Why Test Cases For Trading Application is the Right Way

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Trading systems include trading platforms or trading applications. While trading platforms include the software through which investors and traders can open, close, and manage market positions, trading applications are usually multi-product that cater to multi-user options and consist of end-to-end functionality that processes numerous volumes of traffic at extreme speeds.

The key to creating and managing effective trading systems is ensuring high volume and low latency throughput. With the activity of traders and money managers around the invention of new strategies and new methods of electronic price discovery, this paves the way for a continuous increase in the volume of trades and management of vast amounts of market data. This leads to huge network traffic from various orders being placed, creating an exponential market data growth rate. Typically, trading systems employ a set of complex rules within their matching engines to perfectly match and handle buying and selling options on top of handling cancel and replace requests.

Recent innovations such as automated trading, the need for 24-hour continuous trading, market fragmentation, and changes in underlying technologies, such as algorithmic trading, have further added to the trading system complexity. Moreover, as business opportunities continue to change in today’s rapidly evolving marketplace, the result is increased data flow and processing loads. In the world of trading, time is literally money. All these various reasons have led to the emergence of the need for testing trading systems and make testing inevitable for these trading segments. Now, let us see some of the other reasons why testing is needed for trading applications.

Why Testing is Needed for Trading Systems?

As trading systems need to process vast amounts of data in real-time, data accuracy is crucial to avoid huge losses in terms of money and reputation. In addition, stock markets have inherent complexity in terms of business flows and business rules, and testing plays a critical role in ensuring effective business delivery. Thus, testing plays an important role in the efficient functioning of trading systems. There is a high importance bound around having a well-tested trading application as it will not fail in real-time and gives an edge for client’s options and purchases.

Let us see some of the challenges involved with trading systems.

Key challenges involved with Trading Systems

Navigating Complex Trading Scenarios Overcoming challenges in developing intricate trading scenarios that accurately mirror real-time market conditions.

Sustaining Domain Competence Ensuring ongoing proficiency in the specific industry domain for effective decision-making and strategic implementation.

Managing Technical Complexity Addressing technical hurdles arising from intricate scenarios and diverse interface gateways.

Integrating Multiple Systems Overcoming complications arising from various systems operating through multiple interfaces and gateways.

Efficient API Coordination Streamlining the management and coordination of multiple Application Programming Interfaces (APIs) for seamless operations.

Optimizing Performance and Reducing Latency Mitigating performance issues linked to latency levels while meeting Service Level Agreements (SLAs).

Testing Legacy Applications Overcoming challenges in testing older, often outdated, applications that lack modern testing capabilities.

Enhancing Network Performance Ensuring optimal network performance facilitates smooth and reliable trading operations.

Navigating Regulatory Compliance Addressing issues related to adhering to industry-specific regulatory requirements and standards.

Mitigating 3rd-Party Application Impact Dealing with challenges posed by third-party applications that may disrupt existing trading systems.

Other challenges include changes in business models, rules and regulatory requirements and the introduction of new products

Testing Trading Systems and Platforms

The major types of testing trading systems include functional, interface, security, and performance testing. These testing types are important in evaluating the speed, functionality, security, and overall trading system performance. Smoke tests and unit test cases for trading applications need to be created for each functionality. A smoke test should be implemented to test the complexity of multiple real-time order transactions. Regression testing must also be taken up continually to ensure that the existing functionalities are not affected when new functionality is introduced into the trading system. Interface testing is one of the key tests conducted to ensure the quality of software products. In trading applications, interface testing focuses on the system’s data accuracy needs and the interfaces’ functioning, as the test environment should be similar to that of the real-time scenario. Testing needs to be performed around the network, and interfaces as the loss incurred by stock exchanges due to data leakage could be huge. Security testing includes threat analysis and vulnerability analysis, and threats are identified through security code reviews. Performance testing involves testing the leading trading application, its subsystems, and the connecting interfaces.


Let us also know about Backtesting, which refers to applying a trading system to old data and verifying how it behaves to the data during the specified time period. This type of testing evaluates simple ideas, while forward performance testing, also known as paper trading, provides traders with another set of out-of-sample data on which to evaluate the system. It is just a simulation of the actual trading system. Thus, effective testing performed on trading systems can obtain positive results and good performance.

Cigniti Technologies has a decade of expertise as an independent testing services provider. Contact Cigniti’s team of testing experts to know more about the testing of your trading applications.


  • Cigniti Technologies

    Cigniti is the world’s leading AI & IP-led Digital Assurance and Digital Engineering services company with offices in India, the USA, Canada, the UK, the UAE, Australia, South Africa, the Czech Republic, and Singapore. We help companies accelerate their digital transformation journey across various stages of digital adoption and help them achieve market leadership.

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