Learn more about smart investing with automated trading systems and explore how to choose the most appropriate algorithmic and high-frequency trading software for you.
22 January, Capital.com – For the majority of their lives, people work hard and put a lot of blood, sweat, and tears into earning money. It’s no wonder that they become very careful in choosing how to use it further.
Today, thinking of becoming a trader, you are faced with algorithmic and high-frequency trading software. And it’s always a challenge to pick up an appropriate and reliable one.
The success of your trading activity very much depends on the right piece of software that will ensure the accurate and effective execution of your trading orders. Vice versa, the faulty software could plunge you into significant losses.
Now we’ll try to specify the key characteristics you should bear in mind while looking for the right automated trading system.
What is algorithmic trading and who needs it?
Simply said, algorithmic trading presupposes that a special computer programme, following a predefined set of instructions, will place a trade order for you.
Additionally, it will make it at the highest possible frequency and at a speed that could never be achieved by a human being.
Algorithmic trading is popular among investment banks, hedge funds, and trading firms. Very often these firms have enough resources to deliver their own proprietary trading software. Speaking of individual traders, investors, and quants, they also resort to algorithmic trading systems, either buying a readymade variant or building a trading software of their own.
To buy or to build, that is the question
When trying to find the right algorithmic and high-frequency trading software, you always have a choice, to buy or to build your own one.
Both variants have their own pros and cons. For example, the ready-made software provides quick and easy access, whereas building your own system is more flexible and can be adjusted according to your needs.
Automated trading systems are rather expensive to buy and may contain glitches that may cost you too much and bring substantial losses. However, building your own software will take time, deep knowledge and may still contain some weak points that could affect your trading success.
Smart Investing With Automated Trading Systems
Either way, no matter whether you decide to build or to buy, the following features can help you make the right choice:
Market and company data availability
Any algorithmic software should contain real-time market and company data-feed. This is a must for any software and should be either built-in into the system or easily integrated from alternative resources.
Various markets connectivity
Every stock exchange provides data in a different format, including Multicast, FIX, and TCP/IP. Your algorithmic trading software should support feeds of various formats, otherwise, it should work with huge data vendors like Reuters or Bloomberg, to provide data in a uniform format.
Latency
One of the most important features of your algo-trading software is the speed at which it functions. With all software, there is a delay in time for the data to move from one point to another. In general, it may take up to 1.4 seconds to pass all the particular sequence of events and execute the order. In trading, even a split-second matters. Therefore, the latency period should be reduced to microseconds and kept as short as possible to ensure you get the most up-to-date information.
Configuration and customisation opportunities
Although most algorithmic trading solutions offer standard functionality, you should ensure that it provides lots of customisation opportunities and configuration parameters.
Upgrading the functionality
Preferably, you should choose the software that presupposes the possibility to write your own programmes within the initial platform. It should also have a connection to the broker’s network in order to place trades, or directly to the exchange to send the orders.
Regarding all the smart investing with automated trading systems, you should still understand that buying or purchasing algorithmic software is a difficult challenge. Take your time to carefully examine the documentation and the underlying logic of the software you’re planning to deal with.
Avoid solutions that are complete black boxes and use the trial version to the fullest to get a feel for the software. When you’ve done all that, you’re ready to make your final choice.
About author
This article "Smart investing with automated trading systems" was provided by Capital.com.
Capital.com is a fin-tech startup providing an AI-powered trading platform, designed to take trading to the next level. Available on both desktop and smartphone, the trading platform lets users trade CFDs on the world’s top markets including Forex, cryptocurrencies, commodities, indices and more.
The company received a $25 million investment from VP Capital and Larnabel Ventures. Capital.com is licensed by the CySEC.