Trading with an API

How traders use APIs

A trading API, as the name suggests, allows you to interact with a trading system. More specifically, it allows you to execute directly on an exchange. This is particularly useful for traders who run algorithmic models on their own trading systems and want to receive live pricing and be able to execute trades — either manually or automatically through an algorithm — once their model generates a trading signal.

Trading APIs are particularly popular among hedge funds and proprietary trading firms due to their use of algorithmic trading programs, but even private investors can make use of trading APIs provided by online brokerages and more recently by cryptocurrency exchanges.

Most leading crypto asset exchanges, such as Bitfinex, Bittrex, and Coinbase Pro, offer trading APIs to their customer base. These APIs enable live pricing feeds as well as direct trade execution.

APIs and cryptocurrency trading

While the disruption at Binance API may have briefly put cryptocurrency trading APIs in a bad light, they have become an integral part of professional crypto traders’ arsenal and are a testament to the evolution of the cryptographic asset trading ecosystem. The more sophisticated investors enter the crypto asset markets, the more the use of APIs and algorithmic trading will increase. These trading programs, which seek to exploit arbitrage opportunities, for example, will actually help to make the crypto market more liquid and efficient. This, in turn, could attract more institutional investors to this new asset class.

The more the crypto asset trading ecosystem matures, the more market entrants can be expected. Currently, we are heading in the direction of the crypto asset markets becoming a part of the established global financial markets. Once crypto regulations are in place in the world’s leading economies, more institutional money will come, and the development of sophisticated and secure trading APIs will play their small but fundamental part in that.

APIs are omnipresent in today’s financial ecosystem, and yet most people don’t even realize when they’re using one. The recent “irregular” trading incident at Binance has been attributed to malicious API use — and has brought a timely focus to this integral technology.