Guide to developing stock trading apps (2024)

Once the domain of Wall Street executives and millionaires, investing is now more accessible than ever before.

According to a Bloomberg article, the number of individual investors has doubled since 2010.

That number has risen more with the recent pandemic, as people with stimulus checks are stuck at home with nothing to spend on.

Trading apps are part of the reason for this surge.

Thanks to trading apps, it’s now cheaper and easier to invest in the stock market. You can buy anything from blue-chip stocks to cryptocurrencies with just a few taps.

Indeed, the trading app market is forecasted to grow to $12.16 billion by 2028. And if you’re thinking of getting into the game, now is a great time.

Table of Contents

How do stock trading apps work

A trading app acts as the middleman between individual investors and the stock market.

It automates many of the functions of a broker, such as placing orders, selling shares, and displaying stock market data.

Guide to developing stock trading apps (1)

Source: How Stuff Works

At its most basic, trading apps work just like any fintech app, such as mobile wallets.

They allow users to place funds in the app by connecting their bank account or manually sending money to it.

But the difference here is that trading apps also function as a marketplace. They connect to major exchanges and list all the financial assets that the person can buy or sell.

Now, when a user buys a stock, the transaction doesn’t actually happen in real-time.

Instead, the app first sends that buy order to the exchange and looks for someone willing to sell that stock.

The process can take minutes to hours and even days, depending on the trading volume of the asset.

Guide to developing stock trading apps (2)

Source: XTB

Most stock trading apps enable users to connect to two major types of exchanges.

First are traditional exchangeslike the New York Stock Exchange (NYSE) and NASDAQ, where investors can buy shares of public companies.

Some also offer other financial instruments like exchange-traded funds (ETFs) and commodities like gold.

The other are crypto exchanges that allow you to buy and sell cryptocurrencies such as Bitcoin, Ethereum, and Ripple. These exchanges include Coinbaseand Gemini.

Guide to developing stock trading apps (3)

Source: Jim Yang via Linkedin

Whenever a user places a trade successfully, the platform will often get a percentage of the proceeds as a fee.

Some apps charge a flat fee, which is beneficial for users trading large volumes.

The resulting money or asset from the trade is then transferred to the user’s portfolio.

They can also withdraw their cash at any time, which is often credited to their bank account or mobile wallet(in the case of cryptos).

And that is how trading apps work in a nutshell.

Of course, many offer added features like research, real-time market data, and learning resources to differentiate themselves from others in their niche.

Types of trading software

Just like there are different kinds of traders, there are also various types of trading software to serve them.

According to Investopedia, these can be categorized into two general groups: commercial platforms and proprietary platforms.

Commercial platforms are aimed at individual investors and are the ones that you’ll probably encounter the most.

They focus on ease of use and convenience, so they’ll often feature charts, simple UI, educational resources, and AI assistance.

Most of the trading apps in the market, such as Robinhood, TD Ameritrade, and Fidelity, are all commercial platforms.

Guide to developing stock trading apps (4)

Source: Fidelity

Proprietary platforms, on the other hand, are meant for financial institutions. As a result, they feature much more complex UIs and advanced features.

So chances are you won’t be using this kind of platform unless you’re an investment banker or a financial analyst at a big firm.

Guide to developing stock trading apps (5)

Source: Finance Magnates

You can also separate trading software depending on the investment style.

While most trading apps can accommodate all types of traders, some are better for certain techniques than others.

For example, day trading is where someone buys and sells the same stocks in a short period—sometimes in a matter of hours.

It’s an advanced approach suited for expert traders.

Apps like eTradehave features that can help day trading. However, some apps like M1 Financeforbid same-day tradingsince it’s designed for long-term investing.

On the other end of the spectrum are automated investing and robo-advisor apps. This is where the app makes some or all of the trading decisions for the user.

It’s perfect for novices who want to earn money trading but don’t want to get involved in the specifics.

The automated investment plan of the Betterment appis a great example:

Guide to developing stock trading apps (6)

Source: Groovy Post

Knowing which audience you’re aiming at is crucial when designing trading apps.

It would be inefficient and financially unfeasible to implement features that will satisfy alltypes of traders.

