A trading platform is a piece of software that connects you directly to financial markets, giving you an interface to place your orders.

If you plan to trade in the financial markets, you will need a trading platform to do the actual buying and selling. Unfamiliar with how a trading platform works? Read on for our trading platform definition, and how to choose the best trading platform for your needs.

This article at a glance:

  • Trading platforms refer to software that allows you to open new positions in the market, and manage existing positions.
  • Retail traders generally have access to commercial trading platforms.
  • When choosing the right platform for you, check functionality, pricing, data access and minimum requirements.

Trading platforms explained

A trading platform is a piece of software that provides end-to-end connectivity to financial markets. They are often developed by third parties. For instance, the MetaTrader 4 and 5 platforms have been developed by developer MetaQuotes. These are often popular choices because they’re user friendly and offer the beginner trader everything they need in one place.

Trading platforms also provide real-time data, including market depth and prices, with a variety of charts to use to inform your next trading moves. This can help traders with analysis and decision-making, taking the guesswork out of trading.

Why do you need a trading platform?

A trading platform is one half of what’s necessary to begin your trading journey. It connects you directly to the markets, giving you an intuitive interface to place your orders.

However, you still need a licensed broker to formally execute trades in the market. These brokers provide access to the trading platform software, to enable clients to open long (buy) and short (sell) positions, and manage existing open orders in the market.

Your broker will execute your orders on your behalf, but without a trading platform it’s not possible to set the requirements of your orders. You will also not have the technical capability to understand the markets using charts and other indicators.

Types of trading platforms

Trading platforms can be categorized into one of two broad types:

  • “Prop” (Proprietary) Trading Platforms

Proprietary trading platforms are geared towards professional investors and large-scale financial institutions, including investment banks and hedge funds. These prop platforms are built bespoke to the needs of each investment group or institution. As such, they are not generally made available to retail investors.

  • Commercial Trading Platforms

Commercial platforms are typically designed for the retail investor market. Commercial trading platforms offer broad-based functionality, which allow retail investors to tailor their trading interface using a variety of different tools.

Choosing the best trading platform for me

Take the following aspects into consideration to find trading software that ticks all the right boxes:

  • Available features for technical and fundamental analysis: Which trading features suit your trading style best? Make sure your chosen platform has adequate charting, as well as fundamental insights, news feeds and other features you would want.
  • Platform fees: Are you prepared to pay a fee to use your favored trading platform? Some platforms will come with a pricing structure that charges you for usage.
  • Level 2 data access: Seasoned traders may want Level 2 data access to view the market depth and momentum of order books like the NASDAQ. Only some trading platforms will demonstrate the bid-ask prices at set price levels.
  • Minimum equity requirements: Some trading software will have minimum deposit requirements, so be sure you can meet these.

Selecting the right trading platform for your needs is ultimately a subjective call. Take the right one by understanding your own expectations, and researching your options to find one that matches your requirements.

This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorized to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.