A trading terminal is a software package with which a brokerage company provides a trader with access to the market. It is thanks to the terminal and the Internet, which has already penetrated into almost all spheres of life, that trading in the foreign exchange market is so simple and affordable. Brokers have been actively using these advantages for marketing purposes for a long time, presenting trading as a carefree and simple activity, which requires only a laptop and a sun lounger by the seashore.
Advertising images to some extent have something in common with reality, since modern tools allow you to trade literally from anywhere in the world. In this case, you can do without a computer in order to open or close a deal. There are many software solutions for mobile platforms, the functionality of which is sufficient for basic trading operations.
To use the trading terminal effectively, certain knowledge and skills are required.
If a trader is not familiar with the functionality of the program, does not understand the essence of the operations performed by it and their results, then incorrect actions or any non-standard situations requiring urgent solutions can lead to losses or a complete loss of trading funds.
In this material, the trading terminal will be considered as the most important and necessary tool that a trader should own. You will study the general principles of the programs, basic and additional features, the meaning of the most important functions. Get acquainted with the most popular trading terminals, their advantages and disadvantages, which will allow you to form your personal preferences regarding a particular product.
How it works
Before getting acquainted with specific programs and their features, you need to understand what links and stages the connection between the trader and the market consists of. There are three most important components of this system:
- Liquidity providers are large banks and financial institutions that connect orders from many traders, brokers and other companies into a single network. The higher the liquidity, the lower the spreads and, accordingly, the more profitable trading.
- Brokerage companies are intermediaries that provide the trader with access to the market through their technical channels. They provide a wide range of additional services that greatly simplify trading.
- Trader is a market participant who carries out his trading activities using technical means provided to him by a brokerage company.
Within the framework of this material, the above-mentioned participants are purposefully considered in a purely technical sense. More details on each of the terms can be found in other articles.
Now let’s look at how the participants interact with each other. It should be said right away that the following scheme is rather arbitrary and may have a number of additional stages, but the main most fundamental steps in it are demonstrated:
Stage 1. First, one or more (more often) liquidity providers provide the brokerage company with market quotes. Since the parameters of supply and demand are in constant dynamics, the transmitted data turns into a continuous stream. In professional language, constantly updated data on the current state of the market is called “liquidity flow”.
Stage 2. All data via secure gateways goes to the broker’s servers, where the price stream is aggregated (unified). With the help of special software, prices from different liquidity providers are compared and the most profitable offers for buy or sell transactions are selected. At the same moment, the broker puts a reward for his services into the price by adding several points to its value. This is how the well-known spread is formed, which can be floating (dynamic) or fixed.
Stage 3. After aggregation, the asset price data is transmitted to the servers of the trading platform. The broker usually has several of them, each server is engaged in processing the price for a specific tariff offer (for example, a cent account server or a demo account server). On them, the flow is structured into sequences that are understandable for trading terminals, and then broadcast to all client programs authorized in the system.
Stage 4. Quotes go to the trader’s trading terminal and are displayed on his screen. In a good brokerage company, all the way from bank to trader, price data passes in a split second.
Stage 5. The trader opens a deal at the current price and thereby sends a request to the broker’s servers. Before entering the processing queue, the submitted data is checked for security. After that, the request can be aggregated, an identifier is assigned to it, with which it is sent back to the liquidity provider for execution.
Stage 6. The liquidity provider executes an order to open, change or close an order and transfers data on the operations performed and the current state of the transaction to the clearing system. At this stage, an open position receives a number of static and changing characteristics, which are transmitted first directly to the broker, and then to the trader’s trading terminal. As a result, the trading terminal screen displays data on the transaction volume, current profit or loss, and other parameters.
Main functions of the trading terminal
Any trading terminal should have in its arsenal a certain set of minimum basic features. Possession of these functions is a prerequisite for confident use of the program.
- Trading account – access to a personal account from the terminal is the first and fundamental function. By entering the login and password provided by the broker, you get access to the funds in your account. After authorization, the trading terminal becomes your personal tool, and from that moment your actions can have a direct impact on the account and the funds on it. Therefore, be careful and careful if you have no experience with the terminal.
- Quotes – the terminal must display the current market prices for the assets available with a high quality and without any significant delays. Unstable transmission of data or their inaccuracy can affect trading decisions and their final results. In addition to providing current market quotes, the program may provide access to the quotes archive. Such historical data is extremely important for the initial testing of new trading strategies or for more precise adjustment of their parameters.