Why invest in a stock trading app?

The benefits of a stock trading app for users can be summed up in one word: accessibility.

For one, trading apps make investing much cheaper. Some platforms have lower fees than their broker counterparts.

Apps like Robinhood even offer commission-free trading, essentially allowing you to trade for free and keep all the profits.

Guide to developing stock trading apps (7)

Source: Disruptor Daily

This setup allowed Robinhood to reach more than $22 million users in 2021.

Trading apps also make the stock market itself more accessible to everyone. We mentioned that trading was solely for the very rich just a few years ago.

That’s because you needed a broker to place your trades—something that most people didn’t have access to.

But trading apps changed that. Now, you can view and buy the best stocks with simple taps on your mobile phone.

It’s the main reason why the industry has experienced a sharp uptick in trading interest among casual users.

This phenomenon reached full steam during the pandemic when people were stuck at home and looking for ways to earn more money.

Even a country like Pakistan, with a traditionally small number of retail investors, has seen the number of individual traders shoot up dramatically.

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Source: Dawn

It’s no coincidence that a trading app, K-Trade, was the 5thmost downloaded appin the country during that time.

Trading apps are completely changing the financial landscape and rewriting the rules of stock markets. Hence, why it’s a good investment for app developers as well.

How to monetize a stock trading app

Like a traditional brokerage, the primary way stock trading apps earn is through fees and commissions. They charge a certain percentage for every transaction a user does.

However, that’s not the only way a trading app can earn. In fact, apps like Robinhood consistently show that transaction fees are not the most effective monetization strategy.

Remember their zero commission setup? Even without charging per-trade fees, they’ve managed to hit revenues of more than $500 million in Q1 in 2021 alone.

Guide to developing stock trading apps (9)

Source: Business of Apps

So, how do they make money?

The company gets it primarily from payment for order flow (PFOF). It’s essentially a fee that Robinhood charges whenever it directs a trade to a third party, often a market maker.

PFOFs make a substantial chunk of the app’s revenue—up to 75% from 2015 to 2018.

Guide to developing stock trading apps (10)

Source: Ming-Chieh Lee

Another way is through premium subscriptions and added features.

For example, Robinhood offers a Gold account, which gives users access to bigger deposits, third-party research, and the ability to do margin investing. It costs $5 a month.

Finally, apps can collect interest from margin trading, which is essentially money that a user borrows to fund their trade.

Less frequently, apps can also charge interest on unused funds on a user’s account (like Robinhood), but that can be detrimental to the user experience.

What is a stock trading API?

When you develop a trading app, chances are you won’t create the trading algorithm itself. Instead, you’ll use a stock trading API.

These intermediaries are the ones who perform the transaction for you, such as placing trades or getting market data.

Guide to developing stock trading apps (11)

Source: IG

Here’s one way of looking at it: as a trading app developer, your main task is to create the interface to facilitate user interaction with this API.

The main driver when choosing an API is the assets you want to offer.

For example, some APIs are specific to stocks only, while others offer alternative financial instruments like ETFs or cryptos.

APIs are also specific to a certain task. Thus, you may need to use more than one in your app.

For example, the Polygon.ioAPI is used solely for gathering and visualizing market data.

Guide to developing stock trading apps (12)

Source: Polygon.io

Perhaps the biggest impact of choosing a trading API is when it comes to your app’s features and security.

For instance, an API like Alpacais suitable if you want to offer commission-free trading. They also provide security features like FINRA and SIPC compliance.

Guide to developing stock trading apps (13)

Source: Alpaca

Indeed, APIs play a critical role in trading apps, more so than any other kind of app.

But if you’re using the same API as a dozen other developers, how will you stand out?

Through your app’s features, of course.

Key features of a stock trading app

A stock app must allow users to place trades and manage their portfolios at a bare minimum. But we think these extra features can help a trading app stand out.

One is efficient registration and verification.It’s important to balance usability, asking for personal information, and financial compliance processeslike KYC.

In most cases, the best approach is to delay registration as much as possible.

eToro does a great job of this by allowing users to browse the app without verification. The only time they need to do so is the moment they’re placing a trade.

