Is it time to switch to the MetaTrader 5 platform?

MetaTrader 5 (MT5)

MetaQuotes's 2 trading software suites are the most used online forex trading platforms. The company launched MetaTrader 4 (MT4) in 2005, right when the forex industry was just starting to take off. It's no wonder then that this stock market software has become as popular as it is. However, changes are coming as MetaQuotes no longer sells MT4 licenses. MT4 is still available, but the company no longer issues copies of this software. It is therefore time to switch to MetaTrader 5 (MT5) before its predecessor bemomes completely obsolete.

The MT5 platform was launched in 2010, but it failed to convince traders who still massively prefer to use MT4. As of this writing, there are currently around 1,231 forex brokers with an MT4 license. However, since 2016, MetaQuotes has encouraged brokers and traders to migrate to MT5 through a variety of incentives. In many ways, the two programmes are very similar, especially in terms of appearance, but there are a few major differences. MT5 has some very interesting new features.

 

MetaTrader 5 charts offer more timespan units

MT4 charts only offer 9 different timespan options, while MT5 offers 12 options with, for example, additional periods of time such as 2, 3, 4, and 10 minutes, and yearly, among others. The idea behind the inclusion of different timespan units is to make the trading software versatile enough to fit the style of any trader. They also allow for more precise and better technical analyses.

 

Development of personalised indicators

MT4 has the advantage over MT5 because there are many customised indicators that can be found online for free. These indicators are written in MQL4 (MetaQuotes Language), which is a programming language that is only compatible with MT4. As a result, they don't work on MT5. Customised technical indicators are very useful, but developers who use MT5 aren't scrambling to create custom indicators that are compatible with MT5.

However, the MQL5 language is supposed to be much easier to use, which should offer it a promising future. Thus, in terms of scalability, MT5 is certainly the way to go and since MetaQuotes announced the end of MT4 licenses, more and more developers are going to be developing MT5 indicators.

 

New types of trading orders

MT4 offers 4 types of orders: buy limit, sell limit, buy stop and sell stop. MT5 introduces two new types of orders: the buy stop limit and the sell stop limit. The buy stop limit combines the two order types that are buy stop and buy limit, it is activated when a specified value is reached.

types of trading orders

  1. The red dot is the current market price.
  2. The green dot is the price at which the pending order will be placed (no order will be executed at this level).
  3. The blue dot is the price where the pending order is placed, if the market price reaches the green point.

 

Characteristics of market depth

When is the best time to make a trade? A challenge that all forex traders face is knowing what other traders intend to do. Even with technical and fundamental analysis, the question remains. In MT5, MetaQuotes has introduced a feature that analyses the depth of the market to see how other traders are positioned.

In the stock market, where all transactions go through a centralised exchange, information is not so difficult to obtain. However, with the decentralisation of forex trading, it is very difficult to have an order book that shows the positioning of other traders. The depth of the market is determined by examining the number of pending buy or sell orders on any given instrument.

 

Why is data on market depth so important?

There are several ways to use market depth data. The first is to determine the market's state of mind. Market sentiment is essentially what other traders think of a specific market, and this information can be very important. For example, if there are more pending sales orders on a currency pair than there are for purchase, this may indicate that the majority of traders think that the currency pair's price will go down.

This doesn't mean that you should only rely on the market depth data, but it gives a useful index. For example, if the situation described above occurs just before the announcement of a Fed news item, it may indicate that traders believe that there may be a dovish monetary policy announcement. On the forex, it is often a good idea to follow the tide, and this is perhaps one of the situations where the herd mentality does really work. Keep in mind that values ??change with supply and demand, so market sentiment can put you on the right track.

However, the main use of the market depth is to determine the best time to invest. For example, if you see that there are 1,000 pending orders to buy GBP / USD at a value of 1.2335, but there are only 100 orders to buy at 1.2435, this tells you that there will be more market depth at 1.2335 than at 1.2435. The depth of the market is a good indication to determine the likely volatility, and if you can follow the wave when there is a great depth of market, you can make more profits. In our example, the values ??could increase sharply from 1.2335 because many pending purchase orders will be executed at this value.

