How To Optimize Your Commodity Trading Platform | StoneX

In the contemporary futures marketplace, the commodity trading platform is an integral part of conducting day-to-day business. It is the trader’s gateway to the markets, a software lifeline that links participants and brokers to the exchange. Ensuring that the platform is in peak operating condition is a key part of competent trading.

So how can this task be accomplished? The answer lies in addressing one subject: latency. If you are going to trade commodities online, you must be aware of latency and work to reduce its negative effects.

Addressing Latency

Latency refers to any delay in the time it takes for a trader to interact with the market. Latency impacts every facet of online futures trading: the flow of pricing data, order entry, and trade execution. To optimize a commodity trading platform, one must mitigate latencies.

When it comes to latency in the markets, there are two types: those local to the trader and those that exist in the market infrastructure. Unfortunately, issues that originate at the exchange, brokerage, or internet provider can’t be fixed by the trader. However, there are three tools an average retail participant can use to promote strong commodity trading platform performance: maintenance, connectivity checks, and broker evaluation.

Maintenance

Among the greatest attributes of modern software trading platforms is that they are user-friendly. One does not need a PhD in computer science to troubleshoot most problems that arise. Many of the issues that plague performance may be solved through taking a few basic measures:

• • Update Software: Making sure that your operating system and trading software are up to date eliminates any glitches or bugs that may plague older versions.
  • Address Security Conflicts: Firewalls or third-party security providers can place barriers on data flow. If your CPU is equipped with these features, it is critical that they are set up to allow market data to be sent and received unfettered.
  • Perform Hardware Maintenance: Though it is unnecessary to regularly purchase top-of-the-line equipment, it is also important to maintain what you already have. This is accomplished by regularly defragmenting your hard drive, compressing secondary data files, and ensuring that there is enough RAM available to operate multiple applications simultaneously.

Connectivity Checks

An online trader’s ability to access the market relies upon internet connectivity. If your internet connection is slow or inconsistent, then you are at a competitive disadvantage.

Unfortunately, there is very little that you can do to improve an inherently bad connection. However, all is not lost. After identifying the degree of connection latency, you can adopt strategies that don’t rely on speed to succeed. Here are a couple of tests that anyone can conduct to gauge the strength of a connection to the market:

• Speed Tests: A simple online speed test will give you the download/upload rates for your connection. There are no hard rules or specs for speed, but faster is always better. Also, upload speeds are more important than download speeds. This is a key point because trade execution often depends upon how fast orders can get to the market.
• Ping Tests: Periodically performing ping tests between your CPU and broker/exchange servers is a great way to monitor connectivity. A ping test can be your barometer of how fast data is flowing to and from the exchange. If there is a tremendous variance in day-to-day ping rates, then relatively rare issues such as data bottlenecks may exist.

It is important to remember that fast upload speeds and pings trump download speeds. Though a certain amount of bandwidth is needed to fuel the commodity trading platform, the ability to send data to the exchange is crucial to performance.

Broker Evaluation

Perhaps the most difficult area in which to identify latency is in the broker’s infrastructure. In some cases, inefficiencies exist completely unbeknownst to the trader. These items can compromise the effectiveness of a commodity trading platform without anyone being the wiser.

Fortunately, there are two areas where broker-related latencies become evident:

• Order Routing: Where orders are stored as they wait to be executed is a key element in trade-related latency. Orders are commonly held in two fashions: client-side or server-side. Server-side is ideal because orders rest in a queue at the exchange instead of locally on traders’ PCs.
• Experience: If fills are consistently poor over time, then something is likely amiss. Monitoring slippage rates over weeks and months is a solid way of evaluating a broker’s aptitude.

A periodic and honest broker evaluation is an important aspect of maintaining adequate performance. Though perfection is impossible, consistently poor fills and significant slippage are signs that a broker’s technological infrastructure is inadequate. If this is the case, then it may be time to investigate alternatives.