uses a programming language called MQL5 as opposed to MQL4 which is used by Metatrader 4. The exciting thing about MQL5 is that it allows for "black box" programming which in its simplicity means it is easier to program which provides a better framework for users and developers of trading robots and other expert advisors. However, MetaQuotes extended this feature to MQL4 in 2014, so there is no difference between the platforms today.

Metatrader 5 has two key programming-related advantages over Metatrader 4. Firstly, its backtesting capabilities where you can test programmed trading strategies to see how they had performed over a period of time in the past. This runs at a much faster speed in MT5, which can save you a lot of time if you are a trader who likes to backtest your strategies. MT5 also allows for the backtesting of multiple currency pairs at the same time which can also speed up the backtesting procedures immeasurably.