Forex Trading Software is the driver and catalyst of an enormous and thriving forex trading market.
Trading in Forex Markets stood at $6.6 trillion per day in April of 2019 according to BIS’s 2019 triennial survey.
That’s an enormous amount so much that if we asked you to write in numbers, there are great possibilities that you wouldn’t be able to do it.
The last 2 decades have seen rapid innovation in information technology that has brought unprecedented changes in almost all industries. And the financial industry is no exception. In fact, the financial market was one of those few early adopters of software and hardware that came along IT revolution.
What changed for Forex Trading in the last 2 decades?
While currency or foreign exchange has been very frequent and routine work between large corporations and banks world over to make and receive payments, forex trading in its current form didn’t even exist 2 decades back.
Commodities, Stocks & Indices were the most common trading instruments up until the 90s. Then Crude & Forex Trading started getting the attention of traders and the whole pandora box opened for forex trading software, hardware, tools, solutions, and services.
Since the Forex market didn’t have a central authority, several institutions and brokers started offering forex trading to retail traders.
The launch of innovative Forex Trading Software like MT4 (MetaTrader4) in the year 2004 and mobile trading platforms have played an exceptional role in the spread of the forex trading industry globally.
Once retail forex trading started getting traction, different technology companies and businesses started working on filling the gap of forex trading software and tools that were needed to speed up online trading.
What is a Forex Trading Software?
For most people especially those who trade into currency pairs or Forex pairs, the trading platform they use is the Forex Trading Software. And to a large extent, they are right, but not completely!
See, the forex trading terminal is just one part of the grand Forex Trading Software. It is just the tip of the iceberg.
Most of these trading platforms are free to download and traders can see price quotes and trade with virtual money but to do real forex trading, one needs a Forex Broker that will allow retail traders to open an account, deposits, live price quotes, trading, order book, and withdrawals.
So the most important question; What is Forex Trading Software? A Forex Trading Software is a combination of the trading terminal, Manager Terminal for brokers, matching engine, trade server, data server, security protocols, set of APIs for custom development, provision to add third-party tools and plugins.
Forex Trading Terminal
Forex Trading Terminal is where traders can see currency pairs, charting tools, indicators, live price quotes, place different kinds of trades, see the live positions, profit and loss statement, exposure, order book, updates news feed, forex calendar, and place withdrawal requests, etc.
Manager Terminal is the forex trading software delicately developed for brokers to create a user account, assign trading instruments, set charges like spread, commission, brokerage, swap, etc, place orders on behalf of clients, check the exposure, credit, and debit balance to user accounts.
Matching Engine in Forex Trading Software is the matchmaker that ensures the orders placed by traders are matched and filled according to the rules set by brokers.
B Book brokers’ clients’ trades are matched and filled automatically as the broker is the counterparty.
In the case of A Book arrangement, trades are sent to Liquidity Providers or other third parties for matching.
C Book or Hybrid brokers send some trades to LP while settling some trades themselves.
A matching engine is a robust component of forex trading software that lets the trading platforms engine running.
Every great Forex Trading Software keeps the provisioning for custom development by providing the necessary APIs. Take MetaTrader Forex Trading Software like MT4 & MT5. They both have manager and server APIs.
MT4 has MT4 Manager API that lets developers create Broker CRM, Traders Room, etc., and MT4 Server APIs that give flexibility for automated trading, find management tools like PAMM, MAMM, Trade Copier, Social Trading Software, etc.
Same as MT4, MetaTrader 5 has MT5 Manager API & MT5 Server API.
Felxibility to connect third party tools, bridges and APIs
By developing such complex forex trading software, these companies have already moved mountains but forex brokers still need a few additional tools and plugins to operate seamlessly and offer complete trading solutions.
These tools, plugins, and APIs need special permissions and protocols to connect and function properly with this forex trading software. Every good forex software has provision to connect third-party tools, APIs, bridges, etc.
Here are few examples for you to better understand this:
Managing Liquidity for forex brokerage business is in itself is daunting work. Most of this forex software like MT4, MT5, cTrader, etc need third-party tools like MT4 Bridge for MetaTrader 4 to connect with a liquidity provider.
