What is a trading platform?

A trading platform is a software system on which forex, commodities, stocks, and other types of financial instruments can be traded online. Traders use a trading platform to enter and close out multiple trades daily. The transactions are typically facilitated through an online broker, a bank, or other financial institutions. These are known as financial intermediaries.

Types of trading platforms

Two types of trading platforms exist, namely, prop (proprietary) trading platforms and commercial trading platforms.

• Proprietary trading platforms: trading software designed by large brokerage firms and other financial organisations, customised for their own trading activities and requirements. Not for use by the public.
• Commercial trading platforms: easy-to-use trading platforms targeted at retail investors and day traders. Typically come with a range of useful features and educational tools.

What is a day trader?

A day trader is someone who usually executes large volumes of trades a day to profit from quick price movements. Positions are usually closed out before the end of the trading day to mitigate any risks associated with overnight positions. Variables like price movement (volatility), liquidity and volume are important for a day trader to make a potential profit.

Selecting an online trading platform

There are various factors a trader needs to consider when choosing a suitable online trading platform.

Features, educational resources, and usability

An easy user interface is critical to ensure the trader can execute trades with ease. A range of useful features that cater to the needs of different types of traders is also important. This includes trading tools for technical analysis, research, advanced charting and indicators, activity reports, and the ability to quickly access market-depth information. Furthermore, a platform that offers insightful educational resources, an economic calendar and daily financial and political news and events is key for traders looking to better understand the markets, hone their skills and become comfortable with trading.

Intermediary or broker

Selecting a reputable intermediary or broker is vital before committing to a particular trading platform to execute trades. Transparency and top-tier client support are fundamental to a high-quality customer experience. Understanding a broker’s fee structure is also essential. So do your research. Visit their website and read through their frequently asked questions to ensure you are better informed before settling on a broker.

Requirements to trade

Every online trading platform comes with its own set of requirements to allow you to open an account and/or execute trades. Some brokerage firms may let you open an account with no initial investment. However, before opening a trade, the account will need to be funded. Identify how much you’ll need in your account to execute trades. This is often determined by the type of account you want to open. There is typically no limit to the number of brokerage accounts you may open.

Forex trading

A forex trader trades currencies through the forex market, one of the largest and most liquid markets in the world with a daily trading volume exceeding $6 trillion. For new forex traders, opening a demo account with a trusted CFD forex broker is an effective way to practise forex trading with virtual money.

A demo account gives a trader the ability to place real-time trades and test various trading strategies to see potential outcomes (losses and gains), as if trading with actual money. It simulates a live trading environment while giving you access to real-time market data and expert insights. A demo account also provides a trader with the opportunity to learn about various market conditions and concepts before selecting and registering an account.

What are CFDs?

CFDs are agreements between a broker and a trader to buy the difference in an asset’s price from when the contract is opened until it’s closed. CFDs are derivative products because you can trade CFDs on different underlying assets without owning them. You speculate on the price movement of the asset.

Share or stock CFDs are CFDs traded on the shares of publicly listed companies. When you open a position with stock CFDs, you agree to trade the difference in the price of the company’s shares between the time you open and close the contract.

CFD markets list two prices, the sell (or bid) price and the buy (or ask) price. The difference between the buy and sell prices is called the spread. The CFD price is based on the price of the underlying instrument. If a trader speculates that the price of the stock CFD will go up on the stock exchange, they typically buy (go long on the underlying stocks). However, if the trader speculates that a particular stock will decrease in value, they usually sell (go short).

Regardless of whether prices increase or fall, CFD trading may offer the opportunity for a trader to make a potential profit.

CFDs stock trading

Trading stocks through CFDs are becoming increasingly popular. This may have to do with the advantages that CFD trading offers like leverage and the ability to go long and/or short.

Leverage (Leverage)

CFDs are leveraged products. This means traders are able to open more prominent positions as they can trade on margin, there is no requirement to deposit the entire transaction value. The trader must deposit a percentage of the position’s value (margin) to open a leveraged position.

Leverage can help traders increase their access to larger positions, freeing up capital for more transactions. When the market shifts favourably, they’ll profit from higher earnings. If the market moves against the trader, leverage may increase losses. This is why it is crucial to properly manage risk and to trade with a stop-loss to mitigate large losses.

Choosing an online CFDs trading platform

A CFDs stock trading platform should meet your trading needs, requirements, and style. It should have easy-to-use software and a simple but secure interface. The platform should offer a variety of features and tools to help you become a better trader.

Selecting a CFDs broker and trading account

In the process of choosing a trading account, traders should keep the following things in mind:

• the amount the trader intends to deposit into their account (largely dependent on what capital a trader has available and the requirements of the CFD broker who may require a larger initial deposit)
• level of risk the trader is prepared to take on
• access to cutting-edge trading tools
• the amount of time the trader has to commit to trading

MetaTrader 4 trading platform

MetaTrader 4 (commonly referred to as MT4) is one of the most popular trading platforms worldwide. Developed in 2005 by MetaQuotes, MT4 is largely used in forex trading. Traders also use the platform to trade CFDs, futures, indices and more. MT4 is considered the best online CFDs stock trading platform for beginners in that it can be easily customised based on traders’ needs and trading requirements. MT4 can be easily downloaded on Windows, iPhone, Android, and any web browser through an online broker.

Other benefits of MT4

MT4 offers an intuitive user experience, with easy-to-access information (charts, indicators, prices) and straightforward functionalities. Used by global traders for the last number of years makes MT4 a reliable choice. The ability to easily download MT4 on a range of mobile devices means traders can trade wherever they are, at any time.

In summary

Monitoring market movements, price fluctuations, the latest financial news and events, geopolitical instabilities, and consuming educational resources regularly will help you become a more informed trader. With this knowledge, choosing a CFDs stock trading platform to trade stock CFDs may become easier.

DISCLAIMER: This information is not considered investment advice or an investment recommendation but a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced or hyperlinked, in this communication.