FX: MetaTrader 5 finally takes off
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Foreign Exchange

FX: MetaTrader 5 finally takes off

The long-awaited addition of hedging functionality to online trading application MetaTrader 5 (MT5) appears to have convinced at least retail FX customers that, seven years after its launch, it might at last be time to trade up their trading platform.

MT5 was described as a powerful working tool for FX trading when it was introduced in 2010, but its design was also heavily influenced by the move by the National Futures Association to prevent hedging in US FX markets.

It is not clear why hedging features were only added to the platform last March – MetaQuotes, the owner of the platform, had failed to provide response to our questions at the time of publication.

Andrew Ralich-160x186

Andrew Ralich, oneZero
Financial Systems

However, according to Andrew Ralich, co-founder of oneZero Financial Systems, there are at least two other good reasons for recent increased interest in MT5 from brokerage clients.

The first is brokers looking to complement their traditional FX offering with other asset classes, he says, explaining: “MT5 is a much more capable platform when it comes to offering equities, futures and other exchange-traded instruments.

“The number of symbols, client groups and general scalability of MT4 as a 32-bit platform (MT5 being 64-bit) has presented significant scaling challenges for brokers. In addition, MetaQuotes has started to focus most of its innovation efforts towards the newer platform.”

Future platform of choice

Tom Higgins, CEO of Gold-i, suggests MT5 will become the platform of choice for brokers within the next two years.

Tom Higgins, Gold-i

“MT5 has always been a much better platform than MT4,” he says. “It offers a multi-venue trading facility via one platform and a single margin account across all asset classes. It is a clustered system – making it easy to scale up – and allows brokers to have one server and link multiple sites to it rather than having separate servers in each regional office.”

When asked why it has taken MT5 so long to gain significant traction, Forexware managing director Shawn Dilkes observes that retail customers are often simply resistant to change. The success of MT4 has made it difficult to convince customers they should change their expert adviser (EA) – or forex robot – and trading strategy.

EA is a programme that allows automation of the analytical and trading processes in the platform and can trade automatically based on predefined conditions and rules.

MT5’s EA development makes use of a different programming language to that of its predecessor, which prevents traders from transferring their existing EAs and indicators over from MT4, explains Yiannos Xenophontos, chief dealer at FxPro.

“This absence of backwards compatibility means that traders would have to entirely recode any existing expert advisers before they could be used on the platform,” he says.

Shawn Dilkes-160x186
Shawn Dilkes,

However, Dilkes at Forexware reckons the change to support hedging should substantially increase the adoption rate among retail customers. 

“One obvious advantage of MT5 over MT4 is the restructuring of the back-end trading system to allow use of more instruments, increased stability and faster performance,” he says. “This makes MT5 a true multi-asset trading platform supporting stocks, futures and other derivatives with full depth of market.”

Ralich at oneZero suggests that the push from retail traders to cross margin and trade multiple asset classes from a single platform has paralleled the adoption of MT5 by traders and brokers. The newer platform has the added attraction of support for trading styles and systems that leverage strategies that trade equities and futures as well as FX.

According to Ralich, brokers who are looking for a seamless way to deploy MT5 alongside MT4 should look to their technology partners to ease the transition for their traders and back-office teams.

This view is shared by Gold-i’s Higgins, who notes that third-party add-ons required for MT5 – such as plug-ins, bridges and multi-account managers – all have to be redeveloped because the MT5 application programme interfaces are different. He acknowledges that this software development is complex and time-consuming.

Yiannos Xenophontos-160x186
Yiannos Xenophontos,

FxPro’s Xenophontos adds that due to the differences in architecture between MT4 and MT5, brokers need to redesign and/or redeploy integrated trading and post-trading applications so that they function correctly on the new platform.

“They also require additional backbone system design and implementation to make use of MT5’s new features,” he says.

However, Higgins remains convinced that MT4 will eventually become obsolete.

“We will start to see new brokers taking MT5 from the outset and established brokers will gradually migrate,” he concludes. “One of the challenges faced by brokers is how to manage the different liquidity streams across multiple asset classes in MT5, but technology providers in the industry have been developing new products to address this need.”