Forex Trading: Ways To Enter Financial Markets

MetaTrader4

The MetaTrader 4 platform, better known as MT4, is a proprietary trading platform for retail foreign exchange speculators. The MetaQuotes Software developed it in 2005, and it was released in 2006. Licensees provide the software to their clients through foreign exchange brokers. Apart from the client component, there is a server component too of the software. The brokers operate the servers, and the customers of the brokers use the client software to see the live streaming prices, charts, place orders, and also for account management.

The client enables users to create their own trading scripts and robots, and thereby automate trading. It is a Microsoft Windows-based application. In 2010, MetaQuotes did a follow-up called MetaTrader 5. It hadn’t yet picked up much speed, with most brokers still using MT4 as of April 2013. There is not an official version of MetaTrader 4 for Mac OS, but some brokers do offer customized solutions. Besides Android, iOS, and Windows mobile, Metatrader also offers a mobile version.

Here are a few historical highlights

MetaQuotes Software, the company behind MetaTrader, released several versions since 2002. The latest version of MetaTrader was released in 2005, which was hugely improved.

As MT4’s popularity with traders continued to grow, coupled with the development of third-party scripts and advisors between the years 2007 and 2010, brokers began to offer MT4 as an alternative to their existing trading software.

InstaForex opened the first MT5 live account in September 2010 after a significantly re-coded MetaTrader 5 was released into public beta testing in October 2009. In 2013 and 2014, MQL4 has been completely rewritten and finally reached MQL5. Since the 600 build, a unified MetaEditor is used for MQL4 and MQL5.

As of September 2019, MetaTrader 4 remained the most popular Forex trading platform in the world, although MT5 came into being in 2009.

It was reported that on September 24, 2022, MetaTrader 4 and MetaTrader 5 platforms were removed from Apple’s App Store (reportedly also from the App Store and Android Play Store). While the company representative claimed that the removal was based on non-compliance with the App Store Review Guidelines, it actually had to do with the western sanctions against Russia, where MetaQuotes is based. After the company’s updates to both MT4 and MT5 iOS applications, they have finally appeared in the App Store again on March 6, 2023.

Characteristics

There is little doubt that MetaTrader 4 is a powerful trading platform indeed. With it, one is capable of performing online trading using all instruments at their disposal.

You can trade online depending on your broker:

One of the most powerful features of MetaTrader 4 is the ability to customize it as wanted. By using the MQL language, you can write scripts that perform certain activities, make your own indicators if the default ones do not fit your needs, create expert advisors to automate certain routine actions or even to trade automatically without your interference. That can be done by using MetaEditor.

Components

There are several components that comprise the entire MetaTrader 4 suite, including:

• It is the client side of MetaTrader 4 that you are using. Brokerages offer free demo accounts for real-time online trading and practice trading. Real-time technical analysis, charts, and trade operations. The user is able to program trading strategies, indicators, and signals using the internal C-like programming language. Each indicator can be further customized; there are 50 basic indicators. There are also the following Windows versions: Windows 98/2000/XP/Vista/7. There are some reports of success using Wine for the client terminal on Linux and WineBottler for the client terminal on Mac.
• Trading accounts can be controlled via mobile devices such as mobile phones and PDAs using MetaTrader 4 Mobile. The application runs on Windows Pocket PC 2002/Mobile 2003, iOS, and Android devices.
• MetaTrader 4 Server: The server part is the very core of this system. It gives access to the users to be able to perform trade operations, record and keep archival records. It also sends price quotes and news broadcasts. This service is available on a subscription basis. There is no separate interface for this product. Remote management of the server settings is possible with the help of MetaTrader 4 Administrator.
• Account management and trade inquiries are possible with MetaTrader 4 Manager.
• MetaTrader 4 Data Center serves as an intermediary between MetaTrader 4 and the client terminal. It is good that the main server is not overloaded with sending price quotes.

As far as bells and whistles go, MetaTrader 4 has just about everything most other trading platforms have to offer. Naturally, the system is not entirely perfect. Generally speaking, MT4 does not execute the trades quite as fast as some other platforms, which is one of the principal complaints. In cases where you cannot afford to waste time and need high-frequency trading, you may look elsewhere.

Despite the comprehensive interface, it is not easy to find out how everything is used. This problem is further aggravated by the lack of live customer support. You should work with a brokerage that charges minimal fees even though the platform is free.

What makes MetaTrader 4 different from other trading platforms

MetaTrader 4 has more to offer compared to its competitors. In fact, most of the industry’s standards are availed by it. Besides, its coding language allows for automatic trades. The advantages of MetaTrader 4 outnumber those of Robinhood, for instance.

