Creating Automated Trading Systems Using Interactive Brokers: Automated Trading With Interactive Brokers
  1. Creating Automated Trading Systems Using Interactive Brokers: Introduction
  2. Creating Automated Trading Systems Using Interactive Brokers: Why Automated Trading
  3. Creating Automated Trading Systems Using Interactive Brokers: Automated Trading With Interactive Brokers

Creating Automated Trading Systems Using Interactive Brokers: Automated Trading With Interactive Brokers

The Interactive Brokers trading platform itself does not offer automated trading. However, several solutions are available for traders who wish to automate trading systems using the IB Trader Workstation (TSW) platform, including:

  • Third-Party APIs
  • Programming Consultants
  • IB APIs

Third-Party APIs
An Application Programming Interface (API) is a language format utilized by an application program to communicate with other system software. An API acts as an interface or "go-between" that allows code to communicate with the IB trading platform. Third-party vendors offer a variety of proprietary APIs that provide customizable, prebuilt algorithms and plug-and-play trading software applications designed to run in conjunction with IB's Trader Workstation (TWS) trading platform.

A list of third-part APIs is available on the IB Web site: from the home page click the "Education" heading and select "The Marketplace@IB." Read the disclaimer and if you agree to the terms, click "If You Agree to the Disclaimer, Please Click Here" to continue. Click on the "Software Tools" tab and the subheading "Order Management Software" to view providers and products (shown in Figure 1).


Figure 1 - Select the Software Tools tab in the Marketplace@IB to browse third-party vendors.

Programming Consultants
In addition to the commercially available APIs, The Marketplace@IB also has a link to Programming Consultants who can assist traders and investors with the development of custom indicators and strategies to be used in automated trading. The consultants provide coding in a variety of languages including Java, C++, Visual Basic, SQL, Perl, Matlab as well as other trading platforms' proprietary languages that can be interfaced with IB.

Keep in mind that programmers can only program absolute rules, and they typically do not offer suggestions for improving the profitability of a system - only the performance of the code. Before working with a programmer, it is important to be able to define all of the trading system's entry, exit and management logic. If it can be defined, it can probably be coded.

Programming with IB APIs
A third solution is for traders with the skills (or desire to learn) to program their own APIs. Interactive Brokers provides several APIs that traders can use to connect through either the TWS or the IB Gateway. Connecting through the TWS requires the application to be running, but allows traders to test and confirm that the API orders are functioning correctly. Connecting through the IB Gateway, on the other hand, does not provide an interface for testing and confirmation, but does allow the API to run without a large GUI application running.

Where the third-party APIs provide customizable, prebuilt algorithms, the IB API programming environment is essentially raw material. IB provides the equipment and components, and the user does all of the programming. Users can program in a variety of languages, including C++, Java, ActiveX or DDE for Excel. There are a number of API-related settings in TWS that traders can configure, shown in Figure 2. The IB API Reference Guide (available on the Interactive Brokers Web site: search for "API Reference Guide") provides an overview as well as instructions specific to the various programming languages.

Figure 2 - Configuring the API settings in TWS.

Conclusion
Traders who wish to implement automated trading systems via the Interactive Brokers platform have a variety of options. Non-programmers may wish to explore the third-party API vendors who offer a variety of customizable or plug-and-play options. Traders with unique ideas can work with a qualified programming consultant. Those with programming experience or the time and desire to learn a programming language can employ the IB APIs when developing automated trading systems.

  1. Creating Automated Trading Systems Using Interactive Brokers: Introduction
  2. Creating Automated Trading Systems Using Interactive Brokers: Why Automated Trading
  3. Creating Automated Trading Systems Using Interactive Brokers: Automated Trading With Interactive Brokers
RELATED TERMS
  1. Application Programming Interface - API

    An interface or "go-between" that enables a software program ...
  2. Annual Percentage Yield - APY

    The effective annual rate of return taking into account the effect ...
  3. Introducing Broker - IB

    A futures broker who has a direct relationship with a client, ...
  4. Manual Trader

    A trader who manually enters trades into a trading system without ...
  5. Associate In Personal Insurance (API)

    A designation earned by professionals looking for training in ...
  6. Java

    A programming language developed by Sun Microsystems to support ...
RELATED FAQS
  1. What is the difference between APR and APY?

    Learn about the difference between the calculations for APR and APY. APY takes into account the number of times that the ... Read Answer >>
  2. What should I look for when choosing a forex trading platform?

    A trading platform is a piece of software that acts as a conduit for information between a trader and a broker. A trading ... Read Answer >>
  3. What are the different types of annual percentage ratings (APR)?

    Learn the differences between annual percentage rate, annual percentage yield and effective annual rate to compare interest ... Read Answer >>
  4. How do quant traders build the relative strength index (RSI) into their algorithms?

    Learn how quantitative traders build the relative strength index (RSI) into their algorithms. Explore how automated trading ... Read Answer >>
  5. What are the advantages of hiring a third-party marketing company?

    Explore the advantages of using a third-party marketing service to drive a marketing campaign. Like with most marketing strategies, ... Read Answer >>
  6. How does portfolio management software work?

    Discover the functions of various complexity levels of portfolio management software, and learn how traders utilize portfolio ... Read Answer >>
Hot Definitions
  1. Physical Capital

    Physical capital is one of the three main factors of production in economic theory. It consists of manmade goods that assist ...
  2. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  3. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  4. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  5. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  6. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
Trading Center