Experienced traders realize the effects of global modifications on Foreign Exchange (Forex/FX) markets, stock markets and futures markets. Things for example interest rate decisions, inflation, retail sales, unemployment, manufacturing productions, customer confidence surveys, online business sentiment surveys, manufacturing surveys and trade balance affect currency movement. While traders could monitor the info manually using conventional news sources, profiting from automated or algorithmic trading utilizing low latency news feeds is an usually much more predictable and effective trading approach which can boost profitability while reducing risk.
The quicker a trader can receive economic news, analyze the data, make decisions, put on risk management models and execute trades, the much more lucrative they can become. Automated traders are generally more successful compared to manual traders because the automation will use a tested rules based trading approach that employs money management and risk management techniques. The strategy will process trends, analyze information and execute trades quicker than a human with no emotion. In order to take advantage of the low latency news feeds it’s necessary to develop the right very low latency news feed provider, have an effective trading strategy and the proper network infrastructure to ensure the fastest possible latency to the news source as a way to overcome the opposition on order entries and fills or even execution.
How do Low Latency News Feeds Work?
Low latency news feeds offer key economic data to advanced market participants for whom rate is a top priority. While the rest of the world gets economic news through aggregated news feeds, bureau services or even mass media like as information web sites, radio or tv very low latency news traders count on lightning quick delivery of key economic 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 improved for algorithmic traders.
One strategy 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 that is right away distributed in a proprietary binary format. The info is sent over individual networks to numerous distribution points near various good sized cities around the world. So as to acquire the news data quickly, it is crucial which a trader use a legitimate very low latency news provider that has invested heavily in technology infrastructure. Embargoed data is requested by a form to not be published before a certain time and date or even unless some circumstances have been attained. The media is provided advanced notice to be able to make for the introduction.
News agencies have reporters in closed Government media areas during a defined lock up period. Lock-up data periods simply control the release of all news data to ensure that every news outlet releases it simultaneously. This may be performed in 2 ways: “Finger push” and “Switch Release” are used to manage the release.
News feeds feature economic and business news that influence trading activity worldwide. Economic indicators are utilized to facilitate trading decisions. The news is fed into an algorithm which parses, consolidates, analyzes and creates trading suggestions based upon the news. The algorithms can filter the news, create signs and help traders make split-second decisions to stay away from substantial losses.
Faster trading decisions are enabled by automated software trading programs. Decisions made in microseconds might equate to a big edge in the marketplace.
News is an excellent sign of the volatility of a marketplace and in case the news is traded by you, possibilities will present themselves. Traders often overreact when a news report is released, and under react when there is almost no news. Machine readable news gives you historic information through archives that help traders to back test price movements against specific economic indicators.
Each country releases important economic news during particular times of the day. Experienced traders analyze and execute trades almost instantaneously when the announcement is made. Instantaneous analysis is made possible through automated trading with lower latency news feed. Automated trading is able to have fun with a part of a trader’s risk management and loss avoidance strategy. With automated trading, historic back tests and algorithms are utilized to select best entry as well as exit points.
Traders must know when the data is released to determine 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 find 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 majority of investors that will trade the media seek to have their algorithmic trading os’s hosted as close as is possible to news source along with the execution venue as possible. General distribution locations for very low latency news feed providers embrace globally: New York, Washington DC, Chicago plus London.
The optimal locations to place your servers are located in well-connected datacenters which allow you to directly connect your servers or perhaps network to the actually news feed source and execution venue. There must 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, close enough to the broker or even exchange to get your order in in front of the masses looking for the most effective fill.
Low Latency News Feed Providers
Thomson Reuters utilizes proprietary, cutting edge technology to generate a reduced latency news feed. The news feed is made specifically for applications and it is machine readable. Streaming XML broadcast is utilized to develop complete text and metadata to guarantee that investors hardly ever miss an event.
Another Thomson Reuters news feed attributes macro economic events, disasters and violence in the land. An assessment of the news is published. When the category grows to a threshold, the investor’s trading and risk management process is notified to trigger an entry or even exit point from the market place. Thomson Reuters has a unique edge on news which is global compared to various other providers being on the list of most regarded company news companies in the world if not most recognized outside of the United States. They have the advantageous asset of along with global Reuters News to their feed in addition to Economic data and third party newswires for both the United States and Europe. The University of Michigan Survey of buyers report is also an additional popular news event and releases data twice monthly. Thomson Reuters has extraordinary press rights to the University of Michigan data.
Other low latency info providers include: Need to Know News, Dow Jones News and Rapidata which we will discuss even more when they make info with regards to their services more accessible.
Examples of News Affecting the Markets
A news feed may suggest a change in the unemployment rate. For the sake of the scenario, unemployment rates will show a positive change. Historical analysis may show that the change is not due to seasonal effects. News feeds demonstrate that customer confidence is increasing due the reduction in unemployment rates. Reports provide a strong indication that the unemployment rate is going to remain low.
With this info, analysis may indicate that traders must short the USD. The algorithm may figure out the USD/JPY pair would yield the most profits. An immediate trade would be executed once the goal is reached, and also the trade is on auto-pilot until completion.
The dollar could continue to fall despite reports of unemployment improvement furnished from the media feed. Investors must keep in your head that multiple things impact the motion of the United States Dollar. Even thought the complete economic climate may not improve, the unemployment rate may decrease. If larger investors do not change their perception of the dollar, then the dollar might continue to fall.
The major 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 a surprise way. If the decision is made on information which is only from the unemployment, the assumption will 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 economic indicators such as responses from big niche players.
Trading The News – The Bottom Line
The markets are moved by news and in case you trade the news, you are able to capitalize. There are very few of us that may argue against that truth. There is no doubt that the trader getting news details ahead of the curve has the advantage on getting a solid short term trade on momentum swap in different markets whether FX, Futures or equities. The price of minimal latency infrastructure has dropped during the last few years making it easy to subscribe to a minimal latency news feed as well as get the data from the source providing a tremendous advantage over traders watching television viewing, the Internet, stereo or standard news feeds. In a marketplace driven by huge banks and hedge funds, low latency news feeds surely give the major business edge to even individual traders.
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