The Ultimate Guide to
How do Forex Trading APIs Work?
What are APIs?
An Application Programming Interface (API) is used to enable software applications, operating systems and servers to connect with each other in order to share assets. The programs communicate using a set of common protocols, with a request sent from one application to access the data or features of the connected application, and the API allows or denies the request on the basis of a predefined set of rules.
What are Trading APIs?
In Forex, CFD and other financial instruments trading, APIs allow a user’s front-end system to be connected to the broker’s back-end system via an encrypted communication channel. This means that traders are not committed to using an application or platform supplied by the broker but can use their own custom platform or app instead. They can conduct trade orders, trade execution, trade settlement, and trade verification, as well as view live prices and access historical market data through their own user interface.
Who can use APIs for Trading?
APIs are particularly useful for institutions and brokers with their own, proprietary trading software. However, they can also be used by private traders and app developers, or anyone with sufficient programming knowledge to set up and maintain the connection.
Benefits of Trading APIs
APIs allow users to create custom front-end trading solutions that can utilise the functionality and data from established suppliers. This includes:
- Live market data and executable prices.
- Historical market data and prices, allowing API users to analyse markets and chart client sentiment.
- Risk management tools and features, such as stop loss and take profit limits.
- Current and historical trading data, so the user can maintain their account through their own user interface.
- Immediate execution and instant confirmation, so orders can be carried out through their own trading platform.
Furthermore, trades can be carried out anonymously, rather than being recorded on the broker’s platform, and as a back-end does not need to be developed by the user, this may save on costs.
What are the Drawbacks of Using APIs for Trading?
API trading is not suitable for everyone. Here are a few reasons why some traders may prefer to use the platforms offered by brokers, rather than attempt to create their own custom solutions:
- API trading requires development time and ongoing maintenance, which can be costly.
- Generally, h2 programming knowledge and skills are required. The extent of this will depend on the broker selected by the client.
- Connecting an API can open the door for hackers to attack the application, so the security of the site may be hampered. Using APIs from trusted and authorised brokers should help to mitigate this risk.
Which Online Brokers Offer APIs
The vast majority of major trading services providers offer API trading solutions, however, the features and degree of support on offer vary between brokers. Here are a few examples:
AvaTrade is a broker regulated by the Central Bank of Ireland to provide Forex, CFDs and other financial instruments and related services. They offer APIs that allow traders to link their custom trading solutions to the AvaTrader servers for secure and instant trade execution using real time transparent pricing data. The AvaTrader API also allows clients access to historical market data. The API libraries are supplied as .NET or Java files, so a good grasp of either of the programming languages is required to get them set up; no technical support is provided. There is no fee to use the AvaTrader APIs, however the client will be required to set up an account and maintain a balance of at least £1000. The APIs can also be used to connect automatic trading solutions to the AvaTrade platform. These can be tested on the demo platform using live market information.
The IG Group is one of the world’s largest, by revenue, retail CFD providers and are authorised and regulated by the Financial Conduct Authority. In addition to offering their own web platform and trading apps, they also provide automated trading solutions via their APIs. The APIs provide access to historical and live market data and prices, and can be used to execute trades using IG’s pricing and execution technology. The IG API also enables users to get real time trade notifications and account status notifications, and allows them access to risk management tools, watch lists and other functionality.
Its API has been designed for various types of organisations such as brokers, financial institutions, individual traders and app developers. IG offer a REST (Representational State Transfer) API – a standard way to get access to the resource over the web. The Web API comes with technical support, including online documentation and developer tools, offering assistance to those that require it. The programming languages supported include Excel (VBA), Java and .Net. For institutional clients with professional programming resource, the FIX API allows OTC trading via a live price feed, direct trading into global stock exchange order books and much more.
FXCM Ltd. are authorised and regulated by the Financial Conduct Authority, with permission to provide trading services and products. They offer a variety of APIs, including the Marketscope Indicore which is for traders who use algorithms as part of their trading strategy. They also have the FXCM Forexconnect API, which uses .Net, Mac, iOS, Linux or Android programming languages, and allows users to run price data analyses. A Java API enables clients to connect their own applications and the FIX API is for institutional clients, offering an interface which can be customised to meet the needs of the client. API specialists are also available at FXCM to provide a walk-through demonstration of the options.
APIs offer a connection between applications, data and resources, allowing them to be transmitted from one system to another. They are a powerful tool for developers wishing to create their own bespoke applications that are based on the market data and features provided by brokers. Whether a client is connecting an algorithm for automated trading, their own platform, or their own app, APIs provide all the tools to securely link to the data suppliers. Institutional clients can benefit from dedicated API solutions, whereas clients with less advanced programming skills can select brokers who offer additional support along with their APIs.
However, please bear in mind that the functionality and data provided through APIs, and the amount of technical support available, varies from broker to broker.