What is Big Market Data and Roll of Trading API Solutions all about?

Trading API allows you to interact with trading systems and auto execute orders and get real time market data – price, volume, open interest, order updates etc.

Further, API based Trading Solutions are enabling auto execution of orders.

Back in the day big data along with API based auto trading was deployed by HFT Firms (High Frequency Trading Firms) and investment banks. Now these are being increasingly adopted by retail traders to profit from the markets.

Auto trading based on signals generated from Trading systems have been completely changing

how the stock markets are functioning and how Traders are making their trading decisions.

Analysis from Big Data is helping traders look for trading opportunities and further helping them develop and backtest trading systems.

As a human trader one can maybe use 4-5 indicators/Setups to help look for trading opportunities but big data can totally change that.

Big Data and analytics can track multiple trading opportunities across the asset classes at the same time and the system itself can generate signals related to buy/sell, when to enter/exit, the quantity of the order and finally the target and Stop Loss.

Further the system can directly via Trading API’s, execute this in live market and that too at much greater speed than one can do manually. Say you have an effective strategy based on the indicator Super trend.

However, manually executing this may lead to slow execution, also it requires you to be present on the trading terminal at all times and further it may happen that emotions creep in thus causing you to trade irrationally.

Trading APIs come in handy here as they remove the emotions out of trading thus removing the emotional bias.

Other popular trading setups would be ones which seek arbitrage opportunities – basically profiteering from price difference of a stock or instrument listed in two different markets

be it domestic or global. other being ones which depend on statistical arbitrage-basically that employ mean reversion models.

Another area where traders have been using Big Data is back-testing. Traders are creating trading systems and back testing them with help of Historical Data before actually executing them in the live market.

This helps them create profitable strategies without having to actually risk capital.

Traders are also using this to further tweak successful strategies by modifying various parameters involved and creating one with optimal risk-return.

Through backtest they are gaining insights like net profit/loss over a specific period and also the volatility.

Overall, implementation of Big Data and Trading APIs are helping smart traders discover – backtest – automate their trading strategies in markets. It is helping them trade faster, smarter and also reduces error. Finally retail traders have a level playing field vs institutions and HFT firms.

(The author of the article is Padavala Anoop Naidu, Tech head – SAS Online)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)