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Best Authentication Method to Use to Connect with External API from Salesforce ( AppExchange App )

Hi Everyone,

We need a quick help or suggestion to use best authentication method to use to connect with Custom API ( We did not finalize the authentication process yet ). This will be an appexchange app and just fetching information from custom API and its user based so we need to authenticate the user.

Requirement is user need not to enter his username & password of custom API all the time so what would be the best way to achieve this.

Another Quick question is can we use Single Sign On for AppExchange App??

Thank you
Mahesh S