Guide to developing stock trading apps (14)

Source: eToro

Even when verifying your profile, the process is smooth and easy. eToro’s form is broken into multiple screens to not overwhelm the user.

It even has some gamification elements, such as a progress bar and trading assessment quiz:

Guide to developing stock trading apps (15)

Source: eToro

A second must-have feature is user authentication, which should be just as seamless as account registration. There also needs to be a balance between security and ease of use.

The best approach is to use biometrics and multi-factor authentication (MFA)for key actions.

For instance, the Robinhood app requires biometrics for signing in. You can also use two-factor verification if you wish.

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Guide to developing stock trading apps (17)

Source: Investment Zen/ Robinhood

Athird considerationis user guidance. Trading is a risky proposition, and it’s easy for inexperienced users to lose their money.

And it’s the app’s responsibility to guide the user and prevent that as much as possible.

Not doing so will damage the user experience and lead to regulatory violations. Just look at the $70 million fineRobinhood got for providing “false or misleading” information.

Education is the best bet here. Having in-app resources like help articles or video guides can help users make informed decisions.

Giving users a demo account is also useful, as it allows them to practice trading without risking money. Below is an example from Capital.com.

Guide to developing stock trading apps (18)

Source: Investiki

Another option is to use artificial intelligence (AI) to give trading suggestions. This is a great option for beginner investors.

A good example is the Fisdomtrading app. They use a goal based approach. Instead of picking stocks to invest in, users specify a financial goal.

Then the app gives investment suggestions to reach that target.

Guide to developing stock trading apps (19)

Source: Toptal

Lastly, let’s discuss the need for robust analytics. Timely, relevant information is the name of the game when it comes to investing.

So users should get access to it at all times. However, you don’t want to overwhelm, either.

A well-designed UI and thoughtful UXare key here, like this example from Tastyworks. It’s meant for more experienced traders, so there’s more data to show.

But we think the developers did a good job doing that without appearing cluttered.

Guide to developing stock trading apps (20)

Source: Aptoide

Of course, there’s much more to a successful trading app than our suggestions here. But if you have them in place, you’ll have a higher chance of standing out.

Need help with your trading app development?

As you can see, creating a successful trading app is no walk in the park.

Apart from the usual app development hurdles, you also need to worry about fintech regulations and compliance.

Not to mention the industry is rife with competition from established players.

Now, we’re not saying this to discourage. Rather, it’s to illustrate that experience and expertise are important ingredients in succeeding in this demanding niche.

And as one of the top fintech app developers in the region, we think we have the chops to help you develop the next big trading app.

Interested?Get in touch today, and let’s talk!

Guide to developing stock trading apps (2024)

FAQs

How to develop a stock trading app? ›

Key steps of stock trading app development
  1. Analyze what's out there on the market. ...
  2. Decide on the core features of your app. ...
  3. Create the design of your product. ...
  4. Write the code and test your MVP — keep legal technicalities in mind. ...
  5. Iterate upon user feedback — flesh out the stock market app.

Can I create my own trading platform? ›

Initiate your trading platform project

Onboard a competent project manager (PM), an experienced IT architect, and a team of business analysts (BAs) with experience working in the financial services industry. You will build web and mobile apps, which are “Systems of Engagement” (SoEs).

How do free stock trading apps make money? ›

Basically, the retail brokerages like Robinhood or or Ameritrade or Schwab collect your orders. You want to buy 100 shares of Apple, you put it in the Robinhood or Schwab app – and instead of Schwab paying for that trade to get executed, actually market makers pay Schwab or Ameritrade or Robinhood for that order flow.

How to use AI for stock trading? ›

To succeed in AI investing, traders need to have access to a variety of tools. Some essential tools include data analysis software, trading bots, and risk management tools. These tools help traders to identify patterns, automate trading, and manage risk effectively.

