MT4 vs. MT5 differences explained

When it comes to trading platforms, forex traders are spoilt for choice. In most cases, the choices of selecting a trading platform is however limited to the forex broker that you use. Although there are many different forex trading platforms available, not all of them are available by every forex broker.

Figure 1: MT5 Trading Platform

This is partly due to the fact that the forex broker’s feed is most likely not integrated with the forex trading platforms. Thus, there are some ways that a trader can overcome this.

Forex brokers offer something known as a bridge which is nothing but a third party software that allows the capability to use a custom trading platform while using the forex broker’s feed and login details.

While the option to use a bridge can allow some level of connectivity, if it malfunctions, there is a big risk that one has to take.

Among the many different forex trading platforms that are available these days, the MT4 trading platform is probably one of the most widely recognized trading platforms. In fact, just about every forex broker always offers the MT4 or the next version, the MT5 trading platform.

The popularity of offering the MT4 forex trading platform is partly due to the fact that over the years, there has been a tremendous growth of the eco-system for this trading platform. This means that traders can easily customize using indicators, expert advisors, scripts and more recently, the option to plugin to third-party applications as well.

While the MT4 or the Metatrader 4 platform is widely used, there is an upgraded version of this called the Metatrader 5 or MT5 trading platform. Although the MT5 trading platform has been made available for quite a while, it is yet to catch up in popularity with its older sibling, the MT4 trading platform.

Figure 2: MT5 Trading platform with depth of market

The MT4 (and the MT5) trading platforms are offered by MetaQuotes Software Corporation which is registered in Cyprus. Still, in the past years or so, the MT5 has been giving the MT4 trading platform a run for its money as traders are slowly starting to accept the newer and the advanced trading platform that is MT5.

As a trader, you might be asking the question whether the MT4 or the MT5 trading platform is better. In most cases, if you have been trading for a while, then you would also have developed custom trading indicators, expert advisors and/or scripts.

So, does the MT5 trading platform support the indicators from the older version? Should you really need to upgrade to the MT5 trading platform? What is new in the MT5 trading platform?

In this article, we aim to answer all these questions and more.

By the end of this comparison between MT4 and MT5 trading platforms, you would know whether you should be upgrading from the MT4 trading platform or not, or if you should opt for a new trading account with MT5 or stick with the trusted MT4 trading platform. 

What is the MT5 Trading platform?

The MT5 trading platform is the abbreviation for Metatrader 5. The number 5 indicates the version number of the trading platform.

Metatrader 5 was released in 2010. This release came nearly five years after the release of the Metatrader 4 platform. Over the years and for obvious reasons, the Metatrader 4 platform quickly became a trader’s favorite. This eventually led to more forex brokers offering the Metatrader 4 trading platform by default and for free.

Since the first release of the Metatrader 4 trading platform, there have been subsequent releases as well. Therefore, the general perception has been that the MT5 trading platform is just another upgrade from the older MT4 version.

Figure 3: MT5 Strategy Tester Window

While there is partly some truth to this, meaning that the MT5 platform is an advanced version of the MT4 trading platform. Also, the MT5 trading platform has the main features such as backtesting and has the same graphical user interface.

In reality, the Metatrader 5 platform was designed to be more advanced and was built to address some issues that the Metatrader 4 platform was not able to. Furthermore, the MT5 trading platform also caters to a slightly different market compared to the Metatrader 4 platform.

Still, traders prefer to know the differences between the MT4 vs. MT5 trading platform.

In the next section, we will look a bit closer in some other differences between the MT4 and the MT5 trading platform.

What is the Difference Between MT4 and MT5 Forex Trading Platforms?

Figure 4: MT5 Symbol configuration

The Metatrader 5 platform, right out of the bat has some distinctive characteristics that are otherwise absent with the MT4 platform. The MT5 platform was designed to be used for other markets besides forex.

These include, futures, stocks and commodities. The reason for this was that the MT5 trading platform had the ability to plug in to an exchange. On the other hand, the forex markets which are traded over the counter are decentralized.

A number of liquidity providers plugin and allow the forex broker to pass off their trades. Thus, you will often see that the spreads and prices can differ from one forex broker to another.

Comparatively, when it comes to futures or stocks and commodities they are standardized and traded at an exchange. This is where the real power of the MT5 trading platform comes in. While there has been a significant change on the backend, the frontend looks pretty much the same, leading many to unknowingly compare MT5 as an upgrade from the MT4 version.

