04. Core Components to Build an Algorithmic Trading System

Published at 1649067484.514817

When building an algorithmic trading system in Vietnam, for technical analysis in the derivatives market, investors can use Entrade or third-party software such as AmiBroker and MetaTrader.

If investors need a complete system that can deploy a variety of algorithms including but not limited to fundamental analysis, multi-data (e.g. real-time oil price chart), or high-frequency trading systems, the following core components are critical.

  • Trading algorithmAlgorithms are the most crucial factor. If there’s no stable profitable trading algorithm in the long term, a super-powerful system still cannot take advantage of computing power. In addition, shaping the trading strategy is a prerequisite to structuring the remaining system components. Specifically, a derivatives trading strategy works on vastly different data compared to a stock trading strategy.
  • Database. Database stores price, volume, account, and transaction information with financial statements. Databases are often underinvested because they have little impact on algorithmic trading systems in real scenarios while they require lots of time and energy to maintain. However, for sustainable growth, algorithmic traders have no choice but to build high-performing databases. In the long run, databases serve algorithm enhancement with research and serve as inputs to high-latency algorithms.
  • Stock Market APIs. APIs allow placing and canceling orders as well as retrieving account information in real-time. There are many public security companies offering API services. This promotes the development of algorithmic trading in Vietnam in recent years.
  • Real-time Trading Data. The trading system relies on real-time trading data to make trading decisions. In addition, these data are also stored in databases for long-term usage. In Vietnam, besides the APIs of security companies that come with data packages, investors can purchase data from providers such as FireAnt and Fialda. When building an automated trading system from scratch, investors normally use raw data from the security companies’ API because of its high coverage, low latency, and free of charge. Data provider services are most suitable for MetaTrader or AmiBroker.

All trading prototypes use programming and data terms. Programming skills are required to build algorithmic trading systems. Python is a powerful and popular programming language for algorithmic trading. C is also a top choice for investors who need high execution speed.