Are you interested in a financial trading system for yourself or your investment business? There are many starting points. There are several important considerations to ensure it gets done right and you arrive at a strong system.
The sheer number of choices is the first challenge when buying or building a financial trading system. Software varies greatly from cheap applications under $100 to multi-million-dollar enterprise systems used by Tier 1 banks and hedge funds. Ask yourself "where do my needs fit in terms of trading volume and strategies?" This helps decide on the features you really need, what it will cost you, and where you will buy. You can also decide to build your own system if that makes sense.
So, let's say you are a small firm of 10 traders with a range of different strategies you implement every day in the markets. This size firm doesn't merit a massive financial trading system designed for a big investment bank. But the firm's traders also are not small fry -- they trade millions in shares and commodity futures on a daily basis. What they need is something that is highly configurable, modular, easy to understand, easy to change, and does the trick.
The main parts of a financial trading system are the trading strategy builder, watch lists, execution methods, price-volume data module, position tracker, P&L reporting and risk analytics. Depending on your needs, two more components to consider are accounting and an OMS. The boundary between your trading, accounting and order management systems is up to you. You can rely on your broker for much of this.
Microsoft Excel is one of the most-used applications for this purpose. Programming trading strategies directly into Excel with VBA code or formulas is achievable with a limited amount of training. A typical trader can learn to do this fairly easily. User controls such as buttons, dropdowns, data entry fields, charts, etc. can be added in a way that mimics the visuals and behavior of more expensive software platforms. You can automatically import market data (prices, volume, volatility...) for use with technical indicators. Basic if-then rules, with statements and loops can be used to create elaborate or simple strategies. Excel's statistical calculations are a great add-on. Sophisticated analysis can be done before and after the trade. These are why Excel is so widely used by Tier 1 traders, despite the fact they have the most elaborate trading systems available to them.
For smaller firms, trading execution directly in the market with a financial trading system is the responsibility of your broker. At a bank trading desk, orders are typically routed through the bank's OMS for direct execution or sent to electronic markets and liquidity pools. Excel can be integrated via APIs to send a variety of order types.
Building a financial trading system in Excel involves strategy definition, data management, position sizing, P&L reporting, backtesting and a variety of other processes. You can build or integrate third-party components for these functions. Excel can also be used for basic back office trade processing, though there are dedicated systems available which are better at this. Real time market executions require special infrastructure to handle large volumes and low-latency speed -- Excel is less suited to this than software coded in C# or java.
These are a few of the considerations when planning a financial trading system build or buy.
The sheer number of choices is the first challenge when buying or building a financial trading system. Software varies greatly from cheap applications under $100 to multi-million-dollar enterprise systems used by Tier 1 banks and hedge funds. Ask yourself "where do my needs fit in terms of trading volume and strategies?" This helps decide on the features you really need, what it will cost you, and where you will buy. You can also decide to build your own system if that makes sense.
So, let's say you are a small firm of 10 traders with a range of different strategies you implement every day in the markets. This size firm doesn't merit a massive financial trading system designed for a big investment bank. But the firm's traders also are not small fry -- they trade millions in shares and commodity futures on a daily basis. What they need is something that is highly configurable, modular, easy to understand, easy to change, and does the trick.
The main parts of a financial trading system are the trading strategy builder, watch lists, execution methods, price-volume data module, position tracker, P&L reporting and risk analytics. Depending on your needs, two more components to consider are accounting and an OMS. The boundary between your trading, accounting and order management systems is up to you. You can rely on your broker for much of this.
Microsoft Excel is one of the most-used applications for this purpose. Programming trading strategies directly into Excel with VBA code or formulas is achievable with a limited amount of training. A typical trader can learn to do this fairly easily. User controls such as buttons, dropdowns, data entry fields, charts, etc. can be added in a way that mimics the visuals and behavior of more expensive software platforms. You can automatically import market data (prices, volume, volatility...) for use with technical indicators. Basic if-then rules, with statements and loops can be used to create elaborate or simple strategies. Excel's statistical calculations are a great add-on. Sophisticated analysis can be done before and after the trade. These are why Excel is so widely used by Tier 1 traders, despite the fact they have the most elaborate trading systems available to them.
For smaller firms, trading execution directly in the market with a financial trading system is the responsibility of your broker. At a bank trading desk, orders are typically routed through the bank's OMS for direct execution or sent to electronic markets and liquidity pools. Excel can be integrated via APIs to send a variety of order types.
Building a financial trading system in Excel involves strategy definition, data management, position sizing, P&L reporting, backtesting and a variety of other processes. You can build or integrate third-party components for these functions. Excel can also be used for basic back office trade processing, though there are dedicated systems available which are better at this. Real time market executions require special infrastructure to handle large volumes and low-latency speed -- Excel is less suited to this than software coded in C# or java.
These are a few of the considerations when planning a financial trading system build or buy.
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To learn more about building a financial trading system in Excel, visit ExcelTradingModels.com
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