You've undoubtedly heard the never-ending argument between MetaTrader 4 (MT4) and MetaTrader 5 (MT5) if you trade prop firms. While some traders appreciate MT5's improved functionality, others stick to MT4's timeless simplicity. But which systems are most effective for prop trading, when speed, efficiency, and flexibility are crucial? Let's examine in more detail which prop firm trading platform best suits your trading style.
A Quick Overview of MT4 and MT5
Let's quickly review what these platforms truly provide before we begin comparing.
- MT4: The preferred platform for FX traders is MT4 which was released in 2005. It contains a vast collection of indicators and Expert Advisors (EAs), is lightweight, and is simple to use. Even though it's older a lot of people still use it, particularly forex traders.
- MT5: The upgraded version of MT4 is MT5 and it was introduced in 2010. Many people believe that MT5 is only an update but in reality, it's a whole new platform with more functionality. It features improved order execution, more integrated analytical tools, and support for additional asset types.
Let's now examine the characteristics that are truly important to prop firm traders.
User Experience: Simplicity vs. Functionality
The MT4 is similar to that reliable and old car you've owned for many years. You know where everything is, it's familiar, and it performs the job. Making the move to MT5 might first feel intimidating if you're familiar with MT4.
However, the MT5 trading platform has additional built-in capabilities which may be useful for traders who would rather have all of their tools in one location. But complexity also means a higher learning curve. The simplicity of MT4 may appeal more to you if you're new to trading. However, you will have access to more advanced tools that can simplify your trading if you are prepared to put in the effort to learn MT5.
Market Depth and Order Types
The Depth of Market (DOM) function is a key advantage of MT5 over MT4. This is particularly helpful when dealing with huge order volumes or trading in a quick-speed market since it allows traders to observe liquidity levels at various price points.
Additionally, MT5 allows additional order types like:
- Buy Stop Limit and Sell Stop Limit which combine limit and stop orders for improved control.
- In addition to the hedging mode offered by MT4, there is a netting mode for trading stocks and futures.
Prop traders can get a modest advantage in execution by using these characteristics to assist in fine-tuning their entries and exits.
Speed and Performance: Which One is Faster?
Execution speed is crucial. Even a slight delay might cost you money when it comes to prop trading.
MT5 is quicker and more efficient than MT4 which works on a 32-bit, single-threaded system since it runs on a more advanced 64-bit, multi-threaded system. This implies that MT5 won't lag while handling more charts, indicators, and scripts.
When trading high-frequency tactics or scalping, the speed advantage of MT5 may be noticeable. However, MT4 is still more than sufficient if you limit yourself to normal forex trading with a few indicators.
Backtesting and Strategy Development
Backtesting is essential for traders who use algorithmic trading or EAs. With multi-threaded backtesting, MT5 provides a significant improvement over MT4's single-threaded technology, enabling you to test strategies considerably more quickly.
In addition to supporting tick data backtesting, MT5's modeling is more accurate than MT4's which occasionally uses approximations to fill in the gaps. This alone may make MT5 the superior option if you're honing a trading strategy for a prop company.
Hedging vs. Netting: Does It Matter?
The majority of forex traders employ hedging which allows you to establish many positions in the same currency pair (buy and sell simultaneously). While MT5 initially just permitted netting (one position per asset), MT4 fully allows this. This isn't as significant as it formerly was, though, because hedging is now supported by more recent versions of MT5.
Before switching, it's still a good idea for prop traders who oversee several positions to confirm that their company permits hedging on MT5.
Compatibility with Prop Firms
Here's a crucial point: While MT5 is becoming more popular, many prop firms continue to use MT4 because of its established reliability. If you're trading with a prop firm, find out what they offer. Some firms give traders a choice between MT4 and MT5 while others only offer one or the other. If your firm only offers MT4 then you'll have to judge the pros and cons based on your trading style.