A trading platform is the digital gateway that allows individual traders and professional investors to participate in global financial markets. These sophisticated software applications allow anyone to buy and sell financial instruments, such as stocks, bonds, commodities, currencies (forex), and cryptocurrencies, anywhere, anytime from a computer, tablet or mobile phone. These platforms are offered by brokerage firms, financial institutions, and direct market access providers and give users the tools necessary to execute trades and manage their investment portfolios.
Some of the key features of a modern trade platform typically include a user-friendly interface that allows for easy navigation and trade execution, real-time market data to keep users informed of up-to-the-minute price fluctuations, and a suite of analytical tools for technical and fundamental analysis.
These tools include charting software, indicators, drawing tools and news feeds. Furthermore, robust security measures are essential to protect users’ data and funds. In this guide, we aim to explore the definition of a trading platform, the and the various trade platform types, and what to look out for when choosing one to trade on.
- Show Full Guide
Understanding trading platforms
Online trading platforms, which came into vogue in the late 1990s, continue to expand their user base at a steady pace. The online trading platform market will expand at a compound annual growth rate of 7.4% through the end of the decade, according to a report by GrandView Research. High-speed internet allows greater connectivity and that is allowing users to conduct real-time trading from nearly anywhere.
Before the internet, trading was confined to physical locations, such as stock exchanges, where brokers engaged in open outcry, shouting and using hand signals to communicate bids and offers. Individuals needed to walk into the offices of brokerage firms to buy and sell assets. Now a smartphone is all anyone needs to conduct financial transactions in a plethora of markets.
Trading platforms are becoming both more user-friendly and sophisticated in the ways in which they enable algorithmic (algo) trading, or provide charts and graphs to recognize complicated trading patterns. There are so many different types of trading platforms that any investor, with a little research, can find the one that suits his or her trading level and style.
What are trading platforms used for?
A trading platform is a digital marketplace that connects users to financial markets, allowing them to execute trades and manage their accounts. These platforms provide access to a wide range of financial instruments, bypassing traditional brokers. Typically, they offer features like real-time market data, news feeds, charting tools, and premium research, enabling traders to make informed decisions and execute trades efficiently.
Trading platforms are customized to cater to specific markets, such as futures, stocks, options, or currencies. This market-specific tailoring ensures that traders have the necessary tools and capabilities to effectively navigate each market’s unique structure. By offering diverse functionalities and market-specific features, trading platforms empower traders with greater control over their trading strategies and execution.
A good trading platform provides several essential features. First, it delivers real-time market data, giving traders the up-to-the-minute price information they need to make quick decisions and place trades.
Second, and perhaps most critical, the platform allows you to actually execute trades. It offers various order types and execution modes, enabling traders to implement different strategies.
Third, trading platforms typically include analysis tools, which help users identify market trends and trading opportunities. Finally, these platforms also support portfolio management, allowing traders to monitor their holdings and track their performance
The features of online trading platforms
A good trading platform is characterized by an intuitive interface, ensuring easy navigation and efficient trade execution. Reliability and robust security measures are important, guaranteeing minimal downtime, fast execution speeds, and the protection of sensitive data. Comprehensive trading tools, including advanced charting, technical indicators, and real-time market data, are crucial for informed decision-making.
Access to a wide range of financial assets supports portfolio diversification, while transparent and competitive fees minimize trading costs. Responsive customer support, available through multiple channels, ensures prompt issue resolution. Mobile accessibility is essential for traders on the go, and educational resources benefit both novice and experienced users. Ultimately, a quality trading platform aligns with a trader’s style and helps them achieve their financial goals.
Types of trading platforms
There are two types of trading platforms – proprietary trading platforms and commercial trading platforms. For proprietary trading platforms, applications are designed by large brokerage businesses and imitate the trading style and requirements of electronic brokerage models.
On the other hand, commercial trading platforms target retail investors and day traders.
Proprietary trading platforms
A proprietary trading platform is a software application developed and owned by a specific financial institution, such as a brokerage firm or a trading house, for the exclusive use of its own traders or clients. Unlike off-the-shelf platforms available to the general public, proprietary platforms are tailored to meet the specific needs and trading strategies of the firm that developed it. These platforms often incorporate unique features, algorithms, and data feeds that give the firm a competitive edge in the market.
These platforms are often highly sophisticated, integrating advanced analytics, risk management tools, and direct market access. They may also be designed to handle specific asset classes or trading styles, such as high-frequency trading, algorithmic trading or copy trading.
Because they are developed in-house, proprietary platforms can be customized and updated quickly to respond to changing market conditions or the firm’s evolving trading strategies. This level of control and customization is a key advantage for firms that rely on specialized trading techniques.