This is incomparable with the price of MetaTrader 4, however. It is free to download and install, but you need a brokerage account in order to use it “for real.” The amount you will pay will also vary depending on the firm you will choose.

MetaQuotes introduced MetaTrader 5 in 2005, five years after the launch of MetaTrader 4. MT4 Forex trading was designed as an all-in-one platform. In addition to the number of instruments that were introduced on MT5, a number of new features were added.

MT4 is a powerful platform for traders of all skill levels in FX, where multiple currencies along with CFDs are available from the same place. MT5 also has some limitations, but it does suit traders other than Forex. More than 500 markets can be assessed on MT5, covering a larger area than MT4.

Strong Points – Technical Analyses

It is possible to conduct technical analysis using both MT4 and MT5. The latter has though increased the number of built-in technical indicators from 30 to 38. Analytical objects have also been increased – 44 against 31 in MT4. The economic calendar incorporated in MT5 is yet another useful addition. The service keeps traders informed about major country data releases and financial market news.

Dates and times

Time frames

The MT4 platform has 9 timeframes: M1, M5, M15, M30, H1, H4, D1, W1, and MN. Besides the ones present in MT4, MT5 has added the following: M2, M3, M4, M6, M10, M12, M20, H2, H3, H6, H8, and H12.

Graphical objects

In MT4 and MT5, you have 31 and 44 graphics objects to choose from, correspondingly. As the chart was growing, more and more tools were required to mark patterns, areas, and levels.

Programming languages

MT4 makes use of the MetaQuotes Language 4; MT5 employs the MetaQuotes Language 5. The MQL4 cannot operate on MQL5, and that is a bit of an issue for traders who upgrade from MT4 to MT5. According to many traders, the MQL4 is a simpler language. The MQL5 has excellent backtesting capabilities. It is also much more efficient in modifying the scripts and creating them.

CFD TRADING

In a contract for differences, the buyer has to pay the difference between the current value and the value of the asset at the time of the contract to the seller. CFDs allow investors and traders to benefit from movements in prices without owning the underlying assets. The calculation of the value of a CFD does not take into account the underlying value of the asset but instead takes into consideration the change in price between entry and exit.

No stock exchange, forex, commodity, or futures exchange intervenes in the process. In this case, the clients and brokers deal directly with each other through a contract. Because of some considerable advantages, CFD trading has gained enormous popularity over the past decade.

Highlights

• An investor and a CFD broker enter an agreement to exchange the difference between the open and close value of a financial product.
• An investor in a CFD will not actually own an underlying asset but will obtain revenue upon fluctuations of the price in an asset.
• CFDs are more advantageous since going long or short on an underlying asset costs less than the purchase of the same.
• When an investor enters a CFD, immediately after initiating a position, their initial position is reduced by the spread, which subcontracts the initial position.
• The industry is also confronted by weak regulation, a shortage of liquidity, and the necessity of maintaining a margin sufficiently large to protect against loss.

How it works

CFD contracts are a way of taking a view on the outcome of financial markets. You can go long as well as short, leveraged and hedged, just like the underlying market, with these contracts. You decide upon how much contract you want to purchase or sell, instead of how much of a certain asset you want to invest in – say 100 HSBC shares. When the market moves in your favor, you will reap profits from your position; it will incur a loss if the market moves against you. The profit or loss you have made when you closed the position is realized when one sells the contracts he bought at the commencement of such sale. Your return from a trade is determined by the size of your position – the amount of money you devote to the trade – and by the movement of the market. That is just as with traditional investing. The difference between the price of 100 HSBC CFDs when you buy them at 400p and the price when you sell at 450p is (100 x 50p) £50. If you sold them for 350p the loss would be £50.

Trading tips

The process requires a few steps to get started, but we will outline them for you as a guide. Follow these steps to trade CFDs online.

Step one is account creation.

You begin by selecting a CFD broker, which will either be a live account where you deposit money and move it across the financial markets, or a demo account where you practice your skills with virtual currencies and learn the software.

Get the downloadable CFD Trading Platforms here

That’s because you have to choose the best CFD trading platform through which to trade these financial products online. In the same manner, brokers cannot just ignore this fact once they elect services provided by them. Your CFD trading platform doesn’t have to be designated solely for trading CFDs. You can carry out trading CFDs with your broker’s platform in case they are offering CFDs.

Web trading with Admirals is including MetaTrader 4 and MetaTrader 5, two of the most popular platforms in the trading world. It also includes Native Trading, which has been specifically designed to be intuitive and user-friendly for those new to trading.