- Analysis tools – the most popular trading terminals provide technical capabilities for analyzing market conditions. For example, built-in sets consisting of the most famous indicators and oscillators, graphical analysis tools (straight and oblique lines, geometric shapes and labels). The largest brokerage companies broadcast news reports and analytics directly to the terminal, which is very convenient for quickly responding to events and making appropriate decisions.
- Additional features – in addition to the above-described basic functions, trading terminals can have tools to expand the client’s capabilities. The use of third-party indicators, advisors and other additional programs is very important for an experienced trader who is trying to realize his full potential. This is necessary to test new ideas and improve them in practice.
The functions of the described groups are typical of most popular trading terminals. They can change their name or the way they work, but the essence will remain the same. And this is normal, since each developer uses new ways and tools to realize their vision of a perfect product.
Types of trading terminals
The rapid development of trading in the foreign exchange and stock markets, as well as the growth in the number of brokerage and IT companies have led to the creation of many software products. Each trading terminal presents its own system of productive and comfortable work. From a variety of terminals, three most general groups can be formed:
- Standard terminals – distributed and installed on a computer as a separate program. Usually, such terminals have the most complete functionality and have practically no restrictions on its expansion. Most often, these solutions are designed to work in the Windows operating system, but in some cases there are versions for Linux.
The most popular MetaTrader 4 and MetaTrader 5 can be referred to the group of standard terminals. They are rightfully considered the gold standard in this area and have the widest possibilities. Also quite well known are such terminals as Mirror Trader, NinjaTrader, ProTrader and others, many of which we will talk about in separate materials.
- Mobile terminals – this segment began to develop actively with the proliferation of communicators and smartphones. The first mobile terminals were operated under the Windows Mobile operating system. There are many solutions for Android and iOS today. At the moment, the rather young Windows Phone platform has been somewhat deprived of attention, but it is likely that trading terminals will appear for it in the near future.
As is the case with standard trading terminals, the most popular mobile platforms are MetaTrader products, which have a more stripped-down functionality compared to desktop solutions. There are also other terminal options, but their market share is significantly less.
- Web terminals – a local product of a certain brokerage company, which is provided online on the official website. This type has received its development due to the growth of standards and browser capabilities. Recently, the functionality provided by web terminals has significantly approximated
Recommendations for trading terminals
Choosing a trading terminal for a beginner is not a very difficult task. There are a number of solutions that have positively proven themselves and are rightfully considered the best choice for both beginners and experienced traders. For the rest, the choice comes down to special cases, for each of which you can also find the most suitable and at the same time popular software.
The optimal and affordable option for a computer are programs from MetaQuotes Software Corporation. The most famous and widespread trading terminals MetaTrader 4 and MetaTrader 5 are used as the main ones by the vast majority of brokerage companies. They combine accessibility and simplicity for a beginner, as well as the broadest functionality and capabilities for an experienced trader. Both programs will be discussed in the following materials, so your acquaintance with them will be even easier and simpler.
In addition to the standard terminal, it is recommended to have in your arsenal a mobile solution that will help you in unforeseen circumstances (power outage, loss of Internet connection or computer breakdown). Also, this option will allow you to always be in touch if you combine your main job and trading.
It is up to you to use the web terminal, as it is a rather highly specialized solution. If you have a standard or mobile terminal, there is practically no need to use this option. But if the broker only provides a web terminal or your smartphone does not have supported mobile programs, then this way of working with the market still takes place.
This material does not claim to be exhaustive on the topic of trading terminals. Here were set out the basic points, on which highly specialized articles on each specific program will subsequently be built (the most popular MetaTrader 4 and development for the future MetaTrader 5. And if you are just starting your way in trading, then after reading this article, you have already formed a kind of framework for a more detailed study. You know how such programs work, are familiar with their types, as well as basic functions.
As an epilogue, I would like to say that in fact, trading has not become easier in its essence. The infrastructure has changed, the technical means of organizing a trader’s work with the market have become more perfect, clearer and easier. But the success of trading also depends on the trader himself, on his knowledge, skills and experience. As in any other area of human activity, where there is a tool, the highest requirements are imposed primarily on the one who performs the task, and not on the means that he uses.
This conclusion must be learned first of all. Treat the trading terminal and other tools as if they were an ordinary tool. Imagine it with a knife in the hands of a woodcarver, a scalpel from a surgeon, or a hammer from a blacksmith. Do not take the tool and its qualities as self-sufficient, and even more so do not place hopes that a progressive program will ensure your success.
Improve yourself, your qualities and knowledge. Become a professional in the field of your choice. And if you grow as a trader, then all your instruments will follow you.