Last Updated on 10 February, 2024 by Trading System

Manual trading can be very tough, especially the psychological aspect of it, which puts you at the mercy of your trading emotions. But even if you are disciplined and can handle your trading emotions, you will still miss some trades since you can’t possibly watch your trading screen all the time.

With algorithmic trading platforms, you won’t have to worry about all that because you will equip your computer to trade on your behalf, which takes away the issue of missing trade and reducing the chances of letting your emotions sabotage a profitable strategy. By using automated trading software, you can set parameters for potential trades and allocate capital while the computer does the trading for you.

Since you will be leaving your hard-earned money at the mercy of trading software provided by your broker, you must ensure that the broker and its computer software can effectively and accurately execute your trade orders without lag. In the lightning-fast world of algorithmic trading platforms, using the wrong brokerage platform for automated trading can lead to disastrous losses. So, in this post, we will review the top brokers for algorithmic trading, but first, let’s take a look at what algorithmic trading is and the factors to consider when choosing a broker.

What is algorithmic trading?

Algorithmic Trading is a method of trading where the computer is given a set of instructions in the form of algorithms, which it uses to search for trade setups, execute the trades when the setups occur, manage the trades, and close the trades when the criteria for exit are met.

A trading algorithm is coded based on a strategy that is believed to have an edge in the market and then tested with historical price data to be sure that it has a positive expectancy before launching it to the live market environment. So, the key factors in an algorithmic trading method are finding a strategy with an edge in the market, coding it into a computer algorithm, backtesting it with historical price data to know the performance, and forward-testing it in a live market.

There are many benefits of algo trading: it helps traders to automate their trading strategies so that the computer makes the buy and sell orders, saving them the time and energy used for frequently monitoring the market. Moreover, trades are executing faster with automated trading.

But why do traders want an automated trading strategy?

One of the reasons is to reduce human errors. As you know, emotion can lead you to make bad trading decisions, and it is nearly impossible to trade without your emotions getting in the way. But with an algorithmic trading strategy, human error will not get in your way, making it easier for traders to make money.

Another reason is to improve risk management. Surely, to mitigate the risks and maximize the opportunities for making profits, you will need an appropriate risk management strategy. Your algorithmic trading program can be a great tool for executing your risk management strategy; they help you to tune the risk management to suit your specific trading strategy.

Also, it makes it possible for trading round the clock. You can set your computer algorithms to trade 24 hours a day, 7 days a week. As long as there is a market open in any corner of the world, your algorithm trading system will keep working.

But one of the most important reasons for algorithmic trading is that it makes it easy for you to backtest your strategy to confirm, without any biases, whether the strategy has a true edge in the market. With algorithmic trading, you will not need to beat around the bush; you simply test your strategy with the historical data within minutes and know, for sure, how the strategy performs.

While you can buy trading an algorithm trading system, creating your own algorithmic systems will make it easier for you to learn algorithmic trading.

How to choose good brokers for algorithmic trading

When choosing a broker for algorithmic trading, you need to ask yourself these questions:

1. Is the broker regulated?

The first thing you should find out is whether the broker you are licensed by a known financial regulator. It shouldn’t be any regulator; make sure it is authorized by a tier-1 financial regulator. The broker should clearly specify this on its website. In a country, there may be different regulators for different assets.

For example, in the US, futures are regulated by the Commodity Futures Trading Commission (CFTC), while stockbrokers are regulated by the Securities and Exchange Commission (SEC). In the UK, most of the financial markets are regulated by the Financial Conduct Authority (FCA), while in Australia, they are mostly regulated by the Australian Securities and Investments Commission (ASIC).

2. How fast and reliable is the trading software?

You will need a fast and reliable algorithmic trading platform if you must make anything out of algorithmic trading because you may not be around to monitor what is going on. If the broker’s trading platform is not working properly, your orders, which include the stop loss-orders, may not be sent or maybe delayed and lead to catastrophic losses.

So, you need to take the issue of the trading software seriously. Does the platform come with real-time market data, charting and analysis tools, and news feed? If you intend to trade across multiple markets, check the software’s connectivity to the various markets. Also, check the latency period of your orders.  Another important factor is whether the software supports customization and easy it is to code your trading algorithms with the software. You can also design a suitable algorithmic trading system on QuantConnect, so find out if the platform supports algorithmic trading systems from QuantConnect. One more thing, what is the strategy tester like? You will be needing it for backtesting your strategies with historical data to know the performance. After that, you paper trade in live market, which is known as forward testing.

