The business of being a trading software vendor?

Discussion in 'Programming' started by clearinghouse, Feb 4, 2013.

  1. Just curious if any of you vendors would comment.

    How do you really even know whether it's worth your time to do the software side of things? Do you vendors just cast your products out there and hope someone will pay? How do you know the space is actually high margin? I didn't think, for example, that market data vendors really made all that much money, and there's not much said about the Murray Ruggierio/NinjaTrader/ModulusFE types, at least on the financial side of things.

    Moreover, if trading volumes are going down or are in the doldrums with fewer and fewer people making money, is it a drag on the business of selling shovels to the gold miners?

    How many of you started trading and then just decided to sell your software instead?
  2. Eyez


    Depends on what kind of service you are providing. custom software vendor vs trying to sell something out of the box. It's much less lucrative selling out of the box software as you face price elasticity issues. The age old question that if something works, why is it $49.95, etc.

    Software business is more lucrative on a consulting basis; ie. when you aren't advertising on every single trading forum, news site, etc; ie. word of mouth, you have a proven record of success providing value to high-net worth individuals, so they will refer you to their friends.
  3. 1245


    It's like any other business. You need a product that people have a need for, that fills a niche. Then you need a marketing plan and the right connections to get it out there. Very difficult without a big partner or single projected client to build your business around.

  4. My situation is closer to a single projected client, who'd then resell to multiple clients. The need for my code exists, but it's hard to tell how large the demand is because it's such a niche space, or whether it's even worth my time to service client needs. The situation's specifics are kind of vague to me, as I don't know what kind of problems I'll run into on this path.

    There are already competitors in the space, but their product sort of misses the mark for a lot of what guys are trying to accomplish.
  5. gmst


    Great question. I am a user of Multicharts, previously used Trade station and use them daily for strategy prototyping and idea testing. However, I also feel frustrated by a lot of bugs and LIMITATIONS that Multicharts have.

    For a firm like Multicharts, most of their revenue comes from new traders. A starter in this business learns about MC from forums and then buys it based on their sleek marketing and good reviews they get. Most people don't make money in trading, so most of the users after losing money for 1-2-3 years, decide to leave trading and continue with their main job.

    Only a few progress to become independent traders - these are the guys who understand all the limitations of an off-the-shelf software like MC. They become advanced and power users and only these guys become frustrated upon discovering that a software like MC can't do what they "naturally" expect such a software to do for them. However, MC has no reason to cater to demand of these guys - since these guys don't pay them any recurring fees. Their main aim is to sell their software to new traders on the block, which generates revenue and MC team gets paid their salary.

    To be honest, for an advanced trader, the situation is a one big clusterfuck!!!!!!!!!!!!

    I have often wondered how much better software can be created by a team of 3 top notch programmers who are based out of India (I know top-notch Indian programmers is a rare breed, but some Indians can write very good code). This will keep the cost low. And how much better software can be created than Multicharts.

    But the quandary will still apply. New users who will give all the revenue will not need all the thorough features and power and advanced users won't give you yearly revenue. So, development suffers compared to sleek marketing to newbies.

    But I would be interested if someone experienced in software development can comment on how much top 3 very bright guys out of IITs can do in 1 year as far as creating a competing trading software like MC (with the ability to do Easylanguage translation if required - so that software can be sold to masses) is concerned??!!
  6. gmst


    So, no comments on this post yet. Experts where are you.
  7. Wulfrede


    gmst, to answer your question: tons.

    Three top notch guys (I don't believe they exist in India, btw, but that's only from my personal experience) can do what MC does (or rather do only what's needed and ignore the myriad of useless features) and then add the things that a profitable trader who "gets" it actually needs. They can do this in a year flat or even faster, if you are willing to spend the bucks.

    The beauty of getting these three guys to work for you is that you will have *the* perfect solution delivered to you on an iterative basis. Meaning, you'll use aspects of as it is being coded. Best way to develop (in the right direction) and test.

    There is no money in it for the vendors. That's why you won't find one selling a product in this manner. There is plenty of money in it for the trader and that's why every trading shop hires their own top notch staff.

  8. Huh? What can't MC do that is so important? Something that doesn't involve price, volume, and time and sales, the order book? LOL...
  9. I'm pretty sure that those top notch staffs exist all over the world. Paying them what they are worth is the hard part. I've seen a project that went great with a few really good coders but their payscale was too much for personnel so they were replaced with about three dozen coders that worked cheaper!
  10. gmst


    Thanks, appreciate your response. Makes lot of sense.
    #10     Feb 5, 2013