Are you considering how to implement a financial trading system for yourself or your firm? There are a tremendous number of places to start Forrest Lamp Color Rush Jersey , but how do you sort it all out? Most importantly, what are the key considerations to ensure you do it right and end up with a solid system that doesn’t waste lots of time and money?
The first challenge is laying out what you want to achieve on the trading side versus position-keeping, accounting and trade processing. There are a plethora of software platforms available from those less than $200 to massive systems used by global financial institutions. At the beginning you should ask “what do we really need versus want in terms of trader tools?” The answer will help guide the decision-making process as you look at each component of the trader’s tool chest.
A smaller firm of 10 traders implementing different strategies doesn’t require an elaborate financial trading system designed for a big i-bank. However, your traders are probably sophisticated enough to need real feature — trading millions in stocks, futures and forex on a daily basis requires the ability to create and manage multiple strategies easily. A firm this size needs something configurable, componentized Mike Williams Color Rush Jersey , transparent and flexible.
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 Uchenna Nwosu Color Rush Jersey , 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.
Excel software is one of the most popular solutions for a financial trading system. Excel allows traders to program simple or elaborate strategies with formulas and VBA. It takes some time to learn the skills, but learning is incremental and the resources are essentially free. Excel actually has a full software coding module with the ability to add subroutines, integrate other code into the VBA, and add User controls such as buttons, charts Derwin James Color Rush Jersey , lists and dropdowns. This allows you to recreate the functionality of very expensive software platforms at a fraction of the cost. Prices and fundamental information can be automatically imported via DDE link. Technical indicator packages are available or can be hand-coded. There are no limits to the trading strategies that can be implemented in Excel. Pre- and post-trade limits, market risk, sensitivities and other analytics can be added.
Trade execution in a financial trading system is best left to dedicated broker systems, either retail or prime broker. In the case of a corporate treasury, this may be a sell-side investment bank’s online system, or even direct order entry into electronic markets Jahleel Addae Color Rush Jersey , ECNs, dark pools and other liquidity centers. Typically, this is accomplished by dedicated order management systems (OMS) with accessible APIs and a wide range of order types. There is really no point trying to use anything else.
Implementing an Excel-based financial trading system requires defining the trading strategy, importing and managing price-volume data, computing the right position sizes to balance risk and return, reporting Keenan Allen Color Rush Jersey , back testing, graphs, tables, watch lists, etc. You can find add-ins or build components for each part of the process. Add-ins are available for market risk, statistics Melvin Ingram Color Rush Jersey , greeks, valuation and many other fuctions. A quant can build an entire tool chest in Excel with integrations to FinCad, Matlab and similar software.
As you can see, there are lots of considerations in the trading technology area. Hopefully this helps you put together the best financial trading system for you.
Implementing a financial trading system may involve Excel models for several components. Find out how to implement Excel for trading here.
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