You’re Ready to Place Your First Trade!

One of the most exciting things you can do while learning how to trade CFDs is placing your first trade in a live or demo account. The steps are as follows:

• If you have created a Trade.MT4 or Trade.MT5 account, then log in via the Admirals Dashboard. To open Native Trading click ‘Trade’ once you have located your account details.

Advantages

By this stage, a better understanding of CFDs should have been achieved, but for what reasons are traders using them? One of the strong points about trading CFDs is that the means of performance are easily accessible to beginners, as opposed to many other types of trading. However, people trade CFDs for a number of different reasons.

Before passing on to the discussion related to the risks connected with CFD trading, we will outline a few of the most significant advantages of trading through CFDs.

Strong points of CFDs

Leverage for CFDs

The main advantage of CFDs is leverage enabling you to have larger positions with smaller deposits.

Your broker, your country, and the financial instrument that you are trading dictate the amount of leverage available when trading CFDs. For example, if you are a British retail trader, the Admirals CFD trading platform offers up to 1:30 leverage. What does this mean to us?

With a 1:30 leverage, you can have a $30 position for every $1 that is in your account. Or you would have to deposit $50 to open the position by using the leverage of 1:30 if you wanted a position worth $1,500.

The same potential profits and losses can be accessed with a relatively small deposit as with a larger position size. Although the leverage in CFDs may be higher than those in other traditional markets, and this could increase both your gains and your losses, CFD leverage needs to be applied carefully.

Risk management in trading CFDs

Because CFDs are a leveraged product, traders need to be very careful in managing their risk. Every trade should be attended with a stop loss and a take profit as two fundamental ways of controlling the associated risk.

The take profit order commonly means the limit order, which automatically closes your position when you reach the certain profit level. In that respect, they help you stick to the plan, as winning positions can easily tempt you to hold onto them when at least technically this would be the potential reversal point.

Stop losses also automatically close positions once a specific loss level is reached. They reduce your total risk when used. Standard stop losses are not 100 percent effective if your market ‘gaps’ over your stop loss. If you want to make certain that your position closes when you reach your stop level, upgrade to a guaranteed stop.

PAMM Account

Also called percent allocation money management, the percent allocation management module is a software application used primarily by foreign exchange brokers-forex-that allows clients to allocate money to a particular trader who is managing the account in their name based on a limited power of attorney.

In a PAMM solution, the trader manages an unlimited amount of managed accounts simultaneously on one trading platform. Each managed account in the PAMM has a different ratio based on its deposit size. After every round turn, the results of the activity of a trader, both profitable and losing, will be distributed among the managed accounts according to the managed accounts’ ratio.

Currency trading and other forms of arbitrage are usually profitable only within very narrow margins, hence allowing more money to be put into play, while the risk is spread among several investors.

How does it work

Investment accounts. A method by which investors gain access to a professional money manager or trader without having to take an active part in managing their investments.

Through registration with a forex broker, the investor opens a PAMM account

Opening a PAMM account may therefore be done through an online forex broker, and this therefore is the first step the investor must undertake.

The investor deposits the funds

Investors open PAMM trading accounts by depositing funds into them. To make PAMM accounts more accessible to a wider pool of investors, these accounts have low minimum deposit requirements that vary from broker to broker.

It is also upon the investor to choose an account manager or a trader

It is at this point that the investor can select a trader or a team of traders to manage his or her assets once they deposit their funds. This kind of manager appointed for managing investments is known as an account manager.

This is the stage when it becomes very crucial on the part of the investor to consider the performance history, investment strategy, fees, and other factors while selecting an Investment Manager for a PAMM account. Investment objectives and risk tolerance of investors must be in line with the past performance as well as the investment style followed by the trader.

Investments are managed by the traders
When he or she is appointed as the Investment Manager, investors allow the trader to manage their investments. A number of investors can appoint the same investor as their investment manager. While one PAMM Manager can be managing several PAMM accounts at the same time, even the Investment Manager can manage a number of investment strategies at the same time.
When a number of investors combine their funds together to make an investment in the forex market with an aim to realize profits.

The investment manager controls the investment and takes a performance fee. Usually, the amount is calculated as a share of the investment possible return.

Profits and Losses are distributed
The PAMM accounts are divided in the same proportions among investors based on investment.

The trader receives a performance fee as the Investment Manager. Also, the trader’s proportion of the profit is increased accordingly.

When the investments result in losses, it is the same distribution of the losses among the investors. Losses do not incur performance fees.

