Experienced traders realize the consequences of global modifications on Foreign Exchange (Forex/FX) marketplaces, futures markets and stock markets. Factors for instance interest rate choices, inflation, retail sales, unemployment, manufacturing productions, customer confidence surveys, online business sentiment surveys, trade balance and manufacturing surveys affect currency movement. While traders could monitor the information manually using traditional information sources, making money from automated or even algorithmic trading utilizing low latency news feeds is an usually even more predictable and effective trading strategy which can maximize profitability while reducing risk.
The more quickly a trader is able to receive economic news, analyze the details, make decisions, apply risk management models and perform trades, the much more lucrative they’re able to become. Automated traders are usually more lucrative compared to manual traders since the automation will use a tested rules-based trading approach that employs money management and risk management techniques. The method will process trends, analyze data and perform trades more quickly than a human with no emotion. To be able to take advantage of the low latency news feeds it is vital to include the right very low latency news feed provider, have a good trading strategy and the correct network infrastructure to make sure probably the fastest possible latency to the media source to be able to beat the competitors on buy entries and fills or perhaps execution.
How do Low Latency News Feeds Work?
Low latency news feeds offer key economic data to sophisticated market participants for whom pace is a main priority. While the rest of the world receives economic news through aggregated news feeds, bureau services or even mass media such as info web sites, radio or even tv low latency news traders count on lightning fast delivery of key financial releases. These include work 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 is an embargo. After the embargo is lifted for news event, reporters enter the release data into electronic format which is right away handed out in a proprietary binary style. The info is sent over private networks to numerous distribution points near various large cities around the earth. To be able to receive the news data as fast as possible, it is important which a trader use a valid very low latency news provider that has invested heavily in technology infrastructure. Embargoed data is requested by a form not to be published before a certain time and date or unless some factors have been attained. The media is presented advanced notice in order to prepare for the introduction.
News agencies have also reporters in closed Government press rooms during a defined lock up period. Lock-up data periods just manage the release of all media details so that every news outlet releases it simultaneously. This may be performed in two ways: “Finger push” and “Switch Release” are utilized to control the release.
News feeds feature economic and business news flash that influence trading exercise worldwide. Economic indicators are utilized to facilitate trading decisions. The info is fed into an algorithm that parses, consolidates, analyzes as well as makes trading strategies based upon the news. The algorithms can filter the news, produce signs and help traders make split second decisions to stay away from substantial losses.
Automated software trading programs enable faster trading decisions. Decisions made in microseconds could equate to a big advantage in the industry.
News is a great sign of the volatility of a market and if you trade the news, possibilities will present themselves. Traders usually overreact when a news article is released, and under-react when there is little or no news. Machine readable news gives you historic statistics through archives that help traders to again test price movements against specific financial indicators.
Each country releases important economic news during specific times of the day. Experienced traders analyze and then execute trades almost immediately when the announcement is made. Instantaneous evaluation is made possible through automated trading with lower latency news feed. Automated trading can play a part of any trader’s risk management and damage avoidance strategy. With automated trading, historical back tests and algorithms are used to select best entry as well as exit points.
Traders has to know when the data is introduced to determine when you ought to monitor the market. To illustrate, important economic data in the United States 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 globe, traders could always designate a market which is ready and open 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
employment & Unemployment
Exactly where Can you Put Your Servers? Vital Geographic Locations for algorithmic trading Strategies
The vast majority of investors that trade the news seek to get their algorithmic trading platforms hosted as close as is possible to news source as well as the execution venue as possible. General distribution locations for low latency news feed providers include globally: New York, Washington DC, Chicago plus London.
The optimal locations to place your servers are located in well connected datacenters that enable you to even connect your servers or network to the actually news feed supply plus execution venue. There needs to be a balance of latency and distance between both. You need to be in close proximity enough to the news to be able to act upon the releases however, in close proximity enough to the broker or exchange to get your order in in front of the masses looking for the most effective fill.
Minimal Latency News Feed Providers
Thomson Reuters utilizes proprietary, state of the art technology to create a minimal latency news feed. The news feed is designed specifically for applications and is machine readable. Streaming XML broadcast is accustomed produce complete text as well as metadata to make certain that investors hardly ever miss an event.
Another Thomson Reuters news feed features macro-economic events, natural disasters and violence in the land. An analysis of the news is released. When the category grows to a threshold, the investor’s trading and risk control system is notified to cause an entry or perhaps 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 respected business news agencies worldwide if not probably the most recognized outside of the United States. They’ve the advantage of as well as global Reuters News to the feed of theirs in addition to third party newswires and Economic data for both the United States and Europe. The University of Michigan Survey of buyers article is also another big news event and releases data two times monthly. Thomson Reuters has exclusive press rights to the Faculty of Michigan data.
Other very low latency news providers include: Need to Know News, Dow Jones News and Rapidata which we will discuss further when they make information regarding their services more available.
Examples of News Affecting the Markets
A news feed may suggest a difference in the unemployment rate. For the benefit of the scenario, unemployment rates will show a positive change. Historical analysis may show that the change just isn’t due to seasonal effects. News feeds demonstrate that customer confidence is increasing due the decrease in unemployment rates. Reports provide a powerful indication that the unemployment rate is going to remain low.
With this information, analysis might indicate that traders must short the USD. The algorithm may determine that the USD/JPY pair would yield the most profits. An instant trade will be executed when the goal is reached, and the change will be on auto-pilot until completion.
The dollar could continue to fall despite stories of unemployment enhancement furnished from the news feed. Investors needs to keep in your head that several factors greatly influence the motion of the United States Dollar. The unemployment rate may decrease, but the overall economic climate won’t improve. If larger investors do not change the perception of theirs of the dollar, then the dollar could continue to fall.
The leading players will generally make the decisions of theirs prior to virtually all of the smaller or retail traders. Big player decisions may affect the market in a surprise way. If the decision is made on info that is only out of 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 all potential financial indicators which includes reactions from huge market players.
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Trading The News – The Bottom Line
The markets are moved by news and if you trade the information, you are able to capitalize. You can find few of us that could argue against that point. There’s little doubt that the trader getting news details ahead of the curve has the edge on getting a solid short-term trade on momentum trade in a variety of markets whether FX, equities or Futures. The cost of very low latency infrastructure has dropped in the last couple of years making it possible to subscribe to a low latency news feed as well as have the details from the source giving a tremendous advantage over traders watching tv, the Internet, radio or standard news feeds. In a market driven by huge banks and hedge funds, low latency news feeds certainly give the huge organization advantage to even particular traders.