Trading Platforms

Just a few years ago all trades had to be placed through a real person, a broker. Now electronic platform trading is used almost exclusively for trading, especially in Forex.

A trading platform gives you a feed of price information and allows you to buy or sell online. The fierce competition for this business has meant that more and more sophisticated platforms are available and many are free.

Some platforms only allow you to trade Stocks. Some only allow you to trade CFDs (Contracts for Difference) or spread betting. However almost all platforms now allow you to trade almost everything from your computer screen:

  • Stocks
  • Options
  • Futures
  • Indexes
  • Forex
  • CFDs
  • And so on.
Of course as in everything else in life you get what you pay for. Whilst you do get live prices for Forex on all platforms, you usually get delayed prices for futures and indexes and options. Also the charting and the usability of free platforms are sometimes poor.

I thoroughly recommend trying a number of free platforms before you commit to one. Also you must phone and email the help desk before you commit. It is critical that you can speak to someone if there is a problem.

You also need to check the functionality of each platform. Does it include all of the technical analysis tools you need? Can you easily place stop loss orders?

You also need to aware of the margin requirements for each product you are trading. This means how much money you need to have in your account in order to trade a certain size contract. What happens if the position goes against you and you exceed the entire margin in your account? Are all of your positions automatically cut?

Finally you also need to be aware of the credit risk of the provider of the platform. So if you put $50,000 into your trading account and the institution becomes insolvent the next day, you may never see your $50,000 again! Know who your provider is and what their credit rating is!

The accepted leader in Trading Platforms is Tradestation - www.tradestation.com

To use their platform will cost you US$250 per month. So for US$3,000 per year you need to be sure that the advanced functionality and feed is going to improve your P&L (Profit and Loss account) by at least US$3,000 per year.

However you can be profitable without paying for a trading platform! Remember 10 or 20 years ago traders had no electronic platforms and people made plenty of money back then without them!

I use a free platform that does everything I need it to, Saxo Trader - http://saxotrader.saxobank.com

However because Saxo Trader does not have live prices for Futures, Options and Indexes I also use a dedicated Futures platform which my broker provides me, PrimeTrade which is a Credit Suisse First Boston product - http://www.csfb.com/primetrade

Conclusion

Online Trading Platforms now allow you to trade all financial markets from your computer. They are incredibly powerful and have amazing functionality. If you are a beginning or intermediate trader a good free platform is all you need. But ensure that you:
  • Check your broker has a good help line;
  • Trial a number of platforms before you commit to one;
  • Look at the functionality of each platform;
  • Check the margin requirements of your platform;
  • Check the credit worthiness of the counterparty you are depositing your funds with.
 
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