What is the Best Software for Algorithmic Trading, Beyond High-Frequency Trading?
When exploring algorithmic trading software, it's important to distinguish between different types of trading activities. High-frequency trading (HFT) involves extremely rapid transactions, often in milliseconds, while low-frequency or purely automated trading focuses on longer-term strategies. In this article, we will discuss some of the top software options for the latter, with an emphasis on Ninjatrader and MetaTrader 4, and explore the broader landscape including FIX Protocol.
Introducing Ninjatrader
For users seeking a powerful, graphics-driven platform for automated trading, Ninjatrader stands out. This software offers a robust graphical interface along with comprehensive programming capabilities. If you're looking to develop custom trading strategies, you can harness its C programming language for backtesting and live trading. While the software is free for simulation and backtesting, trading on real accounts requires a paid subscription. The supportive team and community make it an ideal choice for traders at all levels.
Personal Experience with Ninjatrader
I've been using Ninjatrader since 2011, and I still consider it one of the best choices for automated trading. The software has a strong community, and its support teams are always ready to help. While I'm a fan of Ninjatrader, it may not be the only answer for everyone, depending on their specific needs and goals.
MetaTrader 4 for Accessibility and Integration
If you're looking for a more accessible platform, particularly in the Forex market, MetaTrader 4 (MT4) is an excellent choice. MT4 comes with the powerful MQL4 programming language, which is well-suited for developing trading strategies. MQL4 is known for its speed, ease of use, and good integration with most retail brokers, making it an ideal tool for entry-level traders and those seeking to develop robust trading systems.
Exploring FIX Protocol for Institutional-Level Trading
For traders looking to take their automated trading to the next level, especially those dealing with institutional trades, FIX (Financial Information eXchange) Protocol is worth considering. This protocol is used for automated trading, particularly in the equities and futures markets. While it may not be as accessible for retail traders due to its complexity and cost, it is highly valued by institutional traders for its security and efficiency. However, keep in mind that using FIX Protocol typically comes with higher costs and a steeper learning curve.
The Importance of Strategy Testing
No matter which software you choose, the ability to test and simulate your trading strategies is crucial. Both Ninjatrader and MetaTrader 4 offer robust strategy testers that can help you refine your approaches before going live. The MetaTrader 4 Strategy Tester, in particular, is highly regarded for its ability to closely mimic real trading conditions, allowing you to flip from strategy testing to live trading with minimal adjustments.
My current favorite is the MetaTrader 4 Strategy Tester because it seamlessly integrates with real trading conditions. It allows you to start with small amounts of capital and see real results without the added complexity of margin and day trading rules. This makes the testing process more practical and less daunting for novice traders.
Developing Custom Strategy Testers
For highly customized needs, consider developing your own strategy tester. The goal is to create a tool that can loop through any generic data and simulate any type of order, including stop-losses and take-profits. My partner and I are currently building a version that works for any broker or data source. Once completed, we plan to open-source the engine and offer it for free, with the aim of partnering with successful individuals. The plan is to allow users to run the software on their own PCs with their strategies, without the software developers seeing the execution code. This could provide a significant opportunity for traders to collaborate and grow.
Conclusion
Choosing the right software for algorithmic trading is a matter of balancing your goals, budget, and experience level. Whether you opt for Ninjatrader's powerful features and supportive community, MetaTrader 4's accessibility and integration, or the robustness of FIX Protocol, the key is to find a platform that aligns with your trading strategy and provides the tools needed for effective backtesting and real-time trading.