Building a financial trading system from the wide variety of components available in the market can be daunting. Doing it right requires you to consider multiple functions a typical trading system is required to do, then selecting the best tool for the job.
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.
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, transparent and flexible.
The financial trading system components to consider are the strategy creator, code, blotter, data manager, reporting, order management and back test tool. Other areas to consider are risk management and interfaces to your risk, accounting and back office trade processing systems. These are often provided by dedicated software platforms or SaaS technology services. Your execution broker comes into play here, and perhaps a third party service provider for things like end of day fund accounting and valuations.
From a trading strategy and analysis standpoint, Microsoft Excel tends to be one of the top 2 or 3 applications. You can easily program trading strategies directly in Excel with formulas, VBA, and manual user controls such as dropdowns, data entry cells, and macro buttons. A trader can quickly pull in market data (prices, volume, PE ratios, etc.) and combine it with technical and fundamental indicators with simple if-then statements and Excel's native calculation engine. Elaborate pre- and post-trade analysis can be done along with charting and trend analysis in Excel. That's why it's so widely used by Wall Street and City of London traders who have the best desktop trading systems in the world at their disposal.
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.
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, 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, greeks, valuation and many other fuctions. A quant can build an entire tool chest in Excel with integrations to FinCad, Matlab and similar software.
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.
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, transparent and flexible.
The financial trading system components to consider are the strategy creator, code, blotter, data manager, reporting, order management and back test tool. Other areas to consider are risk management and interfaces to your risk, accounting and back office trade processing systems. These are often provided by dedicated software platforms or SaaS technology services. Your execution broker comes into play here, and perhaps a third party service provider for things like end of day fund accounting and valuations.
From a trading strategy and analysis standpoint, Microsoft Excel tends to be one of the top 2 or 3 applications. You can easily program trading strategies directly in Excel with formulas, VBA, and manual user controls such as dropdowns, data entry cells, and macro buttons. A trader can quickly pull in market data (prices, volume, PE ratios, etc.) and combine it with technical and fundamental indicators with simple if-then statements and Excel's native calculation engine. Elaborate pre- and post-trade analysis can be done along with charting and trend analysis in Excel. That's why it's so widely used by Wall Street and City of London traders who have the best desktop trading systems in the world at their disposal.
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.
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, 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, greeks, valuation and many other fuctions. A quant can build an entire tool chest in Excel with integrations to FinCad, Matlab and similar software.
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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