Algorithmic trading software is blessings to the traders who had to sit in front of the monitor, assessing charts, graphs, backtest and then decide what to trade and how. Algorithm-based trading has lessened the time-consuming work of traders and helps them to boost their chances of success.
What is algorithmic trading?
The method of executing orders using automated and pre-programmed trading instructions to account for variables such as price, time, and volume is known as algorithmic trading. Computer programs and chart analysis are used in algorithmic trading to enter and exit trades based on predefined parameters such as price movements or volatility levels. If the current market conditions meet any predefined criterion, the trading algorithm can perform the buy and sell order on behalf of the trader. This ultimately saves the time of a trader scanning the markets and with algorithmic trading, trades can be executed instantaneously.
Who Uses Algorithmic Trading Software?
Algorithmic trading is mostly done by large trading firms, investment banks, and property trading firms. Due to their huge scale, such companies typically develop their own unique trading software, which includes big trading platforms with dedicated data centers and support staff. Experienced proprietary traders employ algorithmic trading on an individual basis. Propriety traders who are not tech-savvy prefer to buy the algorithmic trading software that meets their needs rather than developing one according to their choices.
Features of Algorithmic Trading Software
There are many features of algorithmic trading software that have been developed according to the needs of traders over the course of time. In this article, we’ll mention the top 3 features of Algorithmic Trading Software.
Access to a Variety of Markets
Traders who are interested in trading multiple markets must know that in each exchange the data may be shared in different formats as such TCP/IP, Multicast, or FIX. You should be able to receive feeds in a variety of formats using your software. Another alternative is to use third-party data providers such as Bloomberg and Reuters, who collect market data from several exchanges and present it to end clients in a standard manner. These feeds should be able to be processed by algorithmic trading tools as needed.
Functions to Write Custom Programs
The most frequent programming languages used to create trading software are Matlab, Python, C++, JAVA, and Perl. The majority of trading software provided by third-party suppliers allows you to create your own bespoke programs. This allows a trader to test out whatever trading concept they choose. Obviously, software that allows you to code in your favorite programming language is desirable.
Trading Interface Integration
Algorithmic trading software executes transactions depending on the appearance of certain conditions. The software should be able to connect to the broker(s) network in order to place trades or directly to the exchange in order to issue trade orders.
Why use algorithmic trading?
With an algorithm, there is less chance of making any human error. Trade without allowing your emotions to get in the way of making money or reducing your losses. Your maintenance would come down to a significant level, you just have to set your schedule and they will do the trade on their own. Besides using algorithmic trading you have the chance to increase your opportunity. Choose or build an algorithm that suits your approach and maximizes your exposure to underlying market possibilities. Using algorithmic trading can also work as a supplement to your existing strategy. It can be used to fine-tune your risk management strategy by implementing stops and limits on your behalf.