An example is eToro’s own trading platform:
Commercial, or third-party trading platforms
A commercial, or third-party, trading platform is a software application developed and offered by an independent technology provider, rather than a specific financial institution. These platforms are designed to serve a broad range of traders and brokerages, offering a standardized set of features and tools that can be customized to some extent. They are widely available through subscription or licensing agreements, making them accessible to various market participants, from individual retail traders to institutional investors.
These platforms often boast extensive compatibility with multiple brokers and data providers, giving users flexibility in their trading setup. They typically include a comprehensive suite of tools, such as charting software, technical indicators, news feeds, and order management systems. The developers of these platforms focus on creating versatile and reliable software that caters to diverse trading styles and market analysis techniques. Because they are not tied to a single institution, commercial platforms often prioritize neutrality and broad market access, making them a popular choice for traders seeking flexibility and a wide range of functionalities.
Popular third-party trading platform examples
TradingView
TradingView is the world’s most popular investing web site, according to data by SimilarWeb. Founded in 2011, it is best known for its charting capabilities, but also features paper trading, which allows users to practice trading with virtual funds as well as a Wizard program that promotes traders who share high-quality content.
Its comprehensive charting platform has more than 60 million users. The simplicity of the site makes it ideal for beginner investors as well as experienced ones. It enables investors to better understand trading strategies and the use of different indicators, but it also allows advanced traders to build their own custom scripts for charting.
TradingView has a free plan that’s quite basic. Its subscription plans, though, provide a wealth of charting indicators, including a variety of stock screeners, 14 different chart types, more than 90 drawing tools, more than 100 pre-built indicators, more than 20 timeframes and data on more than 70 exchanges across more than 50 countries.
MetaTrader 4 and 5 (MT4/MT5)
MetaTrader 4 (MT4) and MetaTrader 5 (MT5) were launched in 2005 and 2010, respectively, by MetaQuotes Software Corp. They are two of the most popular third-party trading platforms and are supported by a large number of brokers. MT4 is mainly used for forex and CFD (contracts for difference) trading, while MT5 also includes additional features for trading in futures, equities, and options.
MT4 and MT5 offer a free demo account, a range of technical analysis tools and indicators and support algorithmic trading through the use of the Expert Advisors (trading bots), a computer program that facilitates automated trading decisions on a trading platform. MT5 also includes more advanced charting capabilities and custom timeframe functionalities.
cTrader
cTrader, developed in 2011 by cTrader Limited in London, is a forex trading platform specifically engineered for Electronic Communication Network (ECN) brokers. Following its debut with FxPro, cTrader has gained popularity among prominent ECN brokers such as Liquid Markets, Pepperstone, and Admiral Markets.
The platform’s core functionalities revolve around trade execution and charting. cTrader distinguishes itself with its visually appealing and streamlined interface, prioritizing a clean and uncluttered design. The developers have focused on creating an intuitive user experience, making the platform easy to navigate and operate.
cTrader offers several key features: customizable algorithmic trading (“cBots”) accessible through an integrated programming suite; clear display of active global trading sessions; easy proxy connection for firewall bypass; and detailed Level II pricing/depth of market information, presented visually and numerically, showing real-time buy/sell order volumes at various price levels, enhancing trading decisions.
Breaking down trading platforms by device type
Gone are the days where you had to call or meet with a broker to make a trade. There are several different types of online trading platforms to access markets.
Desktop-based trade platforms
This is any platform that is available via downloadable software that makes financial markets available, along with online quotes, charts and indicators as well as the capability to open and close positions. Desktop-based trade platforms are designed to be used on all types of desktop and laptop computers. They are typically downloadable for Windows, MacOS or Linux operating systems.
Mobile apps for trading
These are software applications that allow users to buy and sell securities on their mobile devices. These apps can be used to trade in a variety of financial markets, including stocks, options, and futures. You can find the various mobile trading apps on the App Store, Google Play or AppGallery.
Webtrader platforms
These are web-based platforms that allow users to trade financial assets such as stocks, currencies, or commodities directly through a web browser, without needing to download any additional software, providing access to a trading account and its functions through a web interface.
Classifying trading platforms by traded instrument
There are different types of trading platforms, depending on what type of securities that you are interested in trading in. Each of these talks specifically about platforms used for certain investments. However, there are platforms that make more than one type of security available to trade.
