As you can guess from the name, you’ll need an algorithm to start algo trading. In the trading community, these algorithms are called trading robots, or “bots” for short. There are three ways to get an algorithmic trading bot:

Create a trading bot from scratch

You can use APIs to establish your own automated trades, create algorithms, etc. 

APIs allow secure and reliable trading as long as you understand how to set them up. The advantage is that you gain complete control over your bot and its functionality. However, this is only a good option for those with advanced technical knowledge. If you aren’t prepared to deal with the technical aspects of bots, creating a bot from scratch isn’t a good option. 

Building an API from scratch requires at least a basic programming and coding background. Any programming language with HTTP support will fit your strategy well (Java, .NET, etc.)

Use a ready-made trading bot

For traders who don’t have a technical background, there are ready-made trading bots that anyone can use.

Software solutions like MetaTrader, Interactive Brokers, and AmiBroker are designed for traders without a technical background. Let’s take MetaTrader4 as an example. It’s a tried-and-true trading platform where you can find and use pre-made trading algorithms. On top of that, you get add-ons and indicators. Some of them are free, while others require a paid membership. MT4 can help you with chart analysis, strategic planning, and execution. 

Ready-made bots are great because you can implement them almost instantly without any coding required. However, these bots do come at a price, and some of them can be quite expensive.

Use a trading bot marketplace

Instead of creating your own bot or paying a software provider for a ready-made bot, you can purchase bots on a trustworthy marketplace like 3Commas. Here, you can find well-rounded algo trading strategies that have already been tried and tested. Instead of worrying about APIs or the peculiarities of specific brokers, you can instead simply copy the strategies of veteran traders to make a profit. The platform offers a simple set of automated strategies to trade stock options, a 24/7 support team, and a free demo account. The demo account is completely free and allows you to test out trading strategies without using real funds.

Key features of algorithmic software

It’s best to pay attention to these three technical criteria when choosing a trading bot:

Customization

Many platforms provide standard algorithms based on a 50-day moving average. As soon as the average crosses the 200-day point, the algorithm shows satisfying results, but some traders may benefit from experimenting. Switching to other strategies may improve both your knowledge and results. You might want to adjust the moving average parameters down to a 20-day moving average with a 100-day average. If the program doesn’t allow much customization, you may be confined to the standard features, causing a lack of flexibility.

Technical add-ons

Some software allows you to build your own add-ons and modules using Matlab, C++, Python, and other programming languages. If you’re looking for a flexible and experimental way to trade, consider software that allows you to add your own code into the main program. 

Advanced backtesting features

Consider software that allows you to access historical data. Backtesting your strategy in this fashion is unrivaled. Implementing both practical and profit-based tactics on historical data has the most impact on your simulation. For backtesting, if a piece of software doesn’t give end-of-day data, you might want to think twice about using it.

Once you decide on a platform/software, it’s time to pick your strategy.

Steps to start algorithmic trading 

No trading bot, platform, or software can think, they can only execute a strategy based on a series of inputs by a trader. Therefore, you need a solid knowledge base to understand how to utilize algo trading effectively.