Trading platforms

For those looking to develop their trading strategies, Kevin Rose investigates whether trading software really does make a difference to your investment return


Technology has been the making of the spreadbetting sector. Recent leaps have transformed it from a complicated niche market to a sector where anyone with a smartphone can trade in minutes. Customers can even buy third-party software to plug into their platform of choice to help them make the right trades.

For spreadbetting firm City Index, the impact of PC and mobile technology is clear: less than 1 per cent of its trading volumes is now placed by phone dealing.

City Index typically sees three high-volume times of the trading day; between 7 and 9am during the open to trading of European stock markets, 1 to 3pm when US stock markets open and the latest US economic data is released, and European market close, where clients attempt to minimise their overnight risk.

ICM Capital is now offering contracts for difference (CFDs) as well as foreign exchange (forex) trading. Providers adding other classes, such as commodities, enable individuals to have the opportunity to trade a wide portfolio of assets on one platform.

There has been a steady rise in the popularity of ‘robots’ or ‘expert advisers’

Glen Ward, ICM Capital’s business development manager, recently added oil contracts to its Meta Trader 4 (MT4) platform due to customer demand: “Traditionally the oil markets were only accessible to oil companies, banks and large trade houses,” he says.

“By putting these products on MT4, the man in the street had access to the markets himself. Once we had done it with oil, other products were soon to follow - gold and silver proving to be extremely popular too.”

The Meta Trader platform is the basis for many forex brokers’ technology solutions. The developers claim it can serve more than 10,000 traders working with multiple accounts simultaneously.

Because of the ability for other developers to integrate with the Meta Trader platform, there has been a steady rise in popularity of so-called “robots” or “expert advisers”. These allow the trader to add a piece of software to their platform which, so the sales pitch goes, will help them make the best trades.

According to Mr Ward, the main use of a robot is to apply technical analysis to a trading strategy. “For example, if the nine-day moving average crosses above the 14-day, then I want to buy,” he says. “By using an expert adviser, this will be executed automatically, whereas you could miss this trade if applying it manually. The main benefit is that you do not have to sit in front of your PC all day long waiting for the signals.”

There are hundreds of thousands of such packages on the market, and the trader is effectively dependent upon the quality and effectiveness of the product they select.

David Jones, chief market strategist at IG Index, argues there is a question mark over these sort of products and does not allow robots on IG’s platform. “It does make it all sound very attractive – buy some software for $99 and have it trading away making a fortune for you while you are at work, but I don’t think that translates into the reality,” he says.

“I think one of the risks is that it lures relatively new traders into thinking that there is a magic system for trading, when all it may end up doing is to allow over-trading and racking up spread or commissions.”

Robots and expert advisers can be extremely useful trading tools, but they can’t remove risk from the picture. As Mr Ward from ICM Capital says: “If there was a guaranteed profit-making program, then everyone would have bought it and be millionaires now. Are we?”

When in ‘roam’

When the smartphone was born, it caused a seismic shift in the way that people trade. In 2009, before City Index unveiled City Trading the first live trading application for iPhone, it saw 3 per cent of total trading volumes being placed via a mobile device. In fact, only one in 20 clients used their mobiles to trade.

At the same time, 90 per cent of total trading volumes were placed via the firm’s online trading platform. Today, nearly 20 per cent of City Index’s total trading volumes is placed via its mobile trading applications, while one in three of its clients now use their mobiles to trade.

Similarly, while IG Index offered mobile trading on the previous generation phones from Nokia, Sony Ericsson and BlackBerry for years, it only typically accounted for around 5 per cent of overall monthly trade volumes for clients the overwhelming majority went through the desktop platforms.

Smartphone apps can offer almost everything that a desktop platform can but in the palm of your hand

There are no prizes for guessing which smartphone has really made  the difference. “It’s the iPhone that has changed this,” explains David Jones, chief market strategist at IG Index. “Since we launched apps for the iPhone and latterly the iPad, mobile trading accounts for in excess of 15 per cent a month and climbing – and 80 per cent of this is on some sort of Apple device.”

While the majority of apps available are for the Apple iOS platform, there are plenty available for users of other smartphone platforms. For example, Vantage FX last month launched its BlackBerry Trader. Available in multiple languages, it provides users of the ubiquitous enterprise handset to access their MetaTrader 4 accounts and trade on the go.

The reality today is that smartphone apps can offer almost everything that a desktop platform can, in the palm of your hand. There should be no good reason why your provider’s app shouldn’t offer features, such as live streaming prices, real-time trading, a complete order book and full account management.

Beyond foreign exchange (forex), a number of providers allow contracts for difference (CFDs) trades to take place on smartphones. IG Index, for instance, allows clients direct market access on their mobiles, letting them place trades directly into the exchange’s order book, which some will use to try to get the trade executed at a better price.

Mobile apps aren’t solely the domain of forex and CFD trades either. TD Direct Investing is touting its TD Trading App as the most comprehensive equity trading app available from a major execution-only broker in the UK. The app allows customers to switch between their linked accounts – their Trading Account, Trading ISA and TD SIPP - to place trades. They will be able to track their portfolio and see an overview of their accounts, including the details of the cash and stock they hold in each international currency.

One of the downsides of smartphones is the limited screen size. Tablets, which run the same operating systems as smartphones, have been the consumer and business sales success of the past two years. The more clued-up platform providers and brokers have either launched, or are in the process of developing, tablet specific apps in order to make the most of the much larger screens, better batteries and more powerful processors.

Expect to see a plethora of new iPad trading apps as well as improved smartphone offerings over the coming months. For instance, ETX Capital says it will be heavily investing in apps this year and in particular for tablets. “We are also developing an application that will offer an overview of the aggregate client positions for macro products such as forex, indices and commodities,” says chief executive Andrew Edwards.