Infrastructure
A rather minimal setup for algorithmic trading is shown in the diagram below.
Most professional organizations will have much more sophisticated
infrastructure in place. This is a minimalist diagram illustrating some
critically important components.
- (3rd party) The data feed is a source of live price data. This comes
electronically from the markets, but is usually supplied indirectly to you
through a third-party data provider, who streams the data to you on request over
the internet. Most data providers also provide some
limited historical data in addition to live feeds.
- (3rd party) The broker holds your investment capital, and provides a way for you
to place orders via the internet. For individuals or small businesses, there are many
brokers who can get orders to the market from an office or home-based computer
with a latency of only around 100 milliseconds or less. The broker may be
the same company that provides a data feed and historical data.
- It is useful to have a dedicated server with a constant connection to the broker
and the data feed. The server would normally be running any algorithmic
strategies that are in production, as well as receiving (and possibly storing)
live data, and making requests for new data. It's not a bad idea to have a
UPS (uninterruptable power supply) attached to the server (and router) just in
case you lose power in the middle of a trade.
- You will need a PC to perform analysis, strategy development, back-testing, and
to do standard things like preparing documents, playing games, etc. It's a
good idea to do this on a separate machine from the server to reduce the
probability of a crash or reboot causing problems with trading. (Also,
machines sold as "servers" are generally built of more reliable equipment than
standard PCs, and are thus less likely to spontaneously fail for some reason.)
- You should have a phone readily available (along with broker phone number, your
account info, etc.) so that you can ring the broker directly to close positions
if all of your infrastructure goes down in the middle of a trade.
Next: Strategy Development
Back to Index