A Setup to Trade Forex Algorithmically Using the Interactive Brokers API

The post “A Setup to Trade Forex Algorithmically Using the Interactive Brokers API” first appeared on QuantInsti blog.

The author of this article is not affiliated with Interactive Brokers. The IBridgePy software is in no way affiliated, endorsed, or approved by Interactive Brokers or any of its affiliates. It comes with absolutely no warranty and should not be used in actual trading unless the user can read and understand the source. The IBKR API team does not support this software.

We know how challenging it is to implement your strategy and monitor its performance in live markets. You may unearth a good idea, strategy, or backtested edge, but then you’re stuck in quicksand when deploying it. We’ve faced this, too.

At Quantinsti, our mission is to provide you with the support, resources, and know-how to work or invest using algo trading in whatever unique way you want to.

In this article, we present two solutions to this problem.

• Solution 1: A ready-to-use-and-tweak live trading setup in Python, recommended for intermediate-advanced Python users
• Solution 2: An algorithmic trading platform, recommended for beginner-intermediate Python users
• Which one should we choose?

Solution 1: A ready-to-use-and-tweak live trading setup in Python, recommended for intermediate-advanced Python users

Python-based setup to automate forex trading

We have created a working version of our Python-based setup to trade forex algorithmically. It is meant for forex trading with the Interactive Brokers API using Python. This script allows you to execute transactions in the forex market using a customisable strategy and swap out forex assets as needed.

The script-based application aims to teach you how to use a ready-made IB-API-based trading setup and how it works during each trading period. We refer to our labor of love as a Python-based setup, trading app, or similar names. We hope it’s self-evident that they all refer to the same thing!

This setup is for you if you want something simple to use, easy to tweak, and ready to deploy your strategy live in the forex market. It is built so that you don’t need to worry about the intricacies of the setup unless you want to customize it. It allows you to trade any forex asset available in Interactive Brokers. You don’t need to create a whole setup on your own. It is ready and you only need to set its hyperparameters and change the strategy to use it and trade in the forex market.

It’s free to use, easy to run, and quick to tweak. IBridgePy is great for a customised setup with simpler functions than the IB API. Here, we provide a ready-made setup, so you don’t need to build it from scratch, either with the IB API or the IBridgePy. Only tweaking the strategy and setting the hyperparameters of the setup will be required to run it.

Please check our GitHub repository for all the free codes and setups we have available for you.

• To run our forex setup quickly, please follow the basic guidelines.

• In case you want to learn everything about the setup, please read the following:
• The ”start here” document: Where you’ll have the details of the main file and how to tweak the setup hyperparameters.

• The strategy document: Where you’ll have the details of the strategy used for the setup and learn how to tweak it so you can modify it as per your requirements.

• The references: Where you’ll find all the necessary books or lectures used to create this setup.

Pros:

• The setup is designed to teach you how to trade algorithmically, making it suitable for beginners who want to understand the mechanics of trading.
• You can modify the trading strategy according to your preferences, risk tolerance, and market conditions, providing flexibility in trading approaches.
• The setup leverages the Interactive Brokers API, allowing for quick execution of trades and access to real-time market data, enhancing the efficiency of the trading process.
• The ability to trade any forex asset available on the Interactive Brokers platform offers broad opportunities for trading your preferred asset.
• The emphasis on backtesting and user accountability encourages a structured approach to strategy development, which can help refine the trading approach before going live.
• Building in Python allows users to leverage the vast array of Python trading libraries and tools available in the Python ecosystem for data analysis and machine learning.
• The setup has mechanisms for generating trade reports keeping the user informed about her trading performance.

Cons:

• You can only trade only a single forex asset at a time. You cannot create a portfolio of forex assets to trade.
• You can only trade forex assets. You cannot trade stocks, commodities or any other financial asset.
• The setup is built so you can only modify the hyperparameters in the main file and change the strategy file functions. You should tweak the source code if you want a more customized setup.
• The setup allows trade using the Interactive Brokers API only. You cannot use other brokers’ APIs to trade.

Solution 2: An algorithmic trading platform, recommended for beginner-intermediate Python users

Trade using iBridgePy

If you are looking for a simple execution platform to trade algorithmically on Interactive Brokers, TD Ameritrade, or Robinhood, you can use IBridgePy which is an easy-to-use tool for beginners. Start with a free 3-hour Interactive Brokers automated trading. This is especially recommended for learners who do not have a GitHub account or are not proficient in Python.

After this course/IBPY tutorial, you will be able to:

• Automate your trading strategies on Interactive Brokers
• Fetch real-time and historical data for different time frames
• Place orders for various instruments such as stocks, futures, options, and currencies.
• Track the status of your orders and your portfolio position in real time.

Pros:

• Simplicity of use: IBridgePy makes it easier for developers and traders with different degrees of Python expertise to connect to the Interactive Brokers API.
• Python-centric: Makes use of Python’s strength and adaptability to give users access to a wide range of libraries and tools for backtesting, strategy creation, and data analysis.
• Supports both live trading and backtesting, allowing users to thoroughly test their ideas on historical data before implementing them in real time.
• Community and support: Gain access to resources, tutorials, and support forums that can help with learning and troubleshooting thanks to a growing user and developer community.

Cons:

• Potential learning curve: Although the IBridgePy framework is easier to use than the raw IB API, there is still a learning curve involved in comprehending its features.
• Limited Control: IBridgePy may provide less precise control over some aspects of the trading process than the raw IB API.
• Community Size: Compared to several other well-known Python trading libraries, the community and support resources are still relatively tiny, despite their growth.
• Possibility of Bugs and Issues: Similar to any third-party library, you may run into bugs or compatibility problems that need to be fixed or do workarounds.

Which one should we choose?

So, if you want a ready-made setup that can be tested quickly and that allows you to change a single file to suit your specific strategy requirements, please proceed with our trading setup.

If you want to build your setup with an easier-to-use API than the IB’s, please use IBridgePy.

Even though we say this, you can still use our existing forex setup’s source code and modify it as needed to create a quicker solution for your customized trading setup. This solution will be quicker than using IBridgePy, but you’ll still be relaying in our source code if that’s what you intend to do.