Another factor that is unique to the Metatrader 5 platform is that it is also compliant with the U.S. rules of no hedging. This means that clients of forex brokers based in the United States are not allowed to hedge. This is also known as the First in first out or commonly known as FIFO. To explain FIFO, let’s say a trader has a long position of 1 lot on the EURUSD currency pair.

The trader then takes an additional long position on the same currency pair for another lot. Under the FIFO rules, the first contract must be closed in order for the next contract to be opened.

Herein comes the first main difference of the MT5 and the MT4 trading platform. The Metatrader 4 platform allows traders to log each trade individually. This means that when you open the second, long position, you will first trade with 1 lot and the second trade with 1 lot.

The MT5 platform on the other hand aggregates all the positions.

To put this in a simple way, while Metatrader 4 allows you to hedge a currency pair, the Metatrader 5 platform is not capable of doing this because of being compliant with the FIFO rules.

Traders in general look for a way to hedge and the lack of this feature can be a big obstacle when it comes to choosing a trading platform.

You can also find a lot of traders complain about being pushed to use the MT5 trading platform precisely for this fact; the lack of the ability to hedge.

Thus, to summarize some of the features of the MT5 trading platform, it was designed for the U.S. markets and for trading other markets such as futures and equities.

Furthermore,

the MT5 platform was designed to address some needs that the MT4 platform was not able to.

The two major differences have already been covered, but there are a number of others worth mentioning within any MT4 and MT5 comparison.

One of the biggest changes with the MT5 platform is the programming language that is vital to the trading platform and for traders. The Metatrader 5 platform uses the MQL5 programming language.

Whereas, the MT4 trading platform uses the MQL4 programming language.

One of the unique aspects of MQL5 is that it allows for a complete blackbox testing which makes it easier to program and thus offers a logically better framework for developers to write custom indicators, scripts and expert advisors.

One of the biggest drawbacks with MT4 and the MT5 programming languages is that there is no backward compatibility. This means that indicators, scripts and expert advisors built on the MQL5 programming language is not compatible with the MQL4 programming language.

Thus, the indicators, EA’s and scripts that are designed for MQL5 cannot be used on the MT4 trading platform. This has been one of the biggest complaints among traders, the lack of backward compatibility.

Despite the shortcomings, the MT5 trading platform is seen to be more robust overall compared to the MT4 platform. Below is a snapshot of the differences and comparison between the MT4 and the MT5 trading platforms. 

Comparison of MT4 vs. MT5 trading platforms

Below is a list of comparison of all the features between the MT4 and the MT5 trading platforms.

Which Trading Platform is Better for You? 

Having covered the differences between the MT4 and the MT5 trading platform, the obvious question that comes to mind is which of these two is a better trading platform.

As initially mentioned, firstly traders should realize that the MT4 and the MT5 trading platforms are distinctively clear. For example, if you were trading futures, chances are that you will most likely have to use an MT5 trading platform.

Conversely, for trading spot forex and commodities, then you are most likely presented with using the MT4 trading platform. There is no doubt that the MT5 trading platform is quite advanced and this is also evident due to the lack of compatibility features for the MT4 and the MT5 trading platforms.

Despite the release of the MT5 trading platform, the MT4 version still remains popular. This is partly due to the fact that a majority of retail traders prefer to trade CFD’s and spot forex compared to the group that trades exchange traded securities such as futures and stocks.

Due to the fact that the MT4 platform has been around for a much longer time, there is no doubt why the MT4 platform is more popular. It could take a while until the MT5 trading platform can catch up to the popularity of its older sibling.

A Trader’s Perspective

Addressing the same question as to whether the MT4 is better than MT5 or vice versa, let’s try to answer this from a trader’s perspective.

The first place to start when addressing this question is what type of securities you will trade. If your preference is for the usual spot forex and CFD’s then the MT4 platform wins hands down.

However, if you are looking into exploring other markets, which are traded at an exchange, then the MT5 platform is the best option for you. Of course, will see brokers that also offer the MT5 trading platform for trading spot forex and CFD’s as well.

The question for you as a trader is whether it is worth the time and money to re-code all your existing custom indicators, scripts and expert advisors in MQL5 language. If there is a possibility to use the MT4 platform, then it does not make any sense to invest time and money to switch to the MT5 trading platform.

While the MT4 trading platform does have some drawbacks, the fact remains that the eco system for the MT4 trading platform is much bigger compared to the MT5 trading platform.

 

 

 

About Me

I'm Mike Semlitsch the inventor of the PerfectTrendSystem. I'm in the trading business since 2007. Helping other traders to succeed in trading is my passion. The PerfectTrendSystem is the result of more than 30,000 hours of hard work. Connect With Me:  

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