However, the main use of market depth information is to determine the best time to invest. For example, if you see that there are 1,000 pending orders to buy GBP/USD at 1.2335, but there are only 100 orders to buy it at 1.2435, this tells you that there will be more market depth at 1.2335 than at 1.2435. Depth of the market is a good indicator to determine likely volatility, and if you can follow the wave when there is great depth of market, you can make greater profits. In our example, prices ??could increase sharply starting at 1.2335 because many pending purchase orders will be executed at this value.

In our example, the depth of the market may also infer that there might be a resistance level at 1.2435 because only a few pending purchase orders have been placed at this price level. You can also respond to this information by covering your position at this level because you know that it's unlikely that the price will go up.

As you can see, depth-of-market data is very useful, but where does one find it?

 

How can one view the "depth of the market"?

Regardless of its magnitude, the depth of the forex market is very difficult to see because the entire sector is decentralised. The only way to get this information is to go through a forex broker. Unfortunately, your broker faces the same challenge, it can only provide "level II" market depth.

Level II depth of market data provides information on the orders of a broker's own clients. A broker can see what all its customers are doing, and it can know the number and direction of pending orders from it's clients. The problem is that the quality of this information depends on the number of clients that a broker has. To have reliable data, it is necessary to use a broker that has hundreds of thousands of clients. Working with a broker that offers MT5 and that has lots of clients should give you a very good idea of ??the depth of the market.

 

Backtesting and optimising a trading strategy

Before using a forex trading strategy in a real account, you first need to know how effective it is in the markets. You can do this with a demo account, but this will take time, maybe even months. With backtesting, however, which involves testing the effectiveness of a strategy on historical data, the hypothetical results are analysed to see if the strategy would have been profitable over a period when it could have been applied.

How does it work?

To understand how backtesting works, you have to imagine a hypothetical situation. For example, if you want to see how profitable a trading strategy based on moving averages could be, just specify the rules of your strategy in the software. They will then be applied to the historical data provided by your broker.

The longer the trial period, the more accurate the results will be. Typically, backtests use data from 2001 to the present, which covers various market situations. Also, you can analyse how successful the strategy would have been if you had used it.

How effective is backtesting?

Backtesting is a very effective way to test a forex trading strategy, and that is why it is very popular - even professional traders use it. However, the strategy tester on MetaTrader 4 software is not the most accurate. MetaTrader 5's is more efficient, it provide modeling quality that exceeds 90% if you choose the best mode.

You can also opt for Forex Tester software, which simulates the forex market with unparalleled realism. It allows you to test trading strategies (either manual or automatic) on several years' worth of data and learn how to trade faster than with a demo account.

 

Speed of transactions

MT5 has been lightened and accelerated so that there are no longer any unnecessary delays when placing or executing orders. MT4 is already pretty good, but it tends to lag a bit, especially when there are a lot of custom indicators running. MT5 aims to eliminate all of these problems thanks to the improved MQL5 programming language. In addition to overall speed, the use of one-click trading should also help traders make faster transactions directly from real-time forex charts.

Scalpers will also appreciate the new chart display techniques. They focus on time units that are between 1 to 10 minutes, which are suitable for scalpers who work on shorter time periods and use ECN forex brokers in order to benefit from good execution speeds.

 

Economic calendar included

On MetaTrader 4, an economic calendar is not available, so you have to look for other alternatives. The only available feature that is anywhere near an economic calendar is the "News" tab under the indicator window that displays a few news headlines. For a trader, this is not enough because the information is not well presented. On MetaTrader 5, the economic calendar is integrated into the software itself and the information can be classified according to the weeks and hours of the day to be effective. Since traders can perform all of their fundamental analyses directly from the software, the trading experience is improved. Obviously, this is a huge plus for MetaTrader 5's trading software.

 

Conclusion - Test MetaTrader 5 on a demo account!

Broker-forex.fr vous recommande de tester les nouvelles fonctionnalités de MT5 avant que MT4 ne devienne complètement obsolète. Comme d'habitude, commencez par un compte de démonstration.

Download MetaTrader 5

Trading CFDs involves a significant risk of loss. It is therefore not suitable for all traders.
(73%-88% of individual investors' accounts lose money by trading CFDs).

 

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