What are key features of advanced trading platforms?

The sophistication and level of complexity between trading platforms can vary greatly.

On the one hand, you have apps aimed at retail traders that offer little more than the ability to buy and sell assets across a handful different markets, and on the other you have the platforms used by investment firms with large capital such as hedge funds, whose needs are much greater than that of average individual traders.

In many respects, a trading platform is the backbone of a hedge fund’s day-to-day operations. As it’s the technology that facilitates the opening, closing and managing of various assets, the trading platform is the most important tool a hedge fund has in its arsenal. Without it, they wouldn’t be able to make trades – or at least not to the extent they would need to in order to make a profit.

A trading platform is one of the pillars supporting the daily operations of a hedge fund and can, in many ways, play a vital role in a fund’s success as it is the very technology that facilitates the opening, closing and overall management of various assets. While hedge funds will rely mostly on their prime broker for many of the trading processes, many of the advanced features supported by sophisticated platforms also play an important role in successfully executing a trading strategy.

Advanced features of sophisticated platforms

There are many factors to be taken into consideration when choosing a trading platform, including the budget, size and strategy of the fund itself. So what are the key features of advanced trading platforms, and more importantly, do you need them?

Access to additional markets

Although the markets that a fund can trade is likely dependent on its prime broker, ensuring that the trading platform actually supports those markets is an equally important factor to consider.

Generally speaking, the more markets a fund has access to, the better. Although this might not be a priority for all hedge fund managers, depending on their strategy, greater access may mean greater versatility, which could prove useful as a fund’s strategy evolves.

Order control

As well as having access to a wide range of asset classes in different markets, the best trading platforms will also support multiple order types to suit every fund’s trading strategy.

This could include a range of native, synthetic and algorithmic order types, such as stop-loss and stop-limit orders, immediate or cancel (IOC), fill or kill (FOK), time-weighted average price and volume-weighted average price. In turn, and when used correctly, order types can help optimise execution speeds, minimise risk, provide price improvement and simplify trading processes.

Real-time data, news and research

Although this will often come at an additional cost, many trading platforms will support access to news, research, fundamentals and market data from third-party providers like Reuters, Dow Jones and Zacks.

This means that traders can stay up to date with the latest headlines, research, data and analyst insight without leaving the platform, which is useful considering how time-sensitive the markets can be.

Analytical tools

Having the ability to analyse the performance of a particular asset or market is a vital part of making trading decisions, such as when to open or close a position. As such, trading platforms provide sophisticated and interactive charting capabilities to assist traders in making well-informed decisions. This could include chart patterns like trend-lines and shapes, as well as technical indicators like moving averages or momentum oscillators.

API integration

APIs enable two different software programs to be seamlessly linked together so that they can function as one piece of software. Although these won’t be needed by every trader, having the option to integrate APIs to a trading platform will enable users to access the benefits of multiple software.

Practically speaking, this can make it significantly easier for traders to execute trades, access live market data and historical prices without needing to manually search through various exchanges and dark pools.

Paper trading

Paper trading is essentially a function that enables traders to simulate trades with zero risk.

While this may be considered a useful tool for those new to trading, veteran traders can also benefit from having the ability to test investment strategies and ideas as well as products, exchanges, order types and APIs in real market conditions, without risking any actual capital.

Although many of the additional features provided by advanced trading platforms are unlikely to be used or needed by regular retail investors, they may prove to be invaluable to hedge funds seeking every advantage over the competition – whether that means executing trades as quickly as possible to maximise profits or making well-informed decisions based on deep data and analysis.

What’s more is that with many of the leading trading platform providers committed to R&D and innovation, the technology is likely to become increasingly advanced over the years to come.