Finally, is the algorithmic trading software available in the desktop or web version? Does the broker provide the mobile apps that you can use to occasionally monitor how your trades are performing?

3. What is the minimum deposit requirement for algorithmic trading?

It is necessary to find out the minimum deposit requirement and be sure you can afford it. Consider the margin rules — both for initial and maintenance margins. This will determine the allowable leverage and when one can get a margin call.

These rules vary with assets and brokers. In stock trading, for instance, the margin is 50%, while in the futures market, the margin can get as low as 5%. For CFD trading, which is completely handled in-house, the margin can get even lower.

4. How much is the trade commission, and what other fees are charged for algorithmic trading?

Brokers charge commissions for their services. Some charge it separately, while others add it to the spread. You need to understand how the broker charges commissions and compare them with other brokers. There may be other fees, such as overnight swaps, inactivity fee, and subscription fee for the trading software and market data.

You should know the fees before choosing the broker. While some brokers offer fixed prices per contract, others have more complex pricing schemes. The most important thing is to go for a broker that offers low fees and commissions because they can easily eat into your profit. But more importantly, the broker should have clearly defined fees and a transparent pricing system so that you know them in time and plan along.

5. How fast are the deposit and withdrawal processed?

The broker’s method of fund deposits and withdrawals should be popular and easy to use; the processing period should not be too long. It shouldn’t take more than a few hours for a deposit to reflect on your trading account, and withdrawals shouldn’t take more than 24 hours to be processed.

6. How reliable is the customer support service?

Confirm that the broker has a functional and knowledgeable customer support team that can easily be reachable. There should be that confidence that when you have any issues, you can contact the support team and have the issue sorted out in no time. The support team needs to be readily available in case your algorithms start misfiring. You may only get the full user experience after you have started trading with them.

7. Does it have an international presence?

Check whether the broker has an international presence in multiple countries, including your own country of residence, and confirm their reputation. It is also necessary that the broker should be able to communicate in the common language. Furthermore, a broker with global reach is more likely to have access to more marketplaces and provide you with multiple options in tradable securities.

8. How long has the broker been offering algorithmic trading?

Find out how long the broker has been in business, as this can show the experience and reliability. A broker that is new in the business will not have been tested and trusted and may not have all the necessary experience to survive in the market. Ensure that the broker you want to trade with has been in the business for more than 2 years.

The best-rated brokers for automated trading

• TradeStation
• Interactive Brokers
• TD Ameritrade
• IG Group
• Saxo Group
• Oanda
• DEGIRO
• XTB
• Qtrade Investor
• Scotia iTrade

TradeStation

TradeStation is a popular broker that offers retail traders a high-tech algorithmic trading platform that makes algorithmic trading very easy, even to a beginner trader. The broker offers its services to traders from different parts of the world.

• Trading platforms: The broker’s state-of-the-art trading software is available in three versions — TradeStation Desktop, TradeStation Web Trading, and TradeStation Crypto. The platform uses the EasyLanguage programming language, which is simple and easy to understand and makes coding an algorithmic trading program a lot easier — even a new trader can write good codes with the language without visiting QuantConnect. There is also a mobile app that traders can use to monitor their trades from anywhere they are. For TradeStation’s brokerage clients, the trading software is free of charge, but non-customers have to pay a monthly subscription fee of $99 to use the platform.
• Regulation: TradeStation is regulated by the Securities and Exchange Commission, the CFTC, and the National Futures Association (NFA). It is also regulated by the Financial Conduct Authority in the UK and the Financial Services Agency (FSA) in Japan.
• Tradable instruments: TradeStation is a multi-asset broker, offering stocks, market indexes, ETFs, futures, currencies, metals, fixed-income instruments, energy, and agricultural commodities.

Interactive Brokers

About the most popular broker in the world — with a presence in over 180 countries — Interactive Brokers mainly serves the institutional trading community, offering them the lowest margin rates in the industry. The broker is the home for high-frequency traders and industry experts because of their low charges.

