MetaTrader 4 vs MetaTrader 5
MetaTrader is an electronic trading platform used by the retail brokerage industry, primarily in the foreign exchange (“Forex”) arena. The platform was developed by MetaQuotes Software Corporation, a Russian Forex trading software company headquartered in Limassol, Cyprus. MetaTrader is a very popular trading platform within the Forex community. It is used almost exclusively by the majority of Forex brokerage firms and banks around the world.
There are two versions of the MetaTrader platform, MetaTrader 4 and MetaTrader 5. These platforms are more commonly known in the Forex industry as MT4 & MT5. MT4 was officially released on July 1, 2005. It’s counterpart, MT5, was released on June 1, 2010.
Despite the length of time that the upgraded version has been available, many brokers still offer the MT4 platform to traders, and have not yet made the switch. However, as the company continue to develop and release new features for the MT5 platform, and as support for older versions of the MT4 platform is discontinued, more and more brokers are dropping MT4 in favour of the new iteration.
The main differences between the two platforms are explained below.
Image: MetaTrader 5
What are the differences between MT4 and MT5?
One of the major differences for traders is the variety of markets that can be traded through the platforms. MT4 was specifically designed for Forex trading, and also supports CFD trading.
The intention of the MT5 system was to extend the selection of markets that traders have access to. Therefore, in addition to Forex and CFDs, trades can be made in futures, stocks, bonds, and options. This enables trading on thousands of different products that are not available through the MT4 platform.
Depth of Market
Depth of market is an important and useful tool for traders, allowing them to understand the liquidity available in the market at each price point and providing them with extra transparency and market visibility. This feature is offered on the newer MT5 platform, but not on MT4.
The order filling policy for MT4 is ‘fill or kill’. This means a trader’s order is required to be executed at the specified volume, or the order is cancelled.
MT5 offers a more liberal order filling policy, in which partial order filling is permitted. For instance, if part of a trader’s order is not immediately filled, MT5 will automatically create a limit or market order to fill the remaining volume.
MT4 is designed to accept four different types of pending orders. These include buy limit, buy stop, sell limit & sell stop.
The MT5 can handle six different types of pending orders. The additional pending order types are buy stop limit and sell stop limit. These features allow a trader to buy or sell a position when the price passes a requested entry point, and also specify the price that they are willing to go to in order to open the trade.
MT4 is certainly more compatible with a 32-bit operating system. When MT4 was first released in 2005, the vast majority of computer operating systems were 32-bit, and MT4 was designed around this system.
These days, 64-bit operating systems are more commonly used, and MT5 has been designed to take advantage of this. MT5 can operate on a 32-bit system, however for maximum performance and efficiency, a 64-bit operating system is preferred.
Order routing is somewhat archaic with MT4. Forex brokers are required to develop their systems in order to link to liquidity providers such as JP Morgan, Citibank and other banks and financial institutions.
Order routing is seamless with the MT5 platform as it offers built-in functionality that integrates with the systems of the major liquidity providers in the Forex arena. This would include firms such as JP Morgan, Citibank, UBS, Goldman Sachs and Morgan Stanley. This allows retail traders to use the platform off the shelf.
The database that hosts the MT4 platform can comfortably handle up to ten million trades.
These restrictions are removed on the MT5 platform, which can execute an unlimited amount of trades. The database is designed to handle extremely large order flows without compromising the integrity of the platform.
The MT4 platform has 30 different technical indicators built in. Technical indicators are used to detect various price patterns in the Forex markets. The majority of these indicators are based on mathematical formulas.
The number of built-in technical indicators available through the MT5 platform has been extended by a further 8.
That said, both systems allow external indicators to be downloaded into the platform. Traders can also write their own, so the number of built-in indicators would not make much of a difference for platform users.
Graphical tools allow traders to draw trendlines as well as support and resistance levels on their various Forex charts. MT4 has 31 different graphical tools accessible to traders.
The availability of graphical tools is quite robust with MT5. Traders can select from 44 different graphical tools.
Forex traders use different timeframes for analysing & trading the markets. For example, some traders prefer to trade using a 30 minute timeframe while others use a shorter timeframe of 5 minutes. The MT4 platform provides traders with nine different timeframes.
Forex traders have the capability to trade in 21 different time frames using the MT5 platform.
Time and Sales Data
Time & sales data is a popular indicator used by many Forex traders. This data provides a detailed account of trading activity for a particular security or Forex currency. It displays the volume, price, direction, and time/date for each trade. Time & sales data is available on the MT5 platform.
Both platforms have an e-mail system which allows registered users to send notifications from the trading terminal, however MT5 allows traders to include attached documents.
News Updates and Economic Calendar
MT5 has an economic calendar embedded in the platform. This allows traders to view real-time news that may affect the markets. This includes news releases from major central banks and government agencies.
The MT5 platform allows traders to test different trading strategies using real-time data. Traders can test multiple currencies at the same time.
Which trading platform is better, MT4 or MT5?
When MT4 was released in 2005, it was quickly adopted by the Forex community. The platform became the ‘gold standard’ within the currency trading industry. Even today, seven years after the release of the MT5 platform, the majority of traders are still using MT4. Does this mean MT4 is a better platform? Not necessarily.
Without question, the MT5 platform has more functionality and trading tools versus the MT4 platform. This includes features such as an economic calendar, time & sales data, real-time testing of trading strategies, a more liberal order filling policy, market depth visibility, a larger selection of technical indicators and graphical tools, and the ability view multiple timeframes.
Therefore, on the surface, it would appear that MT5 is a superior product to MT4. If MT5 is a better platform, why are the majority of traders still using MT4? The answer is that the MT4 platform still serves its function quite well within the Forex community, so although MT5 certainly has more features, the Forex industry have been fairly slow to adopt the new platform.
MT5 was primarily developed with the intent to attract non-Forex traders, with access to stocks, bonds, options, and futures. The MT4 platform is only capable of executing Forex trades and CFD. Therefore, MT5 captures a wider audience of traders.
As the support is phased out for MT4 and as MT5 continues to improve in its offering, it is likely that demand will increase for the new platform over its predecessor, eventually making it the preferred platform choice in the industry.
MT4 still serves the Forex community well, however, and is likely to be continued to be offered by many top brokers for the foreseeable future.
|Brokerage Firms Supporting MetaTrader 4|
London Capital Group
Saxo Capital Markets
|Brokerage Firms Supporting MetaTrader 4 & MetaTrader 5|
Although there are still many more MT4 brokers, this does not imply that MT5 is an inferior product. Instead, it simply means the Forex community is reasonably satisfied with the functionality offered on MT4. Both platforms are quite capable of delivering superior performance to the trading community, but it is likely that the number of MetaTrader 5 brokers will increase significantly in the coming months and years.