Imagine that you’re looking at the coolest Swiss Army knife ever. It’s got scissors, a knife, toothpick, magnifying glass, etc. Well that’s that your trading platform is: A Swiss Army knife for trading and investing.  Simply put, trading platforms are complete software packages that lets you do many things such as analyze the market, place trades, devise complex strategies, and manage your investments. With everything in one package, it saves us the frustration of learning 5, 10, or 50 different tools and trying to make them all work together!  Most online brokers have their own trading platform, but there are many other independent trading platform software you can use.

An electronic trading platform is a computer system that can be used to place orders for financial products over a network with a financial intermediary. This includes products such as shares, bonds, currencies, commodities and derivatives with a financial intermediary, such as a brokers, market makers, Investment banks or stock exchanges. Such platforms allow electronic trading to be carried out byusers from any location and are in contrast to traditional floor trading using open outcry and telephone based trading.

With everyone trading and investing online now, online Brokers have a trading platform for you to make trades through.  So, online brokers are often confused with the trading platform software you interact with.  The trading platform is what allows you to access the the market through the broker’s services.

Electronic trading platforms typically stream live market prices on which users can trade and may provide additional trading tools, such as charting packages, news feeds and account management functions. Some platforms have been specifically designed to allow individuals to gain access to financial markets that could traditionally only be accessed by specialist trading firms such as allowing margin trading on forex and derivatives such as contract for difference. They may also be designed to automatically trade specific strategies based on technical analysis or to do high-frequency trading.

Platforms have all of the coolest gadgets in the world, and whether or not you use them (or even know what they are), they’re there for your use. Platforms are usually split up by asset class: Stocks, Futures, Options, Forex, and each provides a unique set of tools and services that are specific to each group. Instead of breaking them up by asset class for this guide, we decided to go a different route: Brokerage platforms, Independent platforms, and Mobile platforms.  This way, you can see the various types of platforms that available for your investment use, and how they differ from each other.

The Basics

Four basic areas to compare when choosing trading platforms:

  1. Experience. Finding the best trading platform for you can be one of the most difficult assessment to make because of all the tools that exist. Even seasoned traders find it difficult to decide between an awesome customized platform versus a fully integrated trading platform from an online broker. For beginners, instead of trying to figure out which platform is right, get acclimated to all of the tools that exist. Read through all our product guides to get a feel for what types of tools exist, and how they work. In addition, beginners should sign up to papertrade (virtual trading with fake money) with a few different platforms to really get a feel for which one is right for you. Seasoned traders may do the same too, but usually you already know what you need and just need to find it.
  2. Trading Style & Complexity.  The second thing is your investment outlook. If you’re a long term investor, you may not need live market updates or fancy proprietary tools with exceptional execution speed.  As they say, you get what you pay for.  If there’s extra features you don’t need, you probably don’t want to pay additional fees for these complex trading platforms (which could already be included in your broker’s high commissions!). Vice versa, if you’re a trader who needs to watch the market every second of every day, consider choosing a brokerage platform with the best speed, reliability, and even a mobile trading app for your phone or iPad/tablet, so that you’re always connected with the system that you’ve setup.
  3. Risk Appetite. Risk aversion might cause you to be extremely skeptical of unproven techniques or proprietary code that you’re not allowed to view, and thus standard trading platforms (usually from your broker) that offer a lot of prepackaged tools might not be for you. If you’re extremely risk averse and want every tool in the world to confirm your gut feelings before you make a move, you might want to opt for a professional grade platform that’s highly customizable and track everything specific to your needs. The amount of risk you are willing to take and the factors that instill the most precautions for you are the things that you must consider the most.  If you’re not comfortable with the tools you’re using to make a trade, you shouldn’t trade.
  4. Asset Class. Platforms exist for each asset class (equity, options, forex, futures & fixed income), but nowadays many trading platforms have combined tools for these various multiple asset classes. Be sure to note the nuances that exist in each platform for the various asset classes, and what they are focusing on to ensure that you choose the optimal platform for you. If your main focus is trading options, Scottrade’s platform might not be as enticing as using ThinkorSwim or Trademonster (although the brokerage fees might be more enticing for Scottrade). Also, note the additional rules and regulations that accompany the trading of derivatives and some fixed incomes.

The Choices

Brokerage Platform

  • Type: All Asset Classes, Some Mobile Platforms too
  • Pros: Well integrated into the brokerage system for efficient and faster execution, usually free or low fees, a good amount of proprietary and common tools and services for analysis, Ability to save your system setup
  • Cons: Not customizable, Not as extensive tool library
  • Summary: Using brokerage platform is a lot better for the investor/trader who wants a well-rounded platform that does everything well and has everything in a certain format

Independent Platform

  • Type: Standalone platforms, Service platforms
  • Pros: Usually are more extensive proprietary tools and services, more customizable, integrates with a variety of “accepted” brokers that might otherwise have better execution speeds with less advanced platforms
  • Cons: Integration may be difficult, higher fees for use, amount of tools and services can be overwhelming
  • Summary: Independent platforms are extremely useful for traders who might want to trade multiple accounts but trade with the same platform.  Independent trading platforms often have additional 3rd party trading software, tools, apps and plugin libraries to enhance the core trading platform. Fees exist for using these platforms, but they have the possibility of being offset by ease, comfort and execution speed of brokerages that spend less time on platforms and more time on your trades. Also, service platforms are better integrated with news sources and/or data providers that increase proficiency of analysis.

Mobile Platform

  • Type: SmartPhone, Pads, Online
  • Pros: Easily accessible from anywhere with a 3G/4G/WiFi connection and an accepted mobile device, reasonable speeds, always able to manage investments on the go without having to call your broker.
  • Cons: Much slower execution speed, Platform interface is much less advanced and difficult to use, Not as well integrated with brokerages (even broker platforms) because its relatively new technology
  • Summary: For someone on the go or those who can’t bare to not watch their investments even for a second, these platforms are incredibly useful.  Also a good backup when Internet connections are lost.

Compare & Review Trading Platforms »

 

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