What are the Key Features of Algorithm Trading Software?

1. What are the Key Features of Algorithm Trading Software? Algorithm Trading Software is a computer trading program that follows a definite set of instructions and automatically submits trades to an exchange without any human intervention. While using algorithm trading, traders trust their hard earned money to the trading software they use. The right piece of computer software is very essential to ensure effective and accurate execution of the trade orders, as a faulty software can lead to huge losses. Though the risk involved in automatic trading is quite high, but despite of whether you decide to buy or build, it is very essential to know about the basic features needed. The key features include: Available Market and Company Data All algorithm trading software’s are so designed that they act on real-time market data and the price quotes. Any algorithm trading software should consist of a real-time market data feed and a company data feed as well. Moreover, it should have a provision to easily integrate from the alternate sources. Connectivity to Various Markets Traders who are looking to work across various markets should make sure that their software should be able to accept feeds of different formats. Thus, thealgorithm trading software should be able to process the aggregated feeds as needed. Latency It is one of the most important factors for algorithm trading. But what is latency? It is the time-delay introduced in the movement of data points from one application to the other. For instance, it takes almost 0.2 seconds for a price quote to come from the exchange >software vendor’s data center, 0.3 seconds from the data center > your trading screen, 0.1 seconds for your trading software to process the received quote, 0.3 seconds for it to analyze and place a trade, 0.2 seconds for your trade to reach your broker, 0.3 seconds for your broker to route your order to the exchange. Total time elapsed = 0.2+0.3+0.1+0.3+0.2+0.3 =1.4 Seconds

2. Now, within 1.4 seconds the original price quote would have changed a multiple times and this delay can make or break your algorithm trading venture. One needs to keep this latency to the lowest possible so that you get the most up-to-date information without a time gap. Integration with Trading Interface The algorithm trading software places trades automatically based on the availability of a desired criterion. The software should have necessary connectivity to the network of the broker in order to place the trade. Algorithm trading software is pretty costly to purchase and also it is difficult to build on your own. So before venturing into algorithm trading with real money, you must completely understand the core functionality of the trading software. But failure to do so might result in big loss.