• Trading software: Interactive Brokers provides traders with the Trader Workstation (TWS) platform, which offers program hotkeys and a slew of order types for placing every possible trade imaginable, including algorithmic orders. The platform has special trading tools like Algo trading, Options Trading Strategy Lab, Volatility Lab, Risk Navigator, Market Scanner, Strategy Builder, and Portfolio Builder. However, you will need to learn tough programming languages, such as C++, Java, ActiveX, C#, DDE, and Python if you want to create your own algorithmic trading program on the platform. Thus, the platform is not made for beginners, but a determined person can make use of QuantConnect to design suitable algorithmic trading strategies.
• Regulation: The broker is regulated by the Securities and Exchange Commission and the Commodity Futures Trading Commission in the US. In other countries, it is regulated by the relevant agencies: the Financial Conduct Authority in the UK, the Investment Industry Regulatory Organization of Canada (IIROC) in Canada, the Australian Securities and Investments Commission in Australia, and so on
• Tradable instruments: The broker offers the most diverse range of trading instruments — stocks, futures, ETFs, mutual funds, and options trading. It is a market leader when it comes to international trading, offering more than 135 international exchanges in 33 countries.

TD Ameritrade

This is a popular online brokerage brand that is based in the US and serves U.S. and Canadian citizens. The broker delivers the ultimate trading package, including extensive research and data, portfolio-building guidance, $0 commissions for stock and ETF trades, and reliable customer service

• Trading platforms: It offers top-rated algorithmic trading platforms that are available in desktop, web, and mobile versions. The desktop trading platform, also known as thinkorswim, is embedded with a flexible and powerful tool called thinkScript Language, which allows users to create their own strategies and algorithms. Meanwhile, thinkorswim comes with advanced trading features, including a robust lineup of technical analysis tools and studies, customizable screeners and charting, backtesting capabilities, real-time news, quotes, market heat maps, company data, and more.
• Regulation: The company is regulated by the SEC and the CFTC. The broker is now a wholly-owned subsidiary of The Charles Schwab Corporation, which is also regulated by the relevant financial agencies across the world.
• Tradable instruments: They include stocks, ETF, mutual funds, options trading, futures, Forex, and Bitcoin.

IG Group

IG is a world-leading online trading provider that gives you access to opportunities across thousands of financial securities. With operations in 17 countries, IG gives traders and investors leveraged access to over 17,000 financial instruments through its award-winning dealing platform and mobile apps.

• Trading software: The broker provides their clients with the MetaTrader4 platform, which supports algorithms coded with their MQL4 programming language, which can be coded from anywhere including QuantConnect. Also, there is the IG Markets API – Python Library — a lightweight Python library that can be used to connect to the IG Markets REST and STREAM API with a LIVE or DEMO account. You can use the IG Markets HTTP / REST API to submit trade orders, open positions, close positions, and view market sentiment, while you can use the IG Markets STREAM API to get real-time prices, balance, and so on.
• Regulation: IG Group is regulated by the Financial Conduct Authority and the Australian Securities and Investments Commission.
• Tradable instruments: The Group provides Retail Spread Betting and CFD accounts for trading Equities, Forex, Commodities, Indices, and much more.

Saxo Group

Founded in 1992, Saxo Bank is a fully licensed and regulated fintech bank that offers financial trading services. The Group launched one of the industry’s first online trading platforms, making the global markets available to everyone and offering new technology that empowers clients with institutional-grade execution and powerful features.

• Trading software: The Group provides traders with their proprietary SaxoTraderGO and SaxoTraderPro platforms, as well as some APIs and numerous third-party trading software, such as the MetaTrader 4, TradingView, MultiCharts, and others. To code your algorithmic trading system here, you will need to learn several programming languages.
• Regulation: Saxo Bank A/S is a fully licensed European bank under the supervision of Danish FSA and is subject to stringent financial reporting requirements under EU directives and specific regulations regarding client handling.
• Tradable instruments: The Group offers a wide range of tradable products, including stocks, bonds, ETFs, mutual funds, Forex, CFDs, Futures, Commodities, Forex options, managed portfolios, and more

Oanda

With 24 years’ experience in financial trading, Oanda offers a wide range of global CFD instruments. The broker has no minimum deposit requirement and offers a transparent pricing model. Oanda is present in different countries, offering tailored brokerage services to traders in different parts of the world.

• Trading software: Oanda provides traders with the MetaTrader4 platform, which is very popular among forex and CFD traders. The platform allows you to code your preferred trading algorithms using their MQL4 language. Additionally, the OANDA v20 REST APIs provide programmatic access to OANDA’s next generation v20 trading engine. To use this, you must have a v20 trading account.
• Regulation: Oando is a registered Futures Commission Merchant and Retail Foreign Exchange Dealer with the Commodity Futures Trading Commission. The broker is also regulated by the Investment Industry Regulatory Organization of Canada (IIROC).
• Tradable instruments: Oando offers forex trading and CFDs on different assets, including stocks, commodities, and more.

