What is an 'Application Programming Interface - API'

An application programming interface, or API, is a "go-between" that enables a software program to interact with other software. In the context of trading, an API often refers to the interface that enables your software to connect with a broker to obtain real-time pricing data or place trades.

BREAKING DOWN 'Application Programming Interface - API'

Application programming interfaces, or APIs, have become increasingly popular with the rise of automated trading systems. In the past, retail traders were forced to screen for opportunities in one application and separately place trades with their broker. Many retail brokers now provide APIs that enable traders to directly connect their screening software with the brokerage account to share real-time prices and place orders. Traders can even develop their own applications, using programming languages like Python, and execute trades using a broker's API.

There are two types of traders that use broker APIs:

  • Third-Party Applications - Many traders use third-party applications that require access to broker APIs for pricing data and the ability to place trades. For example, MetaTrader is one of the most popular foreign exchange (forex) trading applications and requires API access in order to secure real-time pricing and place trades.
  • Developer Applications - A growing number of traders develop their own automated trading systems, using programming languages like Python, and require a way to access pricing data and place trades.

Despite the obvious benefits of APIs, there are many risks to consider. Most APIs are provided to a broker's customers free-of-charge, but there are some cases where traders may incur an extra fee. It's important to understand these fees before using the API. Traders should also be aware of any API limitations, including the potential for downtime, which could have a significant effect on trading results.

Where to Find APIs

The most popular brokers supporting API access in the traditional stock and futures markets include TradeStation, TDAmeritrade, and InteractiveBrokers, but many smaller brokers have expanded access over time. APIs are more common among forex brokers where third-party applications and trading systems - such as MetaTrader - have been commonly used for many years.

Many brokers provide online documentation for their APIs, where developers can find out exactly how to authenticate with the API, what data is available for consumption, how to place orders through the API, and other technical details. It's important to be familiar with these details before choosing a broker when looking for specific functionality.

Some brokers also provide libraries in various languages to make interaction with their API easier. For example, a broker may offer a Python library that provides a set of functions, or methods, for placing a trade rather than having to write your own functions to do so. This can help accelerate development of trading systems and/or make them less costly to develop.

RELATED TERMS
  1. American Petroleum Institute

    The American Petroleum Institute (API) is a leading oil and gas ...
  2. Annual Percentage Yield - APY

    The annual percentage yield (APY) is the effective annual rate ...
  3. Forex Broker

    A forex broker is a service firm that offers clients the ability ...
  4. Outside Broker

    The term outside broker has several applications in finance. ...
  5. Trading Platform

    A trading platform is a software through which investors and ...
  6. Business Broker

    A business broker is a company that assists in the purchase and ...
Related Articles
  1. IPF - Banking

    The Interest Rates: APR, APY and EAR

    When most people shop for financial products, all they focus on is the listed interest rate. Human eyes instinctively dismiss the fine print, which usually includes the terms APR (annual percentage ...
  2. IPF - Banking

    APR and APY: Why Your Bank Hopes You Can't Tell The Difference

    Do you know the difference between Annual Percentage Rate and Annual Percentage Yield? Check out how they can affect your own account balance.
  3. Investing

    A 3D-Printed House, Built for $10,000 in Just One Day

    Apis Cor, a 3D-printing startup from California, may have developed a way to revolutionize the housing market.
  4. Investing

    The Top 10 Brokerage Firms For Day Trading

    Day traders have different needs from long-term investors. Investopedia rates the top 10 brokerage firms for day traders.
  5. Trading

    How Forex Brokers Make Money

    Forex brokers set their prices based on commission, spread, or a combination of both. Traders have to be cautious in the thinly regulated forex market.
  6. Trading

    How New Traders Can Downplay Costs

    Concentrate on learning to play the game well in your first year as a trader, avoiding high information costs.
  7. Investing

    Google Buys Apigee To Boost Its Enterprise Cloud

    Google's latest purchase is part of the company's strategy of playing catch up with Amazon and Microsoft in the enterprise cloud
  8. Investing

    Discount Broker

    A discount broker is a stockbroker who carries out "buy" and "sell" orders at a reduced commission compared to a full-service broker, but provides no investment advice.
  9. Trading

    Understanding order execution

    Find out the various ways in which a broker can fill an order, which can affect costs.
RELATED FAQS
  1. 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 >>
  2. Can a Broker Sell Your Stocks Without Permission?

    Find out if and when it's legal for a broker to sell securities from a customer's account and portfolio without their permission. Read Answer >>
  3. Why Are Securities Held 'In Street Name'?

    Buying or selling securities through a broker means they're held in your broker's name. Read Answer >>
Hot Definitions
  1. Business Cycle

    The business cycle describes the rise and fall in production output of goods and services in an economy. Business cycles ...
  2. Futures Contract

    An agreement to buy or sell the underlying commodity or asset at a specific price at a future date.
  3. Yield Curve

    A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but ...
  4. Portfolio

    A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, also their mutual, exchange-traded ...
  5. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  6. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
Trading Center