While using algorithmic trading, traders trust their money with an automated trading software. Since that is the case, you must invest in the right system to ensure effective and accurate execution of trade orders.
On the other hand, the wrong software or a system without the features you need may lead to massive losses. It is mostly in this rapid world of algorithmic trading. So, you must look for the right trading platform for quantitative trading. Here are some points to help you choose the right trading software.
High Availability and Performance
Look for an Algo trading software that is an exceptionally reliable and robust system. It should be built on memory efficient, multi-threaded, highly concurrent architecture. It is okay if the software is optimized in terms of high availability and overall performance, so all your trading tasks will be uninterrupted and nonstop.
Check the Availability of Market and Company Data
Most of the trading algorithms are designed to work on real-time market data and price quotes. Some programs are customized to account for business fundamentals data like earnings and P/E ratios.
The auto algorithmic trading software you choose should have a real-time market data feed along with a company data feed. Data should be available as a build-in into the software or should have a facility to integrate from alternative sources easily.
A Backtest is a historical imitation of an algorithmic trading strategy. With it, you can find out how it would have executed on the data in the past. Backtest results will usually show you the strategy’s performance in the form of profits and losses. It also tells you about some famous performance statistics such as Information ratio or Sharpe Ratio quantifying the strategy’s return on risk.
Hence a software having a backtesting feature can be a great addition. Furthermore, you can divide the backtests into ‘Event-Driven Backtesting’ and ‘Research Backtesters.’
The automated trading software may differ in ease of use. Some software may need actual programming expertise, while others do not. However, most platforms offer you a demo version that can help you decide what fits your needs and comfort level.
The difficulty of platforms can be dissimilar for different assets traded. So, you should check the different tools & features available to analyze the particular asset class.
Connectivity to Different Markets
If you are a trader looking to work across multiple markets, then you should note that each exchange may offer you its data feed in a different format. These formats can be like, Multicast, TCP/IP, or FIX.
Your software should be in a position to accept feeds of diverse formats. The algorithmic trading software you use should be able to proceed with these aggregated feeds as per your need.
Number of Strategies Permitted
At times there might be a limitation on the number of long or short strategies you can load on a particular account. Here, you may need different accounts for more strategies. Similarly, you must also check if you have sufficient memory on your computer for various accounts if needed.
After all, the software can be memory-intensive. Some software also offers you trading strategies as add-ons, which you can subscribe to by paying an episodic or one-time fee.
It is another crucial factor for algorithm and quantitative trading. Latency is the time-delay that is there in the movement of data points from one application to another. Keep in mind the following sequence of events:
- It will take 0.2 seconds for a cost quote to come from the exchange to your system data center (DC).
- Then, it will take 0.3 seconds from your data center to reach your trading screen.
- Next, it takes 0.1 seconds for your trading software to proceed with this received quote.
- 0.3 seconds for it to examine and place a trade.
- Then 0.2 seconds it takes for your trade order to reach the broker
- Finally, it takes 0.3 seconds for the broker to route the order to the exchange.
In this dynamic trading world, the original cost can change multiple times within this 1.4 second period. Any delay can make or break your algorithmic trading efforts.
To sum up, when you venture into quantitative trading and start looking for automated trading software, make sure that you keep all the points mentioned above in mind. After all, you must fully understand the core functionality of the trading software before inception.