XTB

XTB is one of the largest stock exchange-listed Forex and CFD brokers in the world, providing retail traders instant access to hundreds of global markets. Offering leverage of up to 500:1, the broker is a global leader in CFD trading.

• Trading software: Traders are provided with the broker’s proprietary forex trading platform, xStation5, which is an award-winning web-based trading platform that is easy to use and has super-fast execution speed. The broker offers open API to the xStation platform, which allows automated trading strategies. The xStation mobile app is among the most reliable and functional trading apps out there.
• Regulation: XTB is regulated by the Financial Conduct Authority and the Cyprus Securities and Exchange Commission.
• Tradable instruments: The broker offers Forex, indices, commodities, stock CFDs, ETF CFDs, and CFDs on cryptocurrencies.

DEGIRO

DEGIRO is one of the fastest growing online brokers in Europe. It started as a wholesale broker but has grown to become one of the largest retail stockbrokers in Europe. Now, retail clients can benefit from the same low rates and opportunities that used to only be available to professional clients. Offering institutional fees to retail traders is what separates DEGIRO from others.

• Trading software: The broker offers a proprietary trading platform that available in web and mobile versions. The platform is comprehensive and easy to use, offering easy access to your portfolio, streaming quotes, market news, and extensive order capabilities. The programming language is easy to learn and code with.
• Regulation: DEGIRO is licensed to practice as an investment firm under article 2:96 of the Act on Financial Supervision in the Netherlands, so it is under behavioral supervision by Netherlands’ Authority for the Financial Markets (AFM) and prudential supervision by the Dutch Central Bank (DNB).
• Tradable instruments: DEGIRO offers access to more than 50 exchanges across 30 countries. With the broker, you can trade stocks, ETFs, bonds, options, warrants, and more.

Qtrade Investor

Qtrade Investor is a Canada-based broker that uses the latest technology to offer comprehensive trading services. The broker offers competitive pricing and easy-to-use trading platforms.

• Trading software: The broker’s proprietary Qtrade platform offers screening tools for technical research and Morning News Call for stocks to watch along with market, business, and economic news. There is also the Questrade API that enables you to develop live or practice applications that can assist you with placing trades through your Questrade brokerage account.
• Regulation: Qtrade Investor is regulated by the Investment Industry Regulatory Organization of Canada (IIROC) and is a member of the Canadian Investor Protection Fund.
• Tradable instruments: The broker offers stocks, bonds, options, ETFs, GICs, mutual funds, and IPOs.

Scotia iTrade

Scotia iTrade is the brokerage arm of Scotiabank, a popular Canadian bank. The broker serves residents of Canada and the US, offering them the opportunity to trade several financial assets.

• Trading software: Scotia iTRADE’s trading platform brings together tools, resources, trading, and investing education, enabling traders to quickly and easily trade and invest with a few simple clicks and transfer funds in real-time with Scotia OnLine. There are also REST APIs for automated trading.
• Regulation: The broker is regulated by the Investment Industry Regulatory Organization of Canada (IIROC) and is a member of the Canadian Investor Protection Fund.
• Tradable instruments: They include equities, ETFs, mutual funds, options, bonds, new issues, and GICs.

What Percentage Of Trading Is Algorithmic?

FAQ

How important is the speed and reliability of the trading software for algorithmic trading?

The speed and reliability of the trading software are paramount for algorithmic trading. A robust platform ensures timely order execution, minimizing the risk of delays that could lead to losses. Regulatory oversight is crucial for ensuring the safety of your funds and the integrity of the trading environment. It’s recommended to choose a broker regulated by a tier-1 financial regulator, such as the SEC, CFTC, FCA, or ASIC.

How are trade commissions and other fees structured for algorithmic trading?

Brokers charge commissions and may have additional fees like overnight swaps or inactivity fees. It’s important to understand the fee structure, compare it with other brokers, and choose one with transparent pricing to avoid unexpected costs.

Can you recommend some top-rated brokers for automated trading, and why are they recommended?

Here are some recommended brokers for algorithmic trading: TradeStation, Interactive Brokers, TD Ameritrade, IG Group, Saxo Group, Oanda, DEGIRO, XTB, Qtrade Investor, Scotia iTrade. These brokers offer advanced trading platforms, regulatory compliance, and a diverse range of tradable instruments.