In the world of trading, low latency refers to using an automated trading system that can respond to the trading events faster than your competitors and maximize your trading profits. When it comes to trading, a difference of even a few milliseconds can make or break your deal.
Software with low latency architecture gives you the ability to make your trade extremely fast and get an advantage in the market. With automated systems, agitated traders can pass their orders instantly and leverage the gain.
Here are a few tips for selecting the best-automated trading software with low latency architecture:
Automated Data Feed Handler
Without accurate data, any software program cannot instigate correct decisions. The software you choose should capture data from varying venues, apply the relevant strategies, and generate decisions correctly. Each market venue can generate market updates every second, and the program should make the needed changes accordingly.
OMS or Order Management System
OMS aims at managing all the orders received by the venues, depending on the signals sent by your trading strategy. It is responsible for handling, sending, replacing, and canceling orders. It also accesses details about any order you already executed, including open and pending ones.
An automated trading program routes every order based on a few factors, like the venue costs, signal strategy, best price, and latency between the venues. The software you choose should also be smart enough to execute an order based on canceled, rejected, partially filled, or completely filled.
Choice of Strategy
Strategies take limit order books from different venues and make informed decisions depending on varying values and parameters. Some strategies analyze entire books’ depth, while others only look at the top book price. The automated trading software you choose should apply infinite strategy types and ensure profitability in low latency architecture.
Relevance to Software Architecture in Different Patterns
The software program has to put several pieces together for concurrent interaction while maintaining low latency between different processes. Since concurrency is of utmost importance in trading, the system should use synchronization methods to work correctly.
With such a system, you will be able to concurrently access the data stored in memory, so that design architecture suitable for low potency needs can be applied in time.
Spinning or Busy/Wait
When it comes to low latency architecture, it doesn’t matter how excellent the systems are or follow acceptable practices, the only thing that matters is latency. The processes would be in tight loops waiting for an event, and those loops will consume all of your computing cycles.
The software you choose should read market data from the module of a limit order book, and if it meets a particular strategy, it should send orders for trade execution. It is one of the fastest ways to receive data from other modules.
Risk Management
The automated trading system consolidates all the sent orders in positions, thereby helping you to monitor any open/close orders. Ideally, the best strategy is the one that keeps flat exposure, but sometimes, it must also allow controlled exposure. The risk module included in the software program must interact with your trading strategy and monitor real-time open positions.
Monitoring System
A fully automated system should be capable of opening and closing positions within milliseconds, ensuring a proper monitoring system for controlling the entire operation. Some strategies may not do what they should, and specific venues may not provide the expected prices. At such times, it’s better to stop the system before any unrecoverable losses happen. Automated trading software with low latency architecture allows you to do just that.
The number of exchanges that enable algorithmic trading for professional and retail traders has surged over recent years, and more and more traders are turning to algorithmic trading. Check the points mentioned above, before selecting an automated trading system with low latency architecture and maximize your chances of profit in trading.
