Finance and programming go hand in hand. Different computer programs do a great deal of work around the finance sphere. There are programs that can detect fraud more easily than a human analyst could. There are programs that are important when it comes to pricing and asset management. And there are programs that are focused on trading. In this article, we’ll look at the best programming languages for Trading.
What is Programming?
Computer programs hold the instructions that computers use to perform their tasks. Much like a chef follows a recipe, computers follow programs to come up with desired results. And programming is the process of writing these commands down.
One can classify programming into two broad categories: low-level and high-level programming languages.
Low-level programming languages use binary language and assembly language. Binary language uses 1s and 0s and is a language easily understood by computers. Assembly language, on the other hand, is easily understood by humans because they use more “English”-like words. For example, The letter “A” is understood by a human to mean the letter A. In order for a computer to understand the letter A, you need to use the binary code for the letter A which is 01000001.
High-level programming languages use the English language more. These languages are not understood by computers but are easily picked up by human programmers. In order for a computer to understand high-level programming languages, these programs need to be translated or converted by a compiler or an interpreter into binary language.
So you can look at how programming works by imagining a chain where the first link is a programmer who, by using a high-level programming language, writes commands into the system for a computer to execute. The second link is the compiler that translates the high-level language commands to binary language: 1s and 0s. And the third link is where the binary code is fed into the computer, the computer understands those commands and executes them.
There are many kinds of high-level programming languages. Finding out the best or the easiest programming language is very subjective and depends heavily on what programs you need to create.
Programming and Trading – which language fits best?
When we talk of trading in this instance, we are focusing on algorithmic trading. So first, a definition of what algorithmic trading is. An algorithm is a set of specific step-by-step instructions to execute a particular task. Algorithmic trading is using a program specifically created for trading purposes to perform trading. These trades will be quick and accurate as long as your programming is solid. Therefore, if you are looking to get involved in creating these algorithmic trading programs, you will need a solid foundation of programming languages that these types of programs use.
There are plenty of programming languages you can choose from. Each with its own merits and drawbacks. For example:
The programming language with a quirky name. Quirky because the creator named his program after the movie Monty Python’s Flying Circus. The best part about Python for trading is that it is open-source. Meaning there are loads of data out in the interwebs for any Python questions you may have or problems you might encounter. Some big names in the trading world have trading programs that use Python.
Python has a functional programming approach. You can extend python code to trading algorithms that are easy to write. Because Python libraries are accessible and extensive, you don’t need to create as much code as other programming languages do when creating algorithmic trading programs. It is also cheaper to maintain a trading system that uses Python.
A huge drawback for Python as a language for trading is the fact that every variable is considered an object. So when you have millions of objects stored, it could cause memory leaks and bottlenecks.
C++ is used in legacy systems of a lot of banks, making this a programming language of choice for some financial institutions. Even Amibroker is built on C++. It is very efficient in processing large volumes of data. It is a high-performing language that can perform trades in millisecond time frames (faster than Python), but it is a hard language to learn — and it doesn’t have its own garbage collector per se. You can make it so it is written into the program, though. It is also important to note that C++ is built on C. So you might need to familiarize yourself with the C language before you delve into C++.
R is used mainly for data analytics and statistics, two things essential to trading. It is an object-oriented programming language that is good for making data usable, building customized data sets, and machine learning. Anyone, even someone with limited coding knowledge, can use the R language. You can build an automated trading system using R, but it won’t be as sophisticated as what can be achieved by other programming languages.
The best programming languages for trading is really a personal choice. It really all depends on what you want your program to do. It also hinges on which language you are more comfortable with. What does your program need for the kinds of trades you perform? Truly, in this case, “best” is very subjective.
We still prefer Amibroker AFL over any other high-level programming language. The reason is simple, AFL doesn’t need reinventing the wheel, you can literally write a full-blown trading system in AFL in few hours. Read Amibroker vs Python comparison here.