Varshney Shekhar. - Developing a Trading Bot using Java

In very simple language, a trading bot, is a computer program, that can automatically place orders to a market or exchange, without the need for human intervention. The simplest of bots could be a curlPOST to an OANDA REST API, such as

which can be setup on a unix cron to run every hour, during trading hours. It has no strategy, nor any external interface or dependencies. It is a one liner to place an order which has an equal probability to be in profit or in loss.

On the other end of the spectrum, it could be a complex program based on a distributed architecture, consuming lots of feeds from various sources, analysing them in realtime and then placing an order. It would be highly available with extremely low latency.

The scale and scope of the bot, as we can see is varied. To be effective, the bot should be able to accomplish the following tasks:

• Consume market data and/or ,external news events, social media feeds and distribute to interested components within the system.
• Have atleast one strategy which provides a trading signal.
• Based on a trading signal place Orders with the brokerage platform.
• Account management, i.e., have the ability to keep track of margin requirements, leverage, PNL, amount remaining etc. in order to curb trading if the amount available breaches a given threshold.
• Position Management i.e. keep track of all currently active positions of various instruments, units of such positions, average price etc.
• Have the ability to handle events which are triggered by the brokerage platform such as ORDER_FILLED, STOP_LOSS etc. and if required take appropriate decisions for such events.
• Some basic monitoring and alerting.
• Some basic risk management. For e.g. loss limitation by using stop losses for orders or making sure that risk is distributed between risky and safe haven instruments. These are just examples and by no means a comprehensive list of fully managing the risk.

I believe most of services provided by exchanges/platforms revolve around the following:

• Market data subscription for instruments of choice and dissemination.
• Place orders and trades.
• Account and position management.
• Historic market data.
• Heartbeating.
• Callbacks for trade, order and account events.
• Authentication

The trading bot is an attempt to generalise these tasks in a framework and provide an ability to provide the broker/exchange platform specific implementation at run time, using a dependency injection framework like Spring. Therefore, theoretically speaking, it would just be a change in the Spring configuration file, where we define our implementations for various interfaces that implement these services, and la voila, we should be able to support various broker/exchange platforms.