A currency trading platform is a software program used by people who trade foreign exchange currency, also known as forex. The software allows traders to study forex trends, analyze potential trades that are under consideration and execute trades. Different currency trading platforms have different features and varying costs. Investors who are interested in forex trading can usually try a demonstration version of a currency trading platform during a trial period. Many investors will try several different currency trading platforms to find the one that best meets their needs.
Each financial institution that acts as an authorized forex dealer will typically have its own proprietary currency trading platform. Each platform will have different features, and each dealer will have its own conventions. For example, each dealer has a stated time of day by which the current trading day ends and the next trading day begins. This is referred to as the daily cut-off. Dealers set this time themselves because forex futures trade 24 hours a day, so there is no ‘closing bell’ as there is in the stock market. The daily cut-off is used for individual investors as well as the interbank market, which is forex trading that takes place between large financial institutions and banks.
When executing a forex trade on a currency trading platform, the two currencies that are being traded are referred to as a currency pair. The first one named is called the base currency, and the second one named is called the quote currency. Each quote consists of the number of units of the quote currency that are being offered in exchange for one unit of the base currency. Sometimes the exchange rate between the U.S. dollar and the British pound sterling is referred to as ‘cable’ because the exchange rate was once transmitted by trans-Altantic cable. The U.S. dollar and British pound sterling is considered to be a benchmark currency pair.
Currency trading platforms have evolved since their introduction in the mid-1990s. They have become more sophisticated as more individual investors and more brokers become involved in forex trading. Many of these platforms take the complexity out of the various types of trades, making them easier to understand, and easier to compare with other investments. As forex trading continues to gain in popularity among individual investors, currency trading platforms will likely continue to become more feature-rich and easier to use, propelling forex trading further into the mainstream investment arena.