What Is A Trading Platform and how to choose the best one?
A trading platform is basically the software you use in order to take trades, be that opening, closing or managing the different market positions, which is done through a go-between called an online broker. In general, the online broker offers the platform either for free or for a discounted rate.
This in exchange for opening and keeping a funded account with the online broker, or by trading a specific number or more of trades per month. A good trading platform will offer a number of robust features coupled with low fees.
Key Take-Aways, what to look for when choosing the best online trading platform
- The basic function of a trading platform is to serve as a software tool for managing and executing market positions.
- Platforms endeavour to be user friendly towards beginners, and thus have basic order entry interfaces, to complex toolkits sophisticated enough for the advanced trader, as well as live streaming quotes and charts.
- When looking for the perfect trading platform, traders and investors have to take into consideration multiple possible outcomes and how they weigh against each other.
Basics of Trading Platforms
As previously mentioned, the trading platform is your basic trading software. It enables the investor and the trader to place their trades and monitor those trades through the service of a go-between called an online broker.
Many such trading platforms come with extra features added to them, such as news feeds, real-time quotes, charting tools and at times premium research.
Trading platforms could also possibly be tailored to particular markets such as either to the futures market, the currencies, options or stocks markets.
You find two types of trading platforms, the commercial platforms and the prop platforms. Commercial platforms are geared towards day traders and retail investors.
These platforms have an easy interface with a number of helpful features like research tabs and investor education, news feeds and charts.
Prop platforms are platforms customized for large brokerages in order to suit their specific needs and trading style. Traders make use of various trading platforms according to their diversified needs and volume.
Picking A Platform
When choosing a trading platform, both investors and traders ought to consider the fees they are likely to pay as well as the features the platform offers.
For day traders and other traders who engage in this practice on a short-term basis, you may require Level 2 quotes as well as market maker depth charts, as these will assist you in making decisions. Options traders may require tools specifically for visualizing options strategies.
The fees you will pay are an important option to consider. For instance, if you are more of a scalping trader, you might want to invest in a platform with trading fees more towards the lower end.
Although lower fee platforms are great, there are trade-offs worth considering. As an example, it is not worth using a low fee platform if it does not offer you the right features.
Certain trading platforms may appear to be resistant towards a specific broker, while others might only be available with a specific broker. Therefore, an investor should also consider the reputation of a broker before you commit to opening an account on a particular platform.
Trading platforms might also have requirements that must be adhered to in order to qualify to use them. As an example, a day trader’s platform may need an investor or trader to have $30,000 in equity as well as being approved for margin trading.
Options platforms, on the other hand, might require approval in order to trade different types of options before they can use the trading platform.
Best Trading Platforms
There are a lot of different online trading platforms. Here are the four that appear to be the most popular:
- Interactive Brokers: This platform is the most popular for professionals. It has low fees and provides access to markets of the world
- TradeStation: TradeStation is popular with algorithmic traders who prefer executing their trading strategies by using automated scripts developed with Easy Language
- TD Ameritrade: TDAmeritrade is popular with both investors and traders, especially after it purchased ThinkorSwim and developed the TradeArchitect platforms.
- RobinHood: RobinHood has as its main target, the millennials. It is a commission-free platform which started off as a mobile app. It has now improved and also has a web interface. It makes its money from various sources, including interest earned on cash in its accounts. It also sells order flow to big brokerages.
Another popular platform, especially for forex traders, is Metatrader. This trading platform allows for interfacing with many different brokers.
Its scripting language, the MQL, allows programmers and those familiar with coding the ability to develop scripts that can automate trading currencies.