This article was written by Yael Warman, Content Manager at Leverate.
In the 21st century, when we are usually bombarded by frequent software updates, and our favourite versions of computer programmes become obsolete before we have completely mastered them, trading software is continuing to buck the trend. In the last decade, we have witnessed the launch of several different versions of Windows, and yet in the same period of time, MT4 has faced only one competitor, MT5, which despite being launched in 2010, has only recently started to gain traction.
Despite many differences between the two platforms, I want to dedicate this article to discussing the several major differences which have been labelled significant by industry experts, before finally answering the question of whether MT5 is finally ready to challenge MT4.
MetaQuotes, the company behind both pieces of software, has begun to regard MT5 as a failed project due to its limited take-up around the world. MT4, despite having faced six years of competition, still accounts for over 70% of global FX market share. One must consider the sheer impressiveness of this achievement, when many independent trading platforms are being offered by brokerages.
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The first reason for the continued popularity of MT4 is its compatibility with expert advisors, known as forex robots. EAs have steadily become more popular amongst traders, and allow traders to input commands in order to fulfil transactions when the trader is not present. Particularly popular in the Asian Pacific market, MT4 is a system which allows a fast compilation of the necessary codes to enable the EA to be efficient, whilst also preventing the porting of said codes to the MT5 system.
The last issue in the above paragraph is a major issue with MT5. Whilst the software does enable both a multi-currency strategy tester and a much faster testing system, any coding which has been written for MT4 will require re-writing for MT5, thus wasting all the time that you have saved in using the newer software.
Whilst MT4, often due to the input provided by third-party software developers, has allowed access to most of the world’s major markets, MT5 is an attempt to access a number of growing markets which were beyond reach beforehand. For example, DGCX, The Dubai Gold and Commodities Exchange, the leading derivatives exchange in the Middle East, the Warsaw Stock Exchange, the Australian Securities Exchange and the Chicago Mercantile Exchange are all now accessible using the MT5 system.
Whilst these markets are lucrative additions, and without wishing to enter the confusing world of hedging, in the lead up to the release of MT5, the National Futures Association, which is the industry-wide, self-regulatory organisation for the US futures industry, prevented hedging from being used in the US forex market. With the MT5 software designed to prevent hedging, the new platform is fully compatible with the US market.
The majority of trading platforms are still using MT4, and it is easy to see why. The coding incompatibility is a major stumbling block, and MT4 is extremely popular with a large majority of traders. At the same time, even though the issue of the EA remains, the emerging Asian Pacific markets are utilising MT5 in their droves as emerging markets are ideally suited to its systems and capabilities. In essence, it appears as though MT5 will continue to gain popularity, but not amongst traders who favour markets compatible with the MT4 software.