What is FIX API trading?
The modern form of investing and trading methodology radically transformed over the last dozen years. Image of a broker who is constantly on the phone, was replaced by an image of a person in front of several displays, more reminiscent of the programmer rather than a FIX API trader. But today this is what the modern trader looks like. In order to become a successful trader, you need to take advantage of auxiliary software and automated systems.
The era of modern technology did not pass by the financial markets. HFT trading begins to take precedence over manual methods. The beginning of all this took place back in the 90’s, when FIX financial data transfer protocol was introduced.
The FIX protocol is a tool for information transfer between financial sector participants. This protocol is used by large banks, hedge funds and brokerage companies to obtain most relevant information in the financial market. Stock quotes, news, comments etc. goes through this protocol. And of course, market quotations are of the greatest value.
Through this Protocol, the information about price changes is received instantly. FIX also ensures timely and accurate values (without spreads and mark-ups). Of course, it is very appealing for any modern trader. It’s a direct opportunity to make trades for most relevant prices without server latencies. This is implemented by brokers who provide the ability to connect to FIX protocol via its API.
FIX API trader, having direct access to relevant quotations, as well as an algorithmic system, can set it to work with the protocol. Simply put, a trading robot that analyzes and performs trading operation in automatic mode, does not trade through a broker, but through a terminal via the FIX API. This is FIX API trading.
Key advantages of FIX API trading:
- Instant order execution;
- Trade opening without slippage and latencies (at market prices);
- No spreads and margins that are often set by brokers;
- The possibility of direct connection to the market
As for the disadvantages, there seems to be just one: not all brokers provide the opportunity for such trading, and those who do, require large amounts on your account.
FIX API can be used by traders, but the speed of analysis and opening positions plays a key role, so it better suits a trading robot. Given this, there are several types of robots that are ideal for working through the protocol:
- Arbitration robots. This is probably the main type used for trading via the FIX API. The bottom line is that the robot conducts an analysis of price differences between brokers or trading sites. Using the FIX API Latency Arbitrage strategy, the robot can analyze quotes at two brokers and open a transaction at the “slower” one. The protocol allows to evaluate and compare prices. In addition to this strategy, there is also the 2-Leg Arbitrage, which opens trades on the same asset at two brokers simultaneously and nets the profit on rate difference. It would be hard for a simple trader to make such an operation. After all, Forex prices change every second.
- Scalping robots. Like arbitration, this type robots commit many speculative operations with the aim of fixing a few pips. Lack of spreads allows to net profits from even the slightest changes in prices. 2-3 pips of profit is an optimal setting for this strategy. However, the advantage comes frome the volume. The robot is able to open more than 100 positions per day, which will bring 200-300 pips of profit and is an excellent result at FIX API Forex.
- News-based robots. Publication of news or fundamental indicators is often accompanied by increased asset volatility, which in turn causes increased prices and the possibility of slippage. And as I wrote above, FIX protocol solves this problem.
FIX API trading allows to get closer to the market and extract maximum profit from it. Modern technology, as well as innovative solutions have enabled to automate the work of a trader, turning a hobby into a real business.