We usually hear that ‘Innovation is the key to success’. Similarly, finance has been revolutionary since the introduction of technology in it. Fintech is taking over almost all the parts of our world. Today, due to technology, investments have grown, diverse instruments are introduced, global economies are connected, etc.
The stock market has been no exception to this revolution. Innovation in the stock market, including technology, has been of huge benefit to all its stakeholders. One such innovation is the Application Programming Interface (API) for stock markets.
Stock market APIs can provide real-time data to investors and enable strategic trading. However, in India, its reach is less. Retail investors do not know much about it. This article will help readers explore this technology, its use and its benefits in detail.
What is API?
Application Programming Interface/API is a set of codes that queries data and sends information from one software to another to establish a seamless connection. It is a bridge connecting two different software services. The services or applications are developed with the use of programming languages.
A popular example of API is Facebook (Meta) Ad API. It helps in advertising of business, events or products. Also, it provides real-time insights to the ad developer regarding the campaign’s performance.
What is the stock market API?
The API technology can also be used in stock market trading to provide real-time data to brokerage firms. Moreover, it can also help investors in algorithmic trading. The brokerage directly connects the screen with the brokerage account. It would facilitate investor’s access to real-time market data such as prices, volume, etc.
Stock trading APIs facilitate a tailored approach for investors. It improves the overall quality of trading for the investor and broker. Due to the lack of manual interference, the trading experience is flexible.
In algorithmic trading or algo trading, this technology is of great use. Algo trading is the process of trade execution based on the market algorithm and set strategies of an investor. Using stock trading API, scrutiny of market data, reading prospects, and trade execution is so quick that it provides a competitive edge over traditional traders.
An interesting read: Automate your unique trading strategies with the help of algo trading.
How can beginners use the stock market API?
It is usually considered that stock trading API is suitable only for investors using technical analysis, making intraday trades or trading in large volumes. However, it is not the norm. Investors willing to tap market prices may benefit from real-time market data.
An individual can procure API keys to process their transaction on a personal end. The following steps can be followed to use the stock trading API mechanism.
- Procure API key
It is provided by the brokerage house. It communicates between the servers or brokerage and the required stock exchange. This API key works like login credentials for the traders.
- Connection with the stock exchange
After procuring an API key, one can use it to establish a connection with the stock exchange. The server of exchanges would then provide real-time market data to process the trade.
- Receive data, consolidate and analyse it
The market exchange would provide data regarding stock, market movements and price actions. Traders or investors can process this data on a fundamental and technical basis.
- Trading strategy
The analysis would help investors create a tailored trading strategy. Moreover, one can set predetermined sorting criteria, stop-loss rules, target rules, etc.
- Execute the trade order
Following the creation of a trading strategy, an individual can execute the trade order as per the rules. Moreover, API automates the trading process. Thus, by feeding the strategy details, one can enjoy seamless trade execution.
Must read: How does intraday trading work?
Benefits of stock trading API
The improved stock trading experience with APIs provides a path for sophisticated trading algorithm creation and stock market management. There are some key benefits of this technique, such as:
- Real-time information
The stock market fluctuation is an inherent part of it. It occurred due to clashes in the perspective of buyers and sellers. However, this provides multiple price opportunities. Individuals in traditional trading systems may not tap such prices quickly.
On the other hand, stock trading APIs help tap such opportunities and execute trade quickly.
- Automated trading sessions
Stock trading APIs don’t require the executor to stay in front of screens with the. The orders can be processed based on the investor’s objectives. It allows software communication between the trade executor and the market. Moreover, a personalised trading algorithm can be built to execute trading strategies.
- Elimination of emotional factors
Traders need to set a strategy for the execution of orders. It eliminates hasty decisions driven by fear or greed. Moreover, due to its accurate data, one can formulate a trading strategy by checking the feasibility of the market conditions.
- Backtesting methods
It is a known trading strategy, enabling traders to apply and evaluate a trading strategy to historical data and a hypothetical example. The data provided by the stock market API helps process this and change the strategy.
Bottomline
The stock market is an interesting investment avenue. However, amalgamating technology API gives this investment a competitive edge. The stock trading API provides investors with real-time current and historical market data. Moreover, its ability to make the trading process seamless can help beginners with a tailored stock market strategy.
Check this out! Ganesh Chaturthi 2024: 3 stocks to pick today
FAQs
Q1. What is API?
Application Programming Interface (API) helps establish a link between different software for data service. These close servers help generate real-time data seamlessly. Moreover, it can be used in varied areas like social media campaigns, stock markets and many more. In the financial markets, API can change the trading game with trading strategies and accurate market data.
Q2. What is an API for financial markets?
The trading and investing process in the traditional techniques is time-consuming and prone to human error. However, the financial market API bridges this gap. It provides the trader with a link to exchange servers and facilitates the trade. It further helps in easy communication.
Q3. How does the stock market API work?
Investors need to first procure an API key from their broker. Following this, a connection can be established between the trader’s account and the market server. Further, traders will receive current and historical market data. This data needs to be analysed and processed to form suitable market strategies. These strategies can be stored in API to execute market trades.
Q4. Can you buy stocks with API?
One can process market trades with the help of a stock market API. However, there are different stock market APIs, so selecting the suitable option requires investors to identify their investment objectives, volumes, and other requirements. However, the stock market API can provide investors with real-time market data to plan their strategy.
