Top picks for algo trading
Best overall choice for algorithmic trading - IC Markets
| Company |
Overall Rating |
Average Spread EUR/USD - Standard |
MetaTrader 4 (MT4) |
MetaTrader 5 (MT5) |
 IC Markets
|
 |
0.62 info |
Yes |
Yes |
IC Markets is the best forex and CFD broker for algorithmic trading in 2024, thanks to its numerous platforms that support automated trading, coupled with low commissions and spreads, and a versatile execution policy to specifically accommodate algo trading.
While it doesn’t yet have its own proprietary platform, IC Markets offers three popular third-party software platforms which all support automated trading with their respective coding languages: the full MetaTrader suite (MT4 and MT5), the cTrader platform, and TradingView.
IC Markets also offers multiple social copy trading platforms, like cTrader Copy, which allow algo traders to share access to their strategies or copy strategies from other providers. Read my full review of IC Markets to learn more about what they have to offer.
Excellent resources for algo-driven API trading - FXCM
| Company |
Overall Rating |
Average Spread EUR/USD - Standard |
MetaTrader 4 (MT4) |
MetaTrader 5 (MT5) |
 FXCM
|
|
0.78 info |
Yes |
No |
FXCM is a great choice for algorithmic trading in 2024 due to its many robust developer tools. With a developer account, you can connect via API, code your trading bot on a specialty platform like MetaTrader 4 (MT4) or TradingView, and use FXCM’s own Trading Station platform which supports backtesting, automated trading, and custom indicators.
Complementing its algo trading offerings, FXCM also offers multiple platforms for social copy trading including ZuluTrade (for those outside the U.K., Australia, France, or Italy).
FXCM has an exhaustive support system for algo traders and includes numerous resources for programming via API, including its GitHub repository with open-source and free-to-use code examples. There is also a dedicated technical support team to assist traders in developing their MT4 Expert Advisors (EAs) — MetaTrader’s version of automated trading. Find out more about these offerings in my full review of FXCM.
Best for multi-asset trading and complex orders via API - Interactive Brokers
| Company |
Overall Rating |
Average Spread EUR/USD - Standard |
MetaTrader 4 (MT4) |
MetaTrader 5 (MT5) |
 Interactive Brokers
|
 |
0.59 info |
No |
No |
Interactive Brokers (IBKR) is an excellent choice for algo trading as it offers access to global markets providing a substantial selection of assets that you can trade via API while running an algorithmic trading strategy.
IBKR’s wide assortment of comprehensive trading API options gives it a strong edge in this category. They include: a RESTful API for its desktop platform (TWS API), a Client Portal (Web API) with support for complex order types, compatibility with FIX API (which is more finance-focused than RESTful API), and even API trading via Microsoft Excel.
IBKR also includes extensive educational resources for those developing an algo to trade via API for the first time, with dedicated courses and open source code on its GitHub repository. For more information, read my full Interactive Brokers guide.
Compare the best brokers for algo trading
Pros and cons of algorithmic trading
In my 20+ years of experimentation with a variety of forex trading strategies, I've found the main benefit of algorithmic trading to be that the automation of the investing process can remove many of the emotional choices that can come with manual trading. However, I also like to remind beginner forex traders that algo trading is complex, and I've found that sustainably profitable algo trading systems are rare.
Pros
- Automate your trading strategy.
- Automate your risk management.
- Automate your market analysis.
- Trade even when not by your computer or device.
Cons
- It takes significant time, effort, and money to create a viable algo trading system.
- Most commercially available strategies aren’t sustainable.
- Algos for sale may be overhyped by their vendor; the advertised performance of algo trading software is sometimes cherry-picked.
- Back-testing results could be curve-fitted (i.e., over-optimized) and algos may perform differently when forward-testing.
- As people pile into an algo strategy, its performance can suffer and it may experience slippage.
lightbulbReminder
Many traders are enticed by the idea of buying and/or deploying an algorithm that can be ignored while it passively generates gains; these traders often lose money. Remember: There's no easy way to make money in the forex market.
FAQs
What is algorithmic trading?
Algorithmic trading refers to the use of sophisticated computer code (also known as algos) to automate a trading strategy. Algo trading software converts the algorithm that represents your trading strategy into compatible code which your broker’s trading platform or API will then understand and implement. When enabled the algo automatically carries out predetermined trading operations, such as adjusting trade sizes, taking profits (by setting take-profit levels), managing risk, or anything else a trader would otherwise need to handle manually.
