Conceptually, trading software is a set of rules and patterns for trading decisions. Stock trading software collects and analyses market data using technical indicators. Such software is designed to simplify trading and help traders understand when and how to sell or buy assets on the exchange.
Custom trading software development can be a difficult task, which requires resources and an understanding of what type of software you may need.
Let's take a more detailed look at the value of such software and what types of trading solutions there are.
Over the past few years, trading has become one of the most popular and accessible sources of income in the financial markets. This approach offers complete freedom of action and unlimited earnings.
Despite its many benefits, the manual trading process requires attention and experience in many aspects. Automation of trading strategies, on the contrary, increases productivity and makes the trading process easier, especially for beginners and people without a financial background.
Such trading systems allow you to manage risks by distributing them between various financial instruments.
Benefits of automated trading systems include:
Traders can buy, sell and track assets in real-time on the trading platform. These platforms can be websites, PCs or mobile.
There are two main types of trading systems:
APIs are a kind of bridge that processes requests and ensures smooth operation of the system. This technology enables communication between data, devices and programs.
Here are some options for common API types:
Index funds have rebalancing or adjustment periods. Rebalancing is the process of bringing the asset allocation after a portfolio change back to the original asset allocation determined by the investor's risk and return profile. This method aims to protect investors from unwanted risks. Because rebalancing is a complex strategy, there are several types of rebalancing:
VWAP uses historical volume data for a specific asset. With this strategy, large orders are divided into smaller ones. Short-term traders primarily use volume-weighted average prices, but professional traders can also apply this strategy to identify intraday price trends.
The time-weighted average price strategy is similar to VWAP in that it divides large orders into smaller ones. However, in this case, equal time intervals are used between the start and end times of order execution.
The strategy is aimed at executing orders at the average price between the start and end of trading. Thus, market impact is reduced to a minimum.
Arbitration is perhaps one of the most popular and accessible strategies. Its value lies in the fact that the arbitrage method allows you to profit from the difference in prices for the same asset on different markets and exchanges.
This trading strategy targets a certain percentage of the market volume over a certain period of time to control the pace of order execution.
In addition to the most common trading strategies and methods, there are also more non-usual algorithms. This type of algorithm can detect others on the side used by the market maker.
This is among the basic methods. Trend-following strategies mean that traders are buying when the price of an asset is in an uptrend (bullish) and selling when it is in a downtrend (bearish).
This method is one of the easiest to implement since it does not involve forecasting or predicting the price, but only reacting to the current trend on the market.
This type of strategy is helpful when a trader needs to analyse changes in the price and volume of assets on the stock exchange. These strategies involve trading a combination of options and underlying securities.
Trading Range or mean reversion is based on the concept that the highs and lows of an asset are temporary. In other words, the price of an asset, after reaching an all-time high (ATH) or all-time low (ATL), periodically returns to its average value.
In this case, the trading algorithm buys when the asset price is low and sells when it rises. It can also automatically trade when asset prices move in and out of a specific price range.
In trading terms, the shortfall is the difference between the price at which a trader wants to execute an order and the average price that was actually reached. This strategy aims to minimise implementation shortfall.
Whether you are a trader looking to monetize your strategy, or you have an idea or specific requirements for a trading platform, you can create automated trading software.
And the first place to start is to understand what type of software is most attractive and valuable to you.
The main thing to remember is that developing software for market trading is a rather complex process that needs to be approached with the utmost seriousness. Otherwise, your or your users’ data and money may be at risk. Therefore, it is critical to work with a professional partner who knows the specifics of trading software development.
You can also find out more about banking as a service architecture to expand your financial knowledge.
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