Features To Look For When Choosing An Algo Trading System
There are many benefits of using automated trading systems for traders and investors. However, there are a variety of automated trading platforms available, each having distinct differences from the next. When you are looking for an automated trading platform, it is essential that you take the time to do your research, and identify important features you are interested in before making a selection.
Features To Look For When Choosing An Algo Trading System
Different automated trading platforms offer different features and services, each having their own advantages and disadvantages, and might fit with certain algo trading strategies better than others. To ensure that you get the most out of an automated trading platform, in today’s post, we are going to discuss some important features to look out while conducting your search.
Backtesting
Backtesting is an essential component of the development of an effective trading system. Backtesting uses historical market data to reconstruct trades to see how it would’ve performed on the data in the past. As a result, backtesting offers statistics that help traders determine the effectiveness of their tested strategy. Results from backtesting usually show the strategy’s performance in terms of profits and losses and other popular performance statistics help to quantify the strategy’s return on risk.
Backtesting is a very popular strategy among traders due to its simple and straightforward approach. Traders who apply this technique believe that past performance is indicative of future results.
Market Data
Depending on the automated trading system that you choose, you may only have access to trading and backtesting for certain securities. For example, there are certain platforms out there that only allow access to specific markets. Before choosing an algo trading platform, it is important to ensure that it offers access to the data and markets in which you are interested in trading. The frequency of data that you would need should also be taken into account. Some strategies would require daily ‘End of Day’ data while some other strategies might require trading data within the day.
Web-Delivered Platform
When choosing an automated trading platform, many traders struggle with the decision of whether to choose a web-based or downloadable desktop program. While each has its advantages and disadvantages, many traders prefer web-delivered platforms for online trading and backtesting as it is generally easier and more convenient to access your trading platform from anywhere with a connection to the internet.
Latency
One of the most important factors of algo trading, latency is the time-delay introduced in the movement of data points from one application to the other. In today’s fast-paced trading world, a delay between the movement of data points from one application to the other could make or break your algorithmic trading strategy. When searching for an automated trading platform, it is important to keep latency to the lowest possible level to ensure that you receive the most up-to-date and accurate information without a time delay.
Ease of Use
Various automated trading platforms will vary in complexity. Some algo trading platforms require actual programming experience, while others may offer an easier-to-use experience. Most platforms, especially web-based, provide a trial version which can help you decide what fits your comfort level. The complexity of automated trading platforms can be different for varying assets that are traded, and it is important to check the different tools and features available to evaluate the specific asset class.
Number of Strategies Allowed
Some automated trading programs may have limitations or restrictions on the number of long or short strategies loaded on a particular account and you may be required to add extra accounts for the implementation of additional strategies. Be sure to check to see if you have enough memory on your computer for multiple accounts if needed, as it can be memory intensive. Some algo trading platforms also offer their own trading strategies as add-ons which can be accessed by paying a subscription fee.
Analysis and Reporting and Trade Management Tools
Algo trading software should offer tools designed to simplify the selection, construction, operation, and maintenance of your trading strategies and portfolios. With the right analysis, reporting, and trade management tools, you’ll be better enabled to reliably pull information from market data to better analyze which asset classes are showing strengths and other investment opportunities to attain profits while potentially mitigating risk and losses.
Protection Against Market Crashes
Market volatility can be brutal for traders, taking them on quite the rollercoaster ride. When market volatility exists, traders are likely to face a sense of negative pressure in addition to all the negativity that is spreading throughout media channels and sources. Some automated trading programs include certain algorithms that monitors the overall health of markets and advises investment strategies to move to safety during a volatile market. This will help in avoiding crippling losses from market dips or long-duration bear markets.
Customization of Strategies and Portfolios
Many traders prefer to create custom strategies and portfolios to enhance their flexibility and potentially yield more-favorable results. Some algo trading platforms allow traders to build custom trading strategies and portfolios to their content or use any of the platform’s pre-built options.
Be sure to consider the above features when searching for an algorithmic trading platform. By choosing a platform with these features and add-ons, you’ll be in a better position to have more success in your trading ventures and bring in higher profit returns.
Start Algo Trading With AlphaDroid
If you’re looking for an algo trading platform with all of the features above, AlphaDroid is for you. AlphaDroid is a web-delivered automated trading platform that delivers returns higher than the S&P 500 with meaningfully lower market volatility risk without the burdensome time, discipline, and training required of market analysts and day traders. Using sector momentum measurements, our elite algorithmic trading software can help identify which portions of the market are likely to outperform near-term, maximizing profit returns and minimizing risk.
To learn more about AlphaDroid and how it can enhance your algo trading, contact our team today!
