Broker to Trading

MetaTrader 5 (MT5) is the successor to MetaTrader 4 (MT4) and has a number of improvements built into the platform. These include more graphical objects, time frames, technical indicators and order types. This does not mean that MT4 will necessarily have less of some features though as more features may be added. Both MT4 and MT5 let the trader build, modify and use more technical indicators. Like MT4, MT5 allows the trader to use automated trading strategies called Expert Advisors (EAs), however MT5 uses the MQL5 language for traders who wish to modify or build EAs.

Some brokers let the trader trade Bitcoin CFDs on MT5, allowing the trader to use the platform features to trade Bitcoin CFDs. A Bitcoin CFD is a Contract for Difference whose value is referenced to the value of the underlying Bitcoin cryptocurrency traded on cryptocurrency exchanges. So when trading a Bitcoin CFD, the trader does not own any Bitcoin. What this means is that the trader does not need a wallet (as this is a means of storing Bitcoin), can go long (speculate on a rising market) or short (speculate on a falling market) and use leverage (however Bitcoin like other cryptocurrencies is extremely volatile and increasing leverage increases risk).

The underlying cryptocurrency Bitcoin is the value token of an online payment network, used for making peer-to-peer payments in Bitcoin. Payments are sent from wallet to wallet and processed and stored in a distributed electronic ledger called the blockchain which is secured using cryptography (hence the name cryptocurrency).

The actual processing of transactions is not performed per se by the Bitcoin network, though it does validate processed data, stores it and sets the rules governing the system. The processing is done by miners, who plug into the network and process transactions in return for a reward, consisting of mined Bitcoin (i.e. it is created or discovered by this process) and any transactions fees. This incentivises and creates a distributed payment processing system which is not centrally controlled (and indeed which has no central authority creating Bitcoin as it is made in effect by payment processing). The supply of Bitcoin is limited simply by the fact that there is a total number of Bitcoin which can be mined. When all Bitcoin has been mined, then miners will be rewarded by transactions fees.

Bitcoin can be seen as a decentralised Internet based system at work, as it uses automated processes, distributes work outside of the network, makes use of cryptography for security and uses the network for verification and storage. The network is governed by rules which can be changed. Some changes result in a hard fork of the Bitcoin blockchain, creating a new cryptocurrency. The motivation for some of these forks has been to change the rules to try and speed up payment processing (as a decentralised system can have issues with efficiency in scale up which a centralised payment system may not).