Experienced traders realize the results of global changes on Foreign Exchange (Forex/FX) markets, stock markets and futures markets. Factors for example interest rate choices, inflation, retail sales, unemployment, industrial productions, customer confidence surveys, business sentiment surveys, manufacturing surveys and trade balance affect currency movement. While traders could monitor this information yourself using regular information sources, making money from automated or even algorithmic trading utilizing very low latency news feeds is an usually more predictable and effective trading method which can boost profitability while minimizing risk.
The quicker a trader is able to receive economic news, analyze the information, make decisions, generate risk management models and perform trades, the much more rewarding they’re able to become. Automated traders are generally more successful than physical traders because the automation will make use of a tested rules based trading method that employs cash management and risk management methods. The strategy will process trends, analyze information and execute trades quicker than a human with no emotion. In order to make the most of the minimal latency news feeds it is necessary to develop the right low latency news feed provider, have a good trading strategy and the correct network infrastructure to make sure the fastest possible latency on the media source in order to beat the competitors on order entries and fills or execution.
How can Low Latency News Feeds Work?
Low latency news feeds offer key economic data to sophisticated market participants for whom speed is a top priority. While the majority of the planet draws economic news through aggregated news feeds, bureau services or perhaps mass media such as information sites, radio or even television very low latency news traders count on super fast delivery of key financial releases. These include employment figures, inflation data, and manufacturing indexes, directly from the Bureau of Labor Statistics, Commerce Department, and the Treasury Press Room in a machine-readable feed that is enhanced for algorithmic traders.
One approach of manipulating the release of news flash is an embargo. After the embargo is lifted for news event, reporters enter the release information into electronic format which is right away handed out in a proprietary binary style. The data is sent over private networks to various distribution points near various good sized cities around the planet. In order to get the news data as fast as possible, it is crucial that a trader use a valid very low latency news provider that has invested heavily in technology infrastructure. Embargoed data is requested by a resource not to be published before a specific date and time or even unless some conditions have been achieved. The media is provided advanced notice to be able to prepare for the release.
News agencies have reporters in sealed Government media rooms during a defined lock up period. Lock-up data periods just regulate the release of all news data to ensure that every news outlet releases it simultaneously. This might be achieved in two ways: “Finger push” and “Switch Release” are utilized to regulate the release.
News feeds feature financial and corporate news that impact trading exercise anywhere. Economic indicators are used to facilitate trading decisions. The info is fed into an algorithm which parses, consolidates, analyzes as well as makes trading recommendations based upon the news. The algorithms can easily filter the news, produce signals and help traders make split second decisions to avoid substantial losses.
Faster trading decisions are enabled by automated software trading programs. Decisions made in microseconds could equate to a major edge in the marketplace.
News is a good warning of the volatility of a marketplace and in case the news is traded by you, opportunities will present themselves. Traders often overreact when a news report is released, and under react when there is little or no news. Machine readable news gives you historic data through archives that help traders to back test price movements against certain economic indicators.
Each country releases important economic news during some times of the day. Proficient traders analyze and execute trades almost instantly when the announcement is made. Instantaneous analysis is made possible through automated trading with very low latency news feed. Automated trading can perform a part of your trader’s risk management and damage avoidance strategy. With automated trading, historic back tests and algorithms are used to choose maximum entry as well as exit points.
Traders needs to know if the details is released to determine when you ought to monitor the market. To illustrate, important economic data in the Country is released between 8:30 AM and 10:00 AM EST. Canada produces information between 7:00 AM and 8:30 AM. Since currencies span the world, traders may well always look for a market that is open and ready for trading.
A SAMPLE of Major Economic Indicators
Consumer Price Index
Employment Cost Index
Producer Price Index
Productivity and Costs
U.S. Import and Export Prices
Unemployment and employment
Where Do you Put Your Servers? Critical Geographic Locations for algorithmic trading Strategies
The vast majority of investors that will trade the news seek to get their algorithmic trading platforms hosted as close as you can to news source and the execution venue as possible. General distribution locations for lower latency news feed providers include globally: New York, London, Chicago plus Washington DC.
The optimal places to place your servers are located in well-connected datacenters which allow you to directly connect your network or perhaps servers to the actually news feed source and execution venue. There ought to be a balance of distance and latency between both. You have to be close enough to the news in order to act upon the releases however, close enough with regard to the broker or exchange to get the order of yours in ahead of the masses looking for the most effective fill.
Low Latency News Feed Providers
Thomson Reuters utilizes proprietary, state of the art technology to make a reduced latency news feed. The news feed is designed especially for applications and is machine readable. Streaming XML broadcast is designed to produce complete text as well as metadata to guarantee that investors hardly ever miss an event.
Another Thomson Reuters news feed features macro-economic events, disasters and violence in the united states. An assessment of the news is put up. When the category reaches a threshold, the investor’s trading and risk management structure is notified to bring about an entry or perhaps exit point from the market place. Thomson Reuters has a unique edge on global news compared to other providers being on the list of most regarded business news companies in the world if not probably the most respected exterior of the United States. They’ve the advantageous asset of as well as global Reuters News to their feed in addition to third party newswires and Economic data for both United States plus Europe. The Faculty of Michigan Survey of consumers report is also yet another big news event and releases information two times monthly. Thomson Reuters has extraordinary media rights to the University of Michigan data.
Other low latency news suppliers include: Need to Know News, Dow Jones News and Rapidata which we are going to discuss even more when they make info with regards to their services more available.
Examples of News Affecting the Markets
A news feed might indicate a change in the unemployment rate. For the benefit of the scenario, unemployment rates will show a positive change. Historical analysis may show the change is not due to seasonal effects. News feeds show that customer confidence is increasing due the reduction in unemployment rates. Reports provide a robust indication that the unemployment rate will remain low.
With this information, analysis could indicate that traders should short the USD. The algorithm might figure out the USD/JPY pair would deliver probably the most profits. An immediate trade would be carried out when the goal is reached, and the trade will be on auto pilot until completion.
The dollar could continue to fall despite stories of unemployment enhancement provided from the media feed. Investors has to keep in mind that multiple things greatly influence the motion of the United States Dollar. The unemployment rate may drop, but the entire economy won’t improve. If larger investors don’t change the perception of theirs of the dollar, then the dollar could continue to fall.
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The big players will generally make the decisions of theirs prior to virtually all of the smaller or retail traders. Big player decisions may impact the market in an unexpected way. If the decision is done on just information out of the unemployment, the assumption is going to be incorrect. Non-directional bias assumes that any major media about a nation is going to create a trading opportunity. Directional-bias trading accounts for just about all potential financial indicators which includes responses from big industry players.
Trading The News – The Bottom Line
The markets are moved by news and if you trade the news, you can capitalize. There are few of us that may argue against that fact. There’s little doubt that the trader having news facts in front of the curve has the advantage on getting a solid short-term trade on momentum trade in various markets whether FX, equities or Futures. The price of low latency infrastructure has dropped in the last couple of years making it easy to subscribe to a minimal latency news feed and receive the details from the source providing a tremendous advantage over traders watching tv, the Internet, radio or perhaps standard news feeds. In an industry driven by large banks and hedge funds, low latency news feeds surely provide the big company advantage to even particular traders.