Depending on the overall trading strategy, at the end of the trading round that may last for days, weeks, or even months, there is a distribution of profits or losses.

Then, a new round of forex trades is opened by the Investment Manager. This is basically how PAMM works.

Advantages

Concentrating funds in a PAMM Account enables the manager to trade with greater volume and, therefore, possibly receive a greater return. A rating of a PAMM Account reflects the manager’s positive trading results and serves as an advertisement for this account. Investors deposit funds into the manager’s account, while the manager’s positive trading outcomes contribute to the PAMM Account rating.
In respect, while the manager is trading, profits are accrued, which in turn attracts more investments so that the manager may trade more funds on behalf of investors.

The PAMM Account structure involves traders or money managers and investors. These investors, who do not have enough time or experience to trade themselves, can benefit from trading with the support of investments into the PAMM Accounts.

A PAMM account is, therefore, one form of a management account in which funds are entrusted to the discretion of the manager. They manage not only their own capital but also other people’s money, which can be very professional and experienced.

This is where, in the Manager’s Proposal, the agreement between him and the investors is established. This will form the consent of the investors to take on risk by making their funds available to the selected managers. It also contains the fee that shall be charged for services the service manager will provide. Money or a percentage may be involved.

The first step to this is the opening of an account whereby the initial investment required is called the manager’s capital, a non-withdrawable amount securing the interest of the manager. This is not allowed to be removed because it ensures that prospective investors get an assurance that the account will be managed responsibly. It is advertised that the activity of the account is on offer and certain conditions are being offered to it.

Profits are also proposed. Because they are not a party in any of the trading processes, brokers advertise the account in the ratings on their websites but claim no responsibility for either losses or profits.

Profits are divided at the close of a trading period between the manager and the investors. Along with distribution of funds, the broker can also act as a regulator if there are cases of misbehaving managers.

PAMM Account gives a great number of benefits for investors and managers alike. In your proposal as a manager, you may set the percentage of the investor’s profit you are to get in case you succeed in trading and managing. The conditions, the extent of control over the trade terms, the trade period, the method of distribution of profits-all these depend on the managers. These are the conditions that must be met by investors.

There are also advantages for investors. First and foremost, effective managers have a high level of trading professionalism. A PAMM Account can also be withdrawn at any time if the results and the trading style of the manager are unsatisfactory to investors.

By diversification of investments across a number of accounts, risk for the investor can be reduced.

Disadvantages

• PAMM accounts are subject to the conditions put forward by the manager of each account: apart from restrictions that may be related to the amount and the number of participants, he may restrict the amount available for input.
• A PAMM account requires additional software and a sophisticated system of risk management. The work of brokers is complicated by it a bit, but investors and managers don’t care.

An overview
A good number of the PAMM accounts in online trading are real. Investment in a PAMM Forex account means placing one’s money in a specific account that is used by an account manager or trader for trading purposes in the financial markets. Profits gained in the account are shared between both parties in the form of a percentage.

This, in turn, gives great confidence to the investors that their money is secure since the trader bonds their own capital with the client’s money.

This would leave little room for the trader to invest irresponsibly.

It is still important that the broker is regulated by a respectable authority such as CySec or FCA. In this way, your funds will be safe. Every reputable PAMM broker will have to follow certain standards and regulations laid down by these institutions.

Prop Firm

A retail trader or an individual trader may get the capital and resources from a retail prop firm, also termed a retail proprietary trading firm. The retail prop firm offers proprietary trading capital, among other support services to retail traders instead of the more common commercial prop firms serving professional traders and institutional investors.

Generally, a retail prop firm spends part of its capital on particular traders in business modeling. These traders are also named prop traders, who trade stocks, options, futures, and foreign exchange markets.

The major features of retail prop firms include the following:

It is considered prop trading if a financial institution decides to make money from market activity instead of thin-margin commissions created from client trading activity. Proprietary trading may occur in many different forms including equities, bonds, commodities, currencies, and other instruments.

One would expect that the use of proprietary trading by financial firms or commercial banks would avail them a better return on investment compared to index investing, bond yield appreciation, and other investments.

Highlights

•  Financial institutions conduct proprietary trading with own capital, not with the client’s money.
• Proprietary traders may execute various market strategies apart from trading index arbitrage, global macro trading, statistical arbitrage, merger arbitrage, fundamental analysis, volatility arbitrage, and technical analysis.
• To hide activities that further corporate self-interest, the large financial institutions deliberately obscure details on proprietary vs. non proprietary trading operations

How does it work

Getting started

Research: It’s a good idea to compare platforms
You really should do your homework and compare different firms before you even think about joining a prop trading firm. You’ll want to know several things such as what kind of trading platform they use, how much capital you need to have, along with what the fees are and what kind of customer service.