Stock trading platforms (Equity trading platforms)
These platforms facilitate the buying and selling of shares of publicly traded companies. They provide access to stock exchanges such as the New York Stock Exchange (NYSE) or Nasdaq. Stock trading platforms range from basic, user-friendly interfaces for beginners to sophisticated platforms with advanced charting tools and research capabilities for experienced traders. These platforms are heavily regulated, and traders actually own the shares they purchase.
Forex trading platforms
Forex (foreign exchange) trading platforms allow users to trade currency pairs, such as EUR/USD or GBP/JPY. Currency trading involves speculating on the fluctuations in exchange rates between different currencies. These platforms operate 24 hours a day, five days a week. Forex trading often involves leverage (borrowed funds from your broker) which can amplify both profits and losses. If you’re interested in trading forex, we have a guide to the best forex trading platforms (brokers).
CFD trading platforms
CFD (contract for difference) trading platforms enable traders to speculate on the price movements of various assets without actually owning them. These assets can include stocks, forex, commodities, and indices. When trading CFDs, you’re entering into a contract with a broker to exchange the difference in the asset’s price between the opening and closing of the trade. CFD trading generally involves fees such as spreads or commissions charged by the broker. This is essentially the cost of using the trading platform. CFD trading also utilizes leverage, which increases potential rewards and risks. CFDs are derivative products, meaning their value is derived from an underlying asset. (We have also compiled a list of the best CFD trading platforms.)
Crypto trading platforms
Crypto trading platforms allow users to buy, sell, and trade cryptocurrencies including Bitcoin, Ethereum, and many others. These platforms can be centralized exchanges or decentralized exchanges. The cryptocurrency market is known for its high volatility, which can lead to significant price swings. Crypto trading platforms operate 24/7. Regulatory oversight of the cryptocurrency market varies across jurisdictions. (We also have an article on the best crypto trading platforms with leverage.)
How to choose a trading platform: Step-by-step process for beginners
When choosing a trading platform, investors should carefully consider several key factors to ensure a smooth and secure trading experience. Here’s a breakdown of the 10 essential factors you need to do to find the trading platform that best fits your trading style and needs:
Match the platform to your style
Think about your experience: Are you a beginner or more experienced?
How often will you trade? A lot (active) or just now and then (passive)?
What do you want to invest in? Stocks, crypto, or something else?
If you’re investing for the long haul, a simple platform might be best. If you’re trading a lot, you’ll need something more advanced.Understand the costs
Look at all the fees: buying and selling fees (commissions and spreads), account fees, and any other charges.
Compare fees between different platforms to find the cheapest option for you.
Remember, lower fees mean more of your money stays with you.
Check how fast trades are processed and how reliable the platform is.
Make sure pricing is clear and easy to understand.
Make sure deposits and withdrawals are fast and the platform accepts various payment options.
Pick a platform that’s easy to use and learn
Choose a platform that’s easy to navigate and looks good.
Make sure you can easily find the tools and information you need.
If you want to trade on your phone, check if the platform has a good mobile app.
Look for good customer support and learning resources like tutorials and videos.
Check if there is a demo trading platform to practice your skills, and if you want to emulate other traders for learning and hands off trading, a copy trading platform.
If you are a beginner, platforms with plenty of educational resources are essential.
Join the community
Platforms with online communities (social trading platforms) can be helpful. You can learn from other investors and see what they’re thinking. The best platforms facilitate communication between their users.
Look for forums or places where you can connect with other investors.
Lots of investment choices
Make sure the platform offers the types of instruments you want to trade (stocks, bonds, etc.).
See if they offer access to investments in other countries e.g.: US stocks.
If you want to buy small pieces of expensive stocks (fractional shares), check if the platform allows it.
Check what types of accounts the platform offers, like retirement, individual or swap-free (Islamic) accounts.
Safe and secure
Make sure the platform is regulated by trusted financial authorities.
Look for information about their compliance and dispute records.
Read reviews from other users, for instance on Trustpilot, or ask trading communities, e.g.: on Reddit or Telegram.
See if the platform has won any awards or had any problems with regulators.
Pros and cons of trading platforms
Trading platforms, dedicated software to engage in financial trades online, have grown enormously over the past few decades. That’s because the pros mostly outweigh the cons of trading platforms. Depending on what type of platform you use for trading, here are a few pros and cons to watch:
Pros
- Lower transaction fees on your trades because you are doing the transactions directly.
- Greater control over your trades because you can see the history of your trades, view the current positions of your stocks, and analyze their performance in a neat dashboard.
- Fewer entry barriers and less expensive withdrawals or deposits.
Cons
- The proliferation of online trading platforms has led to greater volatility in markets.
- Without going through a human broker, you are on your own and that can mean a steep learning curve for beginners.
