Although it is very common for many novice traders, investors or users, and not so novices, to think that MetaTrader 5 is a new version of MetaTrader 4, the reality is that it is not. Metatrader 5 was designed to trade new markets, additional to those available in Metatrader 4, such as Indices, Commodities, Futures and Options.
Seeing this confusion I have decided to create this article where we are going to talk about both platforms making a comparison on them. We begin.
- 1 1. Differences between MetaTrader 4 and MetaTrader 5.
- 2 2. Comparison table of MetaTrader 4 Vs MetaTrader 5.
- 3 3. Conclusion.
1. Differences between MetaTrader 4 and MetaTrader 5.
Although there are many differences between the two platforms, we are going to go to the most important ones on a practical level to help you better understand what they are and at the same time you can develop your own criteria for evaluating these platforms, which allows you to know the one that best suits your trading.
1.1. Available markets.
The main difference. Metatrader 4 was created to operate in a decentralized and poorly regulated market such as the currency market or Forex and in general, CFDs. On the other hand, Metatrader 5, in addition to trading Forex and CFDs, was conceived to operate centralized markets such as stocks, bonds, Futures, commodities, indices and Options.
1.2. Depth of Market (DOM).
Depth of Market (DOM) is a real-time electronic book or record of all pending buy and sell orders to be executed (queued) on a market or trading platform. It can be useful as a trader if you want to see where the largest volume of the asset you are going to trade is concentrated. In my case, I don’t use it.
This tool is available in Metatrader 5 but not in Metatrader 4.
1.3. The No Coverage rule.
I am going to explain to you what happened before with Metatrader 5 and one of the reasons why it was not well received at the beginning. This has now changed as I will explain below.
In Metatrader 4 you work with a hedging system where each operation is registered individually. This means that the trader can close any of his open positions, regardless of which order or position was opened first. In addition, we can have different positions open in the same asset , although they point in opposite directions. You can open a buy order on the USDJPY pair, for example, and then open a sell order on the same pair without them canceling each other.
On the other hand, Metatrader 5 complied with the “No Hedging” rule of the NFA (National Futures Association), this rule also known as FIFO (First in, First out. First in, first out) .
I explain it better. When we trade with a “No Hedging” system, there can only be one open position in the same symbol or financial instrument, that is:
- If we have an open position on an instrument and we perform another trade in the same direction, the size of the new position is added to the existing position.
- If we open a position on a financial asset and then perform another trade in the opposite direction, the size of this new position is subtracted from the existing position. If it is equal to the existing position, then the position is closed. On the contrary, if the volume of the opposite position is greater than the volume of the existing position, a position is opened in the opposite direction to the existing one.
The FIFO rule is a requirement of the United States regulation for Forex traders in that country, so the Metatrader 5 platform is adapted to US traders.
When you trade discretionary (manual) with an account without hedging it can affect your operations, but if you do algorithmic trading the FIFO rule of no hedging can influence even more.
An example to understand. Imagine that we have designed two Forex strategies or systems that operate in the same currency pair. The trading strategy of each robots is different. One of them opens a buy operation and about 5 minutes later the other system opens a sell operation.
Do you know what will happen? Well, the orders will cancel each other because there is no coverage.
With the passing of time, to expand the options of the Forex market, Metatrader 5 made some changes and now a second registration system with Hedge is available to traders. When you open one, you can opt for a compensation system (no coverage) or a coverage system.
1.4. How orders are executed (Execution Policy).
The order fulfillment policy in Metatrader 4 is Fill or Kill (all or nothing). This means that when you place an order, it is executed with the specified size . If, on the contrary, the market does not have the necessary volume (liquidity) to execute the order in its entirety, it is canceled.
In Metatrader 5 we have a broader execution policy, which include the following options:
- Fill or Kill.
- Immediate or Cancel (Inmediata o cancelar).
When we execute an order with these conditions, we accept that the order is executed with the maximum volume available in the market. If the order cannot be filled completely, the remainder of the uncovered volume will be canceled.
- Return (Devolver).
In this case, unlike the previous one, the uncovered volume is not canceled, but remains active to be completed.