Consult a firm for a free consultation
It is always good to learn more about what a prop trading firm does and provides before you get yourself enrolled. You will get to meet the team behind the platform and recognize whether this is the best fit for you.
Below is what you may want to ask from the prop company at the first meeting:
Can they provide what you need?
• Describe the training or mentoring that you will be receiving.
• Do you have the latest technologies and analytics tools?
• Are they providing trading software?
Being asked certain questions will also actually better prepare you for making an informed decision as to what prop trading firm to enter into.

Mentorship and Training Available
This is beneficial for traders who are new to trading. As a prop trader, you will learn the ways and get valuable insight if you take full advantage of the mentorship or training provided by a prop trading company.

Know Your Specialization
Would you say Forex trader? Or maybe cryptography expert? Perhaps commodities trading? You need to know where your expertise lies if you want to become a prop trader. Over time, you will master how to trade that asset class due to specialization.

Your trading strategy should be planned
A proper trading strategy needs to be in place prior to trading with a proprietary trading firm. This is to include risk management parameters of stop-loss and take-profit, along with entry and exit strategies. In essence, this will allow for the smoothing of a trade and will ensure that, over time, it can be as profitable as possible.

Besides keeping oneself disciplined when things do not go as intended, planning the trading strategies upfront effectively could also help to keep away such emotional trading phenomena as the trading FOMO.

Let’s dive in!
The very most challenging part of trading actually starts when you have signed up with any prop trading firm, and taken the training. Take your time, and start taking baby steps. Your profit will rise slowly while minimizing your risk as a result.

Aspects to consider

The main benefit of prop trading is that massive revenues are generated. Whereas brokers derive their revenues in the form of commissions and other forms of compensations, for proprietary traders, 100% of the income of the firm accrues to them. Even investment avenues are offered to proprietary traders.

Businesses may benefit from these attributes

The highest amount of revenue is provided to banks and financial houses. They could also not employ traders so as to make profits even greater.
Proprietary trading also has the flexibility of using assets in various ways. This would, therefore, give banks an opportunity to start purchasing securities for speculative reasons and later selling them to their customers, stockpiling securities for sale in the future. In order to facilitate the short sale of assets, the assets can be lent.

This has the result that firms can be giant market players, especially when dealing with specific assets or very specialized assets. Some of those securities, the firm can liquidate with its capacity.

The advantages of trading

A proprietary trader possesses advanced technology and more capital compared to his or her competitors. With it, a trader is able to execute thousands of trades at a time, using any strategy, including automated approaches.

The prop traders are able to make the high-frequency trading more effective by using advanced trading platforms for a range of financial markets. The strategies that are elaborated by the proprietary traders can be tested, executed, and optimized with all the required tools.

Conflicting interests interactions

Proprietary trading has the potential to pose a conflict of interest with customers for the bank in several ways.

Because investment banks are at the center of merger and acquisition activity, there is the possibility, though illegal, for traders to exploit inside information for merger arbitrage positions. Investment banks must have Chinese walls between their trading and investment banking operations; however, these have come into question of late, most recently during the Enron scandal. In 2007 an Australian Securities and Investments Commission accused Citigroup of a conflict of interest.
Potential front running may also give way to conflicts of interest that could result in much higher trading costs for the clients of buy-side firms. Although front running per se is an illegal practice, there are cases where brokers with proprietary trading desks reap benefits at the expense of their clients.

Aspects of risk

Generally speaking, the risk of trading with a prop firm is much higher compared to trading with a traditional broker. The reason behind that is prop firms are not protected generally by the same set of regulations as traditional brokers do. In addition, prop firms usually require their traders to deposit sizeable amounts as collateral that can be lost in case of failure.

Finally, many prop firms require their traders to sign away their right to sue if they are dissatisfied with the way their accounts are handled. For each of these reasons, traders with prop firms take on more risk than traders with traditional brokers.

First of all, one needs to understand the risks associated with prop firms if one is to intend to trade with them. Ensure you understand what will be expected from you as a client and at no point shy away from asking for clarification on an issue that may seem unclear to you.

We are all aware of how difficult it is to obtain a license for Forex trading, which increases this license’s price. In case you plan to start trading Forex or expand your Forex trading business and obtain a Forex license, the team at Regulated United Europe will be happy to assist you in the incorporation of a Forex company and the application for a Forex license. We can confidently help you find a prospective forex license for sale and buy a ready-to-use solution in no time.