Experienced traders recognize the effects of global changes on Foreign Exchange (Forex/FX) markets, stock markets and futures markets. Factors such as for instance interest rate decisions, inflation, retail sales, unemployment, industrial productions, consumer confidence surveys, business sentiment surveys, trade balance and manufacturing surveys affect currency movement. While traders could monitor these details manually using traditional news sources, profiting from automated or algorithmic trading utilizing low latency news feeds is an often more predictable and effective trading method that could increase profitability while reducing risk.

The faster a trader can receive economic news, analyze the info, make decisions, apply risk management models and execute trades, the more profitable they could become. Automated traders are often more successful than manual traders since the automation will make use of a tested rules-based trading strategy that employs money management and risk management techniques. The strategy will process trends, analyze data and execute trades faster than a human without emotion. To be able to make the most of the lower latency news feeds it is essential to have the right low latency news feed provider, have an effective trading strategy and the correct network infrastructure to guarantee the fastest possible latency to the news source in order to beat the competition on order entries and fills or execution.

How Do Low Latency News Feeds Work?

Low latency news feeds provide key economic data to sophisticated market participants for whom speed is a premier priority. As the remaining portion of the world receives economic news through aggregated news feeds, bureau services or mass media such as for instance news the websites, radio or television low latency news traders count on lightning fast delivery of key economic releases. These generally include jobs 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’s optimized for algorithmic traders.

One way of controlling the release of news is definitely an embargo. Following the embargo is lifted for news event, reporters enter the release data into electronic format which is immediately distributed in an amazing binary format. The information is sent over private networks to several distribution points near various large cities across the world. To be able to receive the news data as quickly as you possibly can, it is essential that a trader make use of a valid low latency news provider that’s invested heavily in technology infrastructure. Embargoed data is requested by a source never to be published before a specific date and time or unless certain conditions have now been met. The media is given advanced notice in order to prepare for the release.

News agencies also have reporters in sealed Government press rooms during a defined lock-up period. Lock-up data periods simply regulate the release of all news data so that every news outlet releases it simultaneously. This can be carried out in two ways: “Finger push” and “Switch Release” are used to regulate the release.

News feeds feature economic and corporate news that influence trading activity worldwide. Economic indicators are used to facilitate trading decisions. The news headlines is fed into an algorithm that parses, consolidates, analyzes and makes trading recommendations in relation to the news. The algorithms can filter the news, produce indicators and help traders make split-second decisions in order to avoid substantial losses.

Automated software trading programs enable faster trading decisions. Decisions manufactured in microseconds may equate to a significant edge in the market.

News is an excellent indicator of the volatility of a market and if you trade the news, opportunities will present themselves. Traders often overreact each time a news report is released, and under-react when there is almost no news. Machine readable news provides historical data through archives that enable traders to back test price movements against specific economic indicators.

Each country releases important economic news during certain times of the day. Advanced traders analyze and execute trades almost instantaneously when the announcement is made. Instantaneous analysis is created possible through automated trading with low latency news feed. Automated trading can enjoy part of a trader’s risk management and loss avoidance strategy. With automated trading, historical back tests and algorithms are utilized to choose optimal entry and exit points.

Traders