1.5. Types of pending orders.
In Metatrader 4 we have 4 types of pending orders: Buy Limit, Sell Limit, Buy Stop and Sell Stop.
In Metatrader 5, in addition to the 4 types of orders in MT4, there are two additional types of orders: Buy Stop Limit (buy stop + buy limit) and Sell Stop Limit (sell stop + sell limit).
1.6. Strategy programming languages.
Metatrader 4 uses the MQL4 (MetaQuotes Language 4) programming language to create robots, indicators, scripts, and function libraries for that platform. Whereas Metatrader 5 uses the programming language MQL5 (MetaQuotes Language 5) .
It is important to note that MQL4 and MQL5 are not compatible, therefore programs written in MQL4 for Metatrader 4 cannot be run in Metatrader 5.
1.7. Strategy tester.
In addition, the backtests that MT5 throws give more complete information about your trading strategies than in the case of MT4 (very good point in favor).
1.8. Compatible operating systems.
Regarding the supported operating systems, these platforms do not present any difference. Metatrader 4 and Metatrader 5 can be installed in:
- PC: Windows, Mac OS and Linux.
- Mobile and tablets: Android and iPhone / iPad.
1.9. Other aspects.
In this category I am going to mention some aspects that, although they have their differences, from my perspective they are not really that important.
Let’s start with the graphic design of the platforms, from this perspective, both MT4 and MT5 are very similar and the small differences are practically imperceptible.
Regarding technical indicators, in Metatrader 4 we have 30 indicators available while in Metatrader 5 we have 38 indicators available.
Metatrader 4 puts at our disposal 31 graphical analysis tools to draw trend lines or support and resistance levels, while in Metatrader 5 we have 44 different graphical tools.
The time frames available on both platforms are different, in Metatrader 4 there are 9 time frames available and in Metatrader 5 there are 21 different time frames.
Unlike Metatrader 4, in Metatrader 5 we have an economic calendar built into the platform.
Another highlight is the technical support offered by Metatrader 5 compared to Metatrader 4, which does not offer this service. This lack of technical support in MT4, is compensated by the great community that exists around this platform to solve all your doubts. In both platforms we can communicate by email, the only difference is that in MT5 we can attach files and in MT4 we cannot.
2. Comparison table of MetaTrader 4 Vs MetaTrader 5.
Next, I show you a comparative table with a summary of everything that I have explained to you in the article:
|characteristics||MetaTrader 4||MetaTrader 5|
|Availability in brokers||Very high||Baja|
Available markets Forex, CFDs Forex, CFDs, Futures, Stocks, Options Hedging Yes Yes Order Execution Policy Fill or Kill Fill or KillImmediate or CancelReturn
Partial execution of orders No Yes Types of pending orders 4 6 Market depth No Yes
Technical Indicators 30 38 Graphical analysis tools 31 44 Timeframes 9 21
Economic Calendar No Yes Programming Language MQL4 MQL5 Strategy Tester Single Thread Multi-currency Real Ticks
Technical support No Yes
The first thing I think you should keep in mind is that Metatrader 4 is geared towards the decentralized Forex and CFD markets. For its part, the Metatrader 5 platform, in addition to decentralized markets, also covers centralized markets such as: stocks, futures, etc.
Another very important difference that we should not forget, especially if we perform algorithmic trading, is that MT4 was developed in the MQL4 language and MT5 was developed in MQL5, these two programming languages being incompatible with each other.
Metatrader 5’s “no hedging” rule makes it the ideal platform for traders based in the United States.
It is not about deciding which platform is better than the other because in reality each of them is aimed at different groups of traders. Although the number of users or investors who use MT4 is much higher than the number of users of MT5, this does not mean that MT4 is better than MT5. This is easy to understand when you consider that most of the large brokers offer their services through MT4 instead of MT5.
Lastly, if you are just starting out in trading, I would recommend starting with MetaTrader 4, which is the easiest and most well-known platform among most brokers. Once you get on well, try Metatrader 5 and then you can choose which one best suits your goals and trading style.
Any questions, I will read you in comments.