FIX API is another Liquidity Tool that large and trusted forex brokers use to connect their clients to large interbank networks to get the best liquidity.
Live Price Feed
To run a smooth brokerage operation, forex brokers need to connect with some third party for Live Price feeds that will keep sending and updating the live price of currency pairs. This is very essential for forex traders to analyze and make trading decisions.
Forex News & Alerts
Forex News & Alerts are one must for forex traders to keep up with what’s happening around the world that may have an impact on currency pair prices. Brokers need third-party tools to connect with their forex trading software to keep getting real-time live forex news and alerts.
Forex Calendar of important events and announcements like FED meeting, Job Data, OPEC meeting, etc have a similar effect as Forex News and Alerts. Every smart Forex Trader always keep a track of these events and a forex calendar is a handy tool for them.
You may require a third-party tool to connect and provide Forex Calendar to your traders.
best forex trading software
We have observed that the Bigger the opportunity to make money; the greater the participation! And this is perfectly right for Forex Trading Market.
As it grew, several top forex brokers and information technology businesses started working on developing Forex Trading Software and tools to suit a larger client base which is the end-user; the forex traders!
Categories of Forex Trading Software
There are 2 categories of Forex Trading Software;
- Category I: Forex Trading Software developed by Technology Companies that don’t offer forex brokerage, trading, investing, or fund management services. Their primary business is developing innovative forex trading software and tools that forex brokers would buy or get the license for a fee.
- Category II: Properietory Forex Trading Software developed by Forex Brokerage Firms offer forex brokerage, trading, investing, or fund management services to retails and professional traders. They may further offer their properietary forex software and tools to other brokers in white label forms. They may develop these forex trading software comepletely inhouse or hire an IT Company that develops bespoke custome forex software.
Top Forex Trading Software
If you have read this blog till now, you would have noticed, we have already mentioned some very popular Forex Trading Software. Here is the list as per the above-mentioned categories.
- Interactive Brokers
- TD Ameritrade
- Tradespoon and more
Forex Trading Software Cost
As a trader, you may feel that I can download MT4, MT5, or other forex trading platforms for free from their website or play store. But these are just for DEMO trading purposes. To make real trades, one needs an intermediary like a forex broker who would provide them a trading platform, forex pairs, live price feeds, live order execution, and filling, etc.
Remember; in every business, all the costs are borne by the end-user.
A business may pay lumpsum amount for software, hardware, employees’ salary, and infrastructure, etc but all these costs are distributed and recovered from end customers.
Forex Trading Software Cost can be understood better as per the categories mentioned above.
Pure Forex Technology companies sell admin or white label licenses. For example, MetaQuotes that has developed MT4 & MT5 and Spotware that has developed cTrader sell Admin or Server Licenses who can further sell White Labels. MT5 Admin License cost USD 10000 per month. cTrader Broker License may cost EURO 5000 as a one-time setup fee, Monthly Fee Euro 2000, and Monthly Volume Fee EURO 5/million.
Developing a proprietary forex trading software may cost over USD 1,000,000 and 8-12 months. It takes lots of domain and regulatory knowledge & experience to develop a forex trading software that will serve all the stakeholders in their best interests and stay compliant.
Forex Brokerage firms literally spend millions of US dollars to develop proprietary forex trading software of their choicest features. This helps them to cater to the requirement of a large forex trader base.
Hope this blog served you as the Forex Trading Sofware Complete Guide and gave you structured knowledge and information about forex trading software.
The Forex Trading industry is ever-evolving and changing rapidly. Technology is the biggest catalyst in the forex trading market’s growth and Forex Trading Sofware is at the core of it; serving thousands of forex brokers and millions of forex traders using their trading platforms.
Best Forex Traders are those who keep innovating, upgrading, updating, and introducing new features and tools. MetaQuotes upgraded their Forex Trading Software MT4 (MetaTrader4) with MT5. Spotware is constantly upgrading the features of their legendary trading platform cTrader.
As far as the forex trading market goes, we have just seen the tip of the iceberg. There is a long journey ahead and innovative forex trading software will lead the way.