Forex Platforms

MetaTrader 4, or MT4, is a software program or electronic trading platform widely used by online Forex (foreign exchange, i.e. currency) speculative traders.

Its developer MetaQuotes Software had previously released MetaTrader 3 (now not used) and a significantly re-coded MetaTrader 5 is currently in public beta testing.^[1]

The client terminal includes a built-in editor & compiler with access to a user contributed free library of software, articles and help. The software utilizes a proprietary scripting language, MQL4^[2], which enables traders to develop Expert Advisors, custom indicators and scripts. MetaTrader's popularity largely stems from its support of algorithmic trading.

Yahoo hosts a large group (over 12,000 members) devoted to development of free open source software for MetaTrader. ^[3]

Lately a number of brokerages have added the MT4 platform as an optional alternative to their existing trading software. Third party developers have written software bridges enabling integration with other financial programs, although MT4 is used as a stand alone complete solution by many brokerages. ^[4]

The complete MetaTrader 4 package includes the following components:

• MetaTrader 4 Client Terminal - the client part. Provided free by brokerages for real-time online trading and as Demo (practice trading) accounts.

Provides trade operations, charts and technical analysis in real time. The internal C-like programming language allows users to program trading strategies, indicators, signals. 50 basic indicators are included, each of which can be further customized. Runs on Windows Vista/XP/2000/98. Some users have reported success using WINE on Linux for the client terminal. ^[5]

• MetaTrader 4 Mobile - controls a trading account via mobile devices such as mobile phone or laptop.

Runs on Windows Pocket PC 2002/Mobile 2003.

• MetaTrader 4 Server - the core of the system, the server part.

Designed to handle user requests to perform trade operations, display and execution of warrants. Also, sends price quotes and news broadcasts, records and maintains archives. Works as a service. Does not have a separate interface.

• MetaTrader 4 Administrator - is designed to remotely manage the server settings.

• MetaTrader 4 Manager - designed to handle trade inquiries and manage customer accounts.

• MetaTrader 4 Data Center - a specialized proxy server and can be an intermediary between the server and client terminals. It reduces the price quote sending load on the main server.

The platform is focused on margin trading. Some brokerages use the platform to trade CFD but it is not designed for full-time work in the stock market or to conduct non margined trading^{[citation needed]}.

MetaTrader 5 is designed as a platform for equity markets as well as Forex, CFD and Futures trading.

Both MetaTrader 4 and 5 can

Retail forex trading is a segment of the vast foreign exchange market. It has been speculated that volume from retail forex trading represents 5 percent of the whole forex market which amounts to $50-100 billion ^[1][2] in daily trading turnover. One thing is certain: The retail forex market is explosively growing and is increasingly becoming an powerful force in the broader FX marketplace. In most cases, spot trading is the offered currency product. Due to the increasing tendency in the past years of the gradual shift from traditional intrabank 'paper' trading to the more advanced and accurate electronic trading, there has been spur in software development in this field. This change provided different types of trading platforms and tools intended for the use by banks, portfolio managers, retail brokers and retail traders.

One of the most important tools required to perform a forex transaction is the trading platform providing retail traders and brokers with accurate currency quotes.

[edit] History and new developments

Since 1996, when retail forex trading was first introduced, several brokers who lacked the sufficient tools developed their own trading platforms tailored specifically to their needs. The 1st retail FX brokers were MG Forex, The Matchbook FX ECN, GFT, CMC Markets, Saxo Bank (then known as Midas) and a handful of others. Most except CMC, Saxo & Matchbook FX were based on the ACT forex trading technology & GUI. These platforms were good enough at the time but required constant investments in R&D and this development cost too much. This was the first wave.

The second wave was in the early 2000s: several software companies entered the retail forex trading market by launching their own versions of trading platforms. Typically these versions were cumbersome for both front-end users (retail traders) and back-end users (retail brokers) due to the misunderstanding of the developers about the forex market and also because of the insufficient programming tools/languages at the time. Simultaneously most of the retail brokers kept using and developing their own systems as they waited for better platforms which were yet to be developed.