A simple algorithm for trading can be something as basic as defining a measurable condition and taking an action based on it. For example, an algorithm for an algo trading platform might be coded to open a trade whenever the price of a currency goes above a certain moving average (or exit the trade when the price falls below that moving average).
Algos can differ drastically in complexity depending on the strategy you wish to code, the ease of the coding language, and the intricacy of the supported trading platform or broker API. Building a sophisticated algo from scratch using Python to deploy on a FIX API is a much more involved and substantial project than creating a simple strategy on TradingView with its relatively easy to understand Pine Script language.
How can I learn to trade using algo software?
Many of the best trading platforms that support algorithmic trading allow you to test algos using a demo account with virtual funds. Set up a free demo account on one of these platforms and then follow the instructions and available examples to test algo trading strategies without risking your funds. Read my guide to the best forex demo accounts to learn more.
Beginner algo traders: I recommend opening an MT4 demo account and exploring the sample Expert Advisors (EAs) within the platform. For instance, the “MACD Sample” EA uses the Moving Average Convergence/Divergence (MACD) indicator in which you can specify the parameters to take profit, set the trailing stop-loss, and adjust trade size.
You can run this either on a forward-testing basis in the demo to see how it performs or open MetaTrader's Strategy Tester to backtest it with historical data for your desired asset or currency pair.
warningCaution
There are many self-purported "trading systems" promoted online. Be wary of any algo system that makes bold claims about its performance; the success of these systems can vary based on changing market conditions. Test any algos extensively before deploying them to a live environment where your real money is at stake.
What broker has the best algo trading platform?
IC Markets is my top choice in the algo trading category, in large part due to its support for multiple algo trading platforms, including the full MetaTrader suite (MT4and MT5), the cTrader platform, and most recently its addition of TradingView.
Keep in mind that these platforms are designed by their respective developers and numerous other brokers offer the same software. However, IC Markets stands out as the best broker for algo trading in 2024 by supporting such a wide variety of trading platform options in addition to low commissions and spreads and a versatile execution policy for algorithmic traders.
psychology_altWhy does execution policy matter?
Some brokers are more suitable for cost-sensitive strategies while others might excel for execution-sensitive strategies. For example, an algo that relies on filling orders at exactly the requested price would prefer the order be cancelled if the price slips, making it more sensitive to execution policy. An algo trading strategy that relies on its trades getting filled regardless of price will benefit more from lower spreads, making it more cost-sensitive.
What is high-frequency trading in forex?
High-frequency trading (HFT) is a type of algorithmic trading that performs a very large number of trading operations per day. HFT is not limited to forex, and exists across nearly all financial markets that operate electronically, including stocks, bonds, options, futures, crypto, and more.
HFT involves the creation or cancellation of potentially hundreds or even thousands of orders per day by an algo accessing the market via API. The algorithms that most retail traders use can be thought of as Low Frequency Trading (LFT) which can range from several to dozens of trades per day. Meanwhile, a large market maker using an ultra HFT algorithm might perform hundreds of trades per minute.
looksHelpful HFTs:
HFT traders help provide liquidity in the market and make markets more efficient, including forex. Spreads would be wider and markets would be less smooth when prices update if it weren’t for HFT.
Depending on the trade frequency of your algorithmic trading strategy, some brokers may limit the maximum number of positions and orders you may have at any given time and place limits on the total number of orders you can hold on their servers. Certain high-frequency trading practices may even be prohibited at your brokerage (like latency-driven strategies or scalping). Always read and understand your broker’s terms and conditions before engaging in HFT. For a deeper dive, read my guide to the best HFT trading platforms.
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Steven Hatzakis is a well-known finance writer, with 25+ years of experience in the foreign exchange and financial markets. He is the Global Director of Online Broker Research for Reink Media Group, leading research efforts for ForexBrokers.com since 2016. Steven is an expert writer and researcher who has published over 1,000 articles covering the foreign exchange markets and cryptocurrency industries. He has served as a registered commodity futures representative for domestic and internationally-regulated brokerages. Steven holds a Series III license in the US as a Commodity Trading Advisor (CTA).
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