Are you interested in a financial trading system for yourself or your investment business? There are many starting points. There are several important considerations to ensure it gets done right and you arrive at a strong system.
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, transparent and flexible.
The main components or modules in a financial trading system to consider are: trading strategy and analysis, trade execution, market data management, position management, profit and loss analysis, and risk management. Depending on the complexity of your needs, two additional modules to consider would be for accounting and user security access. These latter two are needed for formal corporate environments. Otherwise you can rely on broker statements and PC login security.
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, 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.
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.
Building a financial trading system in Excel involves strategy definition, data management, position sizing, P&L reporting, backtesting and a variety of other processes. You can build or integrate third-party components for these functions. Excel can also be used for basic back office trade processing, though there are dedicated systems available which are better at this. Real time market executions require special infrastructure to handle large volumes and low-latency speed -- Excel is less suited to this than software coded in C# or java.
If you're planning to implement a financial trading system, Excel is likely to become a major part of your trading operation. Hopefully, these insights will help make the right decisions for your trading success.
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, transparent and flexible.
The main components or modules in a financial trading system to consider are: trading strategy and analysis, trade execution, market data management, position management, profit and loss analysis, and risk management. Depending on the complexity of your needs, two additional modules to consider would be for accounting and user security access. These latter two are needed for formal corporate environments. Otherwise you can rely on broker statements and PC login security.
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, 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.
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.
Building a financial trading system in Excel involves strategy definition, data management, position sizing, P&L reporting, backtesting and a variety of other processes. You can build or integrate third-party components for these functions. Excel can also be used for basic back office trade processing, though there are dedicated systems available which are better at this. Real time market executions require special infrastructure to handle large volumes and low-latency speed -- Excel is less suited to this than software coded in C# or java.
If you're planning to implement a financial trading system, Excel is likely to become a major part of your trading operation. Hopefully, these insights will help make the right decisions for your trading success.
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To learn more about building a financial trading system in Excel, visit ExcelTradingModels.com
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