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December 12, 2023

Trading Systems: Exploring the Differences

December 12, 2023
Read 6 min

In the trading industry, there are various tools and systems that traders can use to improve their strategies and enhance performance. Some common options include trading bots, cloud-based autonomous systems, and trading platforms. In this article, we will find out what is a trading bot and what is a trading platform, explore the main differences between these tools and discuss the details involved in their development.

Trading Systems: Exploring the Differences

API terminal

This type of trading system is a basic script designed to run on the trader’s computer. It does not come with a user interface or logging capabilities, but it serves as a platform for accessing various financial instruments, monitoring reports, and charts within the terminal. Such trading bots operate on an investor’s computer and utilize the API interface of electronic trading platforms such as MetaTrader 4 to interact with and manipulate the necessary elements. Key features of a trading terminal usually include:

  • market data
  • order execution
  • technical analysis tools
  • fundamental analysis
  • risk management
  • account management
  • news feed

Developing a trading terminal is a viable choice for investors seeking to automate their strategies before creating a complex system. Do trading bots really work? They certainly do, however, it’s the strategy that defines the bot’s efficiency.

Starting with a bot allows for strategy refinement, paving the way for the development of a more advanced system. Additionally, it is feasible to create a bot that monitors the market and provides notifications for specified triggers, without actually trading real money. Therefore, there is no need to worry about unnecessary trades.

One specific condition of this system is that the trader must ensure that the computer stays turned on all the time.

Development time & cost

The time it takes to develop such a system typically takes a couple of weeks, depending on the complexity of the trading strategy. However, it is important to acknowledge that real-world challenges such as latency and other factors may come up, which can add complexity to the actual implementation. As for the cost, it is the most affordable option, with a price range of a few thousand dollars, depending on the developers’ hourly rate.

To learn more about building an automated trading bot and the resources required, read our case study.

Cloud-based autonomous system

Unlike traditional trading terminals, cloud-based trading systems operate in a cloud. They utilize cloud computing infrastructure and technologies to implement automated trading strategies. The WebSocket protocol is commonly used in cloud-based trading systems for real-time communication with the server, enabling streaming of market data, order updates, and other relevant information, thereby enhancing trading efficiency.

Such trading solutions can be accessed from different devices, can handle multiple users and accounts, and are not limited to specific trading sessions. They are faster and more powerful, particularly when deployed close to the broker’s servers, which reduces latency.

Cloud-based trading systems can operate either via the FIX protocol or WebSocket API. The main difference between these two options lies in the level of standardization and complexity:

  • The FIX protocol is the industry standard in fintech for transferring financial information, such as market data and order management. It is a lightweight protocol that uses less data for communication, leading to improved performance and lower latency.
  • On the other hand, the WebSocket API is more versatile and can transfer a wide range of information beyond financial data, offering more customization options. However, it usually results in higher average latency compared to the FIX protocol.

The choice depends on the specific requirements and preferences of the trading system and its users.

The basic features of a cloud-based trading system typically include:

  • automated execution of trading strategies
  • algorithmic trading
  • real-time market data processing
  • predictive analytics
  • risk management tools
  • backtesting
  • monitoring and alerts
  • integration with exchanges
  • user interface
  • dashboards and reports

A cloud-based autonomous trading system combines the benefits of cloud computing with advanced algorithmic trading techniques to create a powerful and flexible platform for automated trading in financial markets.

Development time & cost

Developing a cloud-based trading system will take a few months and cost tens of thousands of dollars, depending on the features required. The process is more challenging and time-consuming compared to building a trading terminal. However, cloud-based trading systems offer long-term benefits as they run faster and consume fewer resources.

To learn more about building a cloud-based trading system and the resources required, read our case study.

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Trading platforms

Trading platforms are complex, enterprise-level solutions that cater to a wide range of entities operating in the financial markets. They allow users to connect to multiple exchanges, provide a strategy builder, and enable the configuration of strategies for various asset classes. These platforms also offer backtesting capabilities and allow different users to connect to different strategies. Traders can allocate funds to multiple bots, each executing a specific strategy.

Trading platforms typically offer a comprehensive set of features and capabilities:

  • support for a wide range of order types
  • risk management tools
  • algorithmic trading
  • advanced market data analysis
  • high degree of customization
  • multi-asset support
  • comprehensive reporting and analytics tools
  • low-latency execution and high-speed data processing capabilities
  • integration with multiple third parties to provide diverse trading opportunities
  • adherence to applicable regulatory requirements and compliance standards

Such platforms play a crucial role in facilitating complex trading strategies, managing large portfolios, and ensuring compliance with regulatory requirements for institutional clients in the financial industry.

Development time & cost

Trading platform development is a complex process that usually takes months or even years to ensure stability and scalability. In terms of cost, building a trading platform can require hundreds of thousands of dollars. For a more accurate estimation, please share your requirements with Itexus specialists, and we will provide you with a quote.

To learn more about the process of building a trading platform and the resources required, read our case study.

Building trading solution

When developing trading software, whether it’s an enterprise-level system or crypto trading bots, there are several factors to consider. These factors include the desired functionality, complexity of the trading strategy, user interface requirements, and the target audience. It is important to have a clear understanding of the goals and objectives before starting the development process.

Choosing the tech partner

Developing trading systems and bots is a multidisciplinary task that requires expertise in programming, finance, and market analysis. Collaborating with professionals like Itexus can offer valuable insights and guidance throughout the development process.

Cost considerations

The cost of developing trading systems and bots can vary significantly depending on the complexity and scope of the project. Simple trading terminals are generally less expensive to develop, while cloud-based autonomous systems and trading platforms require more extensive resources and time investment. It is crucial to carefully assess the budget and allocate funds accordingly to achieve the desired results.

Summary

Different types of trading solutions offer distinct advantages and cater to varying needs within the trading community. Whether you choose a basic trading terminal, a cloud-based autonomous system, or a comprehensive trading platform, it is essential to understand the nuances, functionalities, and cost implications to achieve success.If you are thinking about building your trading system or bot, it is recommended to consult with experts and gather additional information that is tailored to your specific requirements. This will help ensure that your trading solution aligns with your goals and maximizes your return on investments.

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