What is the best profitable trading app? ›

List of The Top 10 Trading Apps In India
RankNamesTop Features
1Paytm MoneyZero commission on direct mutual funds
2Zerodha KiteHas all the stock trading options
3Angel OneRapid buying and selling of stocks
4Upstox AppBest for instant investing
6 more rows

What app do professional stock traders use? ›

TD Ameritrade's thinkorswim is a top stock trading app for active traders. TD Ameritrade features accounts with no recurring fees and no minimum balance. It offers various accounts and investments, including some less commonly supported investments, such as futures, forex, and cryptocurrencies.

How much does it cost to develop trading platform? ›

Cost Comparison for Stock Trading Application Development in India vs the US:
FunctionalityKey FeaturesAverage Cost in the US (USD)
Advanced Functionality:Social Features & Gamification$5,000 – $10,000
Platform:Native iOS App$40,000 – $60,000
Native Android App$35,000 – $55,000
Cross-Platform App$25,000 – $40,000
13 more rows
Feb 2, 2024

Is it legal to automate stock trading? ›

Yes, algorithmic trading is legal. There are no rules or laws that limit the use of trading algorithms. Some investors may contest that this type of trading creates an unfair trading environment that adversely impacts markets. However, there's nothing illegal about it.

How much does it cost to start a trading platform? ›

A stock trading app usually costs about $65,000 to build. However, the total cost can be as low as $30,000 or as high as $100,000. A stock trading app with a low number of features (also known as a minimum viable product, or MVP) will be more affordable than an app that includes all intended functionality.

How do 0 commission brokers make money? ›

Commission-free brokers typically receive payment (in the form of rebates) from market makers, who pay for the privilege of buying what you sell and selling what you buy. Market makers profit from the bid-ask spread (when you buy from a market maker, it's at the “ask” price, and when you sell, it's at the “bid” price).

How does Robinhood trading app make money? ›

Robinhood makes money in many ways, notably through a system known as payment for order flow. That is, Robinhood routes its users' orders through a market maker who actually makes the trades and compensates Robinhood for the business at a rate of a fraction of a cent per share.

How profitable are free apps? ›

Both types of apps do not generate revenue until users start paying to access premium features or continue using the service after the trial. Freemium app has a conversion rate between 1%-30%, although most linger on the lower boundary, while free trial apps enjoy a higher conversion rate of 30% - 50%.

What is the best AI tool for stock trading? ›

Comparison
S. No.Tool NameUses
1EquBotAnalyze, Strategize
2Trade IdeasScan, Identify
3TrendSpiderChart, Analyze
4TradierTrade, Connect
6 more rows
Feb 22, 2024

Which AI bot is best for trading? ›

10 “Best” AI Stock Trading Bots (May 2024)
  • Trade Ideas. ...
  • TrendSpider. ...
  • Signm. ...
  • Signal Stack. ...
  • Stock Hero. ...
  • Tickeron. ...
  • Scanz. ...
  • Imperative Execution.
May 1, 2024

Do AI trading bots really work? ›

Genuine trading bots from reputable providers can help users ensure they don't miss a trade, no matter what time of day or night it may be. Their use is perfectly legitimate, enabling individuals to create round-the-clock trading programs in an attempt to grow their profits.

How to create an investment app? ›

8 steps to develop an investment app
  1. Step 1: Set goals and conduct market research. ...
  2. Step 2: Choose a monetization strategy. ...
  3. Step 3: Find an app development agency. ...
  4. Step 4: Make a list of features. ...
  5. Step 5: Develop UI/UX design. ...
  6. Step 6: Develop an MVP. ...
  7. Step 7: Release your app. ...
  8. Step 8: Maintain your app and keep it secure.
Apr 17, 2024

How to build a stock market app with no code? ›

The steps to building a stock market app with no code include:
  1. Get Started. ...
  2. Configuring your database.
  3. Build your workflows.
  4. Searching for a stock (data from external API)
  5. Adding a new stock to a watchlist.
  6. Displaying a list of stocks.
  7. Fetching stock pricing data (by scheduling a backend API workflow) ...
  8. Privacy & Security.
Sep 18, 2020

How profitable is stock trading? ›

The stock market's average return is a cool 10% annually — better than you can find in a bank account or bonds. But many investors fail to earn that 10% simply because they don't stay invested long enough. They often move in and out of the stock market at the worst possible times, missing out on annual returns.

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