Guide to developing stock trading apps

11 min read
May 9, 2022

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.

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.

how online trading works

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.

the stock market explained

Source: XTB

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

First are traditional exchanges like 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 Coinbase and Gemini.

crypto exchange

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.

fidelity screenshot

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.

finance magnates screenshot

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 eTrade have features that can help day trading. However, some apps like M1 Finance forbid same-day trading since 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 app is a great example:

betterment app screenshot

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 all types 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.

robinhood screenshot

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.

Individuals versus foreign investors in the PSX

Source: Dawn

It’s no coincidence that a trading app, K-Trade, was the 5th most downloaded app in 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.

robinhood revenue chart

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.

how payment for order flow works

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.

What is API trading

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 API is used solely for gathering and visualizing market data.


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 Alpaca is suitable if you want to offer commission-free trading. They also provide security features like FINRA and SIPC compliance.

alpaca screenshot

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 processes like 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.

eToro screenshot

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:

trading knowledge assessment

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.

Source: Investment Zen / Robinhood

A third consideration is 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 fine Robinhood 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 demo account

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 Fisdom trading 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.

old and new school investment process

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 UX are 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.

tastyworks legacy screenshot

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!

Written by

Marko Strizic

Co-founder and CEO

Marko started DECODE with co-founders Peter and Mario, and a decade later, leads the company as CEO. His role is now almost entirely centred around business strategy, though his extensive background in software engineering makes sure he sees the future of the company from every angle. A graduate of the University of Zagreb’s Faculty of Electrical Engineering and Computing, he’s fascinated by the architecture of mobile apps and reactive programming, and a strong believer in life-long learning. Always ready for action. Or an impromptu skiing trip.

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