Experienced traders recognize the consequences of global changes on Foreign Exchange (Forex/FX) markets, futures markets and stock markets. Factors for example interest rate decisions, inflation, retail sales, unemployment, industrial productions, consumer confidence surveys, business sentiment surveys, manufacturing surveys and trade balance affect currency movement. While traders could monitor the information manually using regular information sources, profiting from automated or algorithmic trading utilizing low latency news feeds is an often even more predictable and effective trading technique that can boost profitability while reducing risk.
The faster a trader can receive economic news, analyze the data, make decisions, generate risk management models and execute trades, the much more profitable they are able to become. Automated traders are usually more successful compared to physical traders since the automation will use a tested rules based trading approach which usually employs money management and risk management methods. The method will process trends, analyze information and execute trades more quickly than a human with no emotion. In order to make the most of the low latency news feeds it is vital to possess the right low latency news feed provider, have a good trading strategy and the right network infrastructure to make sure probably the fastest possible latency to the news source as a way to beat the opposition on order entries and fills or even execution.
How can Low Latency News Feeds Work?
Recommended–> : Breaking news headlines local
Low latency news feeds provide key financial data to innovative market participants for whom pace is a top priority. While the rest of the planet receives economic news through aggregated news feeds, bureau services or mass media like as information web sites, radio or tv very low latency news traders count on super quick 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 controlling the release of news is an embargo. After the embargo is lifted for news event, reporters go into the release data into electronic format which is right away sent out in a proprietary binary format. The data is sent over private networks to various distribution points near various big cities around the world. To be able to get the news data as quickly as possible, it’s essential that a trader use a valid low latency news provider that has invested heavily in technologies infrastructure. Embargoed data is requested by a source to not be published before a certain time and date or unless specific conditions have been achieved. The media is provided advanced notice in order to make for the introduction.
News agencies also have reporters in sealed Government media areas during a defined lock-up period. Lock-up data periods just regulate the release of all media data to ensure that every news outlet releases it simultaneously. This might be achieved in two ways: “Finger push” and “Switch Release” are used to manage the release.
News feeds feature financial and corporate news flash that impact trading activity all over the world. Economic indicators are utilized to facilitate trading decisions. The info is given into an algorithm that parses, consolidates, analyzes and creates trading recommendations based upon the information. The algorithms can filter the news, create indicators 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 significant advantage in the market.
News is a superb sign of the volatility of a marketplace and in case the news is traded by you, possibilities will present themselves. Traders tend to overreact when a news article is released, and under react when there is little or no news. Machine readable news offers historic information through archives that allow traders to back test price movements against specific economic indicators.
Of the day, each country releases important economic news during certain times. Experienced traders analyze and then execute trades almost instantly when the announcement is made. Instantaneous evaluation is made possible through automated trading with lower latency news feed. Automated trading is able to play a part of your trader’s risk control and damage avoidance strategy. With automated trading, historic back tests and algorithms are used to choose best entry as well as exit points.
Traders needs to know when the information is introduced to know when you should monitor the market. To illustrate, important financial data in the United States is released between 8:30 AM and 10:00 AM EST. Canada produces info between 7:00 AM and 8:30 AM. Since currencies span the globe, traders may well always designate 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? Important Geographic Locations for algorithmic trading Strategies
The majority of investors that trade the news seek to have their algorithmic trading platforms hosted as close as is possible to news source and the execution venue as possible. General distribution locations for minimal latency news feed providers would be globally: New York, London, Chicago as well as Washington DC.
The best locations to place your servers are located in well-connected datacenters that allow you to directly connect your servers or network to the actually news feed supply plus execution venue. There needs to be a balance of distance and latency between both. You have to be close enough to the media in order to act upon the releases however, in close proximity enough with the broker or even exchange to get the order of yours in in advance of the masses looking for the top fill.
Low Latency News Feed Providers
Thomson Reuters utilizes proprietary, state of the art technology to generate a minimal latency news feed. The news feed is designed especially for applications and it is machine readable. Streaming XML broadcast is utilized to make full text and metadata to guarantee that investors never miss an event.
Another Thomson Reuters news feed attributes macro-economic events, natural disasters and violence in the country. An assessment of the news is published. When the category gets to a threshold, the investor’s trading and risk control system is notified to trigger an entry or exit point from the marketplace. Thomson Reuters has a unique edge on global news when compared to various other providers being among the most respected business news companies in the world if not the most regarded outside of the United States. They have the advantage of along with global Reuters News to the feed of theirs in addition to third-party newswires and Economic data for both United States and Europe. The Faculty of Michigan Survey of consumers article is also an additional major news event and releases information two times monthly. Thomson Reuters has exclusive media rights to the Faculty of Michigan data.
Other very low latency news suppliers include: Need to Know News, Dow Jones News and Rapidata which we will discuss even more when they make info relating to their services more accessible.
Examples of News Affecting the Markets
A news feed may suggest a change in the unemployment rate. For the benefit of the scenario, unemployment rates will show a good change. Historical analysis may show that the change is just not due to seasonal effects. News feeds demonstrate that customer confidence is improving due the lessening in unemployment rates. Reports provide a strong indication that the unemployment rate is going to remain low.
With this information, analysis might indicate that traders must short the USD. The algorithm might determine that the USD/JPY pair would deliver probably the most profits. An automatic trade would be executed as soon as the goal is reached, and the swap is on auto-pilot until completion.
The dollar could go on to fall despite reports of unemployment enhancement furnished from the media feed. Investors needs to keep in your mind that many variables impact the action of the United States Dollar. The unemployment rate may drop, but the complete economic climate may not improve. If larger investors do not change their perception of the dollar, then the dollar might go on to fall.
The leading players will usually make their decisions prior to almost all of the retail or smaller traders. Big player decisions may impact the market place in an unexpected way. If the decision is created on info that is only out of the unemployment, the assumption will be incorrect. Non-directional bias assumes that any major media about a land will create a trading opportunity. Directional-bias trading accounts for all potential financial indicators like responses from huge industry players.
Trading The News – The Bottom Line
News moves the markets and if you trade the info, you are able to capitalize. You’ll find very few of us that could argue against that point. There is little doubt that the trader having news details ahead of the curve has the edge on getting a solid short-term trade on momentum swap in different markets whether FX, Futures or equities. The price of very low latency infrastructure has dropped in the last couple of years making it possible to sign up for a reduced latency news feed as well as have the information from the source providing a tremendous edge over traders watching tv, the Internet, stereo or perhaps standard news feeds. In a market place driven by large banks and hedge funds, low latency news feeds surely provide the big business advantage to even individual traders.