Forex Income Engine 2.0

Public testing of the new MT5 platform started on October 12th, 2009.

MetaTrader5 is the long awaited next generation of the hugely successful MetaTrader4 dealing platform. MT5 is not just an upgrade to MT4. It’s been absolutely rebuilt from scratch.

Here are the claimed features of Metatrader 5.

• Three chart-types, 21 timeframes and over 70 analytical tools.
• 5 order types and four execution modes available for trading.
• Implements almost any trading methods.
• Advanced built-in reports on all trading activities.
• Built-in indicators and graphical objects allows quicker analysis of quotes and trade decision making.
• High performance and outstanding speed MQL5 development environment with new IntellySence system and more complicated strategy tester.

As most of you’ll know, Metatrader four ( MT4 ) is the most generally used ‘off the shelf’ platform in the currency trading and CFD markets. It is expected therefore that when MT5 is out of beta, it too will be widely used.

Today MT4 is the dealing system of choice for almost all foreign exchange robots as well as custom indicators and scripts.

Unfortunately, the Metatrader4 language will not be compatible with MetaTrader 5 . In order to meet the incorporate the requested features and execution speed, a new object orientated programming language was developed. As a result, existing MT4 custom indicators and EAs ( .mq4 and .ex4 files ) will not work with MT5 platform.

You may be thinking that any new investment in MT4 custom indicators, scripts and bots is wasted. That is actually not correct. MT5 is probably going to be in beta for at least 6 more months. The current Mt5 beta doesn’t even include a strategy testing function. So it might be as long a year before any heavy MT5 robots become available.

Even when MT5 has matured into a stable trading system, the surprisingly favored MT4, is still going to be supported by brokers for many years to come. If traders demand it, brokers will support it. You should expect many brokers will be supporting both platforms and there’s nothing to stop you running both MT4 and MT5 clients at the same time.

It is only a matter of time before a MT4/MT5 compatibility is developed. Most likely this may be in the form of a compatibility module or MT4 virtualization plugin for MT5. Instead of recoding every MT4 indicator and EA for MT5, it is almost certain that some clever programmers will code a virtual MT4 plugin platform for MT5. Very like the way you can now run Windows in a virtual machine on a Linux box or Linux within OS X.

Once a tool is developed to convert existing Expert counsellors and indictors from MT4 to MT5, then the uptake of the MT5 platform will occur more quickly.

Here is the official statement about MQ4 and MQ5 compatibility:

‘From the beginning of Metatrader five development we presumed that we’re going to be able to save the compatibility. And we said about it many times. But the many traders/developers requests made us change our mind. We’ve understood that just can’t make a new language compatible. At the same time we have made MQL5 more powerful and in this way we gave you, traders and developers, more abilities - that was our main goal in developing of MQL5 IDE. From one side, new language with the new abilities, and from the other side - MQL4 and MQL5 compatibility. Unfortunately, these two aims can’t be found at the same time.’ Interview with Metrader5 lead developer

The complaint frequently heard about MT4 is that this was built by programmers not traders. Certainly it was built with a focus on the front end and’client side’ instead of the brokers back office side. The platform itself evolved from a price and information delivery terminal that became very popular with traders. Users then started to ask whether trading functions could be built into it. Metaquotes used the same architecture and added trading functionality to it, leading some to call MT4 a Frankenstein creation.

No Hedging and acceptance of the New NFA Rules.

Some may feel that the NFA controlled currency exchange brokers are driving the MT5 development. Others say the MT5 position/order management is to the benefit of the brokers not the traders. Afterall, it is the brokers who pay for the Metatrader platform.

To meet Forex industry standards, MT5 changes the entire core of position handling. From this time on MT5 traders will be ready to keep only one position of any single trading instrument/currency pair. This reflection of orders aligns with the new FIFO ( first-in, first-out ) rule implemented by NFA as a business standard in summer 2009.

Hedging at this point is eliminated and so is the separate management of 2 different in time orders on the same currency pair. Purchasing and Selling the same pair ( hedging method ) will end in 0 positions being open.

For example : 9:00am Long GBP/USD 1 lot 1.3000, and later added 12:00pm Long GBP/USD two lots 1.3500, will be seen on Metatrader five account as one position’Long GBP/USD 3 lots’.

The first order to shut is always the order that was initiated first, so it will always be the 8:00am Long position to close in our example above.

Is the FIFO and No Hedging a Show Stopper?

No individual orders listed, NO Hedging, and INCOMPATIBLE with anything MT4. Is this a step BACKWARDS?

If you like the way MT4 works for you now and or have made the move to a non NFA regulated broker then MT5 doesn’t look a really tasty prospect.

However there will be other instruments and charts accessible beyond currency exchange. Like futures ( cfd-versions ) together with lots of option classes. Lots of possibilities for real-world hedging, ( i.e. Where the two instruments aren’t matching ) and for trading styles that are currently most unlikely. Like buying options on signals, instead of just going long or short the currency pair. Or constructing currency exchange grids with options.

Some traders have said that FIFO ( first order in first order out ) stops counter trend trading or engaging in a fast scalp in the other way when you already have an open position. It does not affect your net position but it affects the way you must manage your trades.

Correlation strategies are also a noticeable alternative way to hedge. Hedging a position can be done by taking position in more than one interrelated currency pair. And in MT5 this should be expanded to forex options and their underlying currencies or forex futures and their own options. In fact if you’re trading on more than one currency pair then currency correlations and their impact leverage and risk is something that must be well understood.

For more on currency correlations and the way to use it on your trading methodology see Correlation Trading system

For more about the Correlation Code system at Forex Correlation Code Platform