There are currently few to no brokers which were part of the first wave trading systems. By now most of the first wave brokers have either vanished, merged or progressed to the second wave trading platforms – the most common example of which is MetaTrader 4 from MetaQuotes.

It is only in the last couple of years that the advanced trading platforms started to emerge. These platforms put much stronger emphasis on the user interface (GUI) making it more accessible to the retail traders while making trading on it very simple and intuitive. Moreover a very strong emphasis was put on the back-end which allowed the retail brokers better control over their operations, better reporting and accurate system and ways to manage marketing campaigns. Gradually this wave is replacing the previous second wave with a major shift now to the friendlier and more intuitive systems of the third wave which according to Aite Group are necessary in order to maintain growth ^[3].

Nowadays, banks have also jumped on the retail forex trading platform bandwagon and have started offering those services to individual traders and money mangers, expanding the forex trading appeal. DBFX and Citibank are some of the banks that are currently offering this service.

n finance, an Electronic trading platform is a computer system that can be used to place orders for financial products, such as shares, bonds, currencies, commodities and derivatives with a financial intermediary, such as a brokers, market makers or stock exchanges over a network. Such platforms allow electronic trading to be carried out by users from any location and are in contrast to traditional floor trading and telephone based trading.

Electronic trading platforms typically stream live market prices on which users can trade and may provide additional trading tools, such as charting packages, news feeds and account management functions. Some platforms have been specifically designed to allow individuals to gain access to financial markets that could traditionally only be accessed by specialist trading firms such as allowing margin trading on forex and derivatives such as contract for difference or to trade strategies based on technical analysis.

Contents [hide] 1 Historic development 2 Trading platform standards 3 See also 4 References

[edit] Historic development

The first electronic trading platforms were typically associated with stock exchanges and allowed brokers to place orders remotely using private dedicated networks and dumb terminals. Early systems would not always provide live streaming prices and instead allowed brokers or clients to place and order which would be confirmed some time later, these were know as 'request for quote' based systems.

Trading systems evolved to allow for live streaming prices and near instant execution of orders as well as using the internet as the underlying network meaning that location became much less relevant. Some electronic trading platforms have built in scripting tools and even APIs allowing traders to develop automatic or algorithmic trading systems and robots, which have been used by high frequency traders.

The client graphical user interface of the electronic trading platforms can be used to trade currencies, equities, future, or options and are also sometimes called trading turrets.

[edit] Trading platform standards

The National Futures Association (NFA) in the US list the following general standard requirements for forex electronic trading systems^[1];

• Authentication (Passwords, Authentication Tokens such as secureID cards; or digital certificates)
• Encryption
• Transactions recording standard
• Pricing and slippage standard

dbFX is Deutsche Bank’s online margin forex trading platform for individuals and small institutions. Based in the United Kingdom, dbFX is FSA regulated and covers over 82 countries.

Contents [hide] 1 History 2 Services 3 Trading Platform 4 References 5 External links

[edit] History

dbFX was launched in May 2006 in response to the growing global forex market and increasing client demand for streamlined access to capital market products [1]. Initially offered to clients across Europe, the Americas and Asia Pacific, dbFX later became the first international investment bank to provide online retail FX services to the Middle East in October 2007 [2].

[edit] Services

dbFX offers online FX trading services [3] to self-directed traders, money managers, hedge funds and financial institutions via its trading platform software. An application programming interface (API) is also available to allow high frequency traders to build their own forex trading systems or plug into an existing program, while gaining access to Deutsche Bank’s pricing and execution. Clients can also access Deutsche Bank research, including daily reports and economic research.

An Introducing Broker Program [4] is offered to those looking to introduce self-directed and managed accounts to dbFX. The program is designed for regulated financial service providers, such as FCMs, brokers, small banks and individuals (e.g. CTAs and IFAs), as well as forex service providers.

[edit] Trading Platform

The dbFX trading platform [5] is available in 7 languages: English, Chinese, Arabic, German, Spanish, French and Russian. Features include integrated charts, hedging with no FIFO restrictions, flexible order types, real-time account summary and 24-hour reporting.

ZuluTrade Inc. is a financial services company, headquartered in 48 Wall Str., New York, NY, with offices in Hong Kong, Shanghai and Athens, Greece. Operating in the foreign exchange market, owns zulutrade.com, an online foreign exchange autotrading service. It was founded back in 2006 by Leon Yohai, a .com entrepreneur and Kostas Eleftheriou [1].

Contents [hide] 1 Business model 2 Technical Description 3 Signal Providers 4 Controversy 5 See also 6 References 7 External links

[edit] Business model

ZuluTrade is a free peer2peer on-line trading network between FX traders worldwide and everyday people that don’t have the time or knowledge to trade the markets. ZuluTrade cites as its advantage the following 5 features^[1]:
a) Auditing trading accounts in real time by controlling the execution flow of each trade in the service and by not allowing users to upload statements (sometimes false) to prove their performance,
b) Executing in real time trades into followers live trading accounts,
c) Funds safety as funds are kept within the user’s live brokerage account,
d) Privacy as live followers do not give discretion to any 3rd party on their account,
e) Diversity as 20 brokerage firms globally are connected with the ZuluTrade peer2peer network^[2].

ZuluTrade receives compensation per trade per contract from the brokers connected within its peer2peer network and splits the compensation with the Signal Provider that have originated the trades which have been executed successfully on one or more live follower’s trading account.

[edit] Technical Description

In contrast to fully automated or black-box Foreign Exchange autotrading, ZuluTrade uses the Signal Provider method: the service audits Forex experts that are members of the service, known as signal providers, and ranks their performance by using ZuluRank, a proprietary rating algorithm. Traders can then select one or more Signal Providers and the service automatically translates signals into trades in the trader’s broker account. ZuluTrade’s autotrading software is integrated with popular FX trading platforms such as MT4, Saxotrader, FXCM trading station, Act Forex platform, GAIN trading station, Ducascopy trading station, GTS station etc. The service is server based, and works with no human intervention whatsoever.

ZuluRank
ZuluRank is a proprietary algorithm that ranks traders by analyzing different factors, such as the amount of trading activity, the Drawdown (economics) of each trade and its P&L, frequency of the trader’s presence in the system and other variables. ZuluRank creates a number of lists based on the Signal Providers’ strategy and performance, such as Best Providers, High Risk Providers, even Worst Providers that can be exploited positively through the Hypothetical Reverse feature.

Hypothetical Reverse
The Hypothetical Reverse feature enables traders to potentially benefit from the worst performing signal providers. Through this option a trader may (automatically) do exactly the opposite of what a signal provider does; for instance, when they “Buy” traders can actually “Sell” and vice versa. This feature is based on the notion that when reversed, the worst traders’ signals can prove profitable.

[edit] Signal Providers

Signal providers place trades on their account and all live followers that have selected a specific provider receive these trades on their live broker accounts, provided they have sufficient funds to cover for the transaction. Signal providers get paid for each traded lot of their signals. Signal providers cannot promote their strategies; they are trying to achieve a positive performance which would give them a higher ranking in the relevant category and a motive for clients to select them in their portfolio.

[edit] Controversy

A number of controversial disputes concerning the operation of the ZuluTrade service have occurred as a result of a highly competitive and technical in nature market^[3].

Signal Providers multiple name dispute
Signal Providers can open multiple accounts with different names on the ZuluTrade service, in order to create diverse strategies under each name. After trader’s concerns that this practice undermined the transparency and reliability of the Signal Providers, ZuluTrade now displays all linked names to each Signal Provider’s profile.

Live Funds
After concerns that Signal Providers trade with virtual funds, ZuluTrade introduced several measures in order to separate real and virtual accounts. A “live followers” tab lists all users that follow the signals of a specific signal provider with real money. Additionally, Signal Providers that trade with own funds are distinguished by means of a relevant symbol. Finally, all trades that have been supported with actual funds are highlighted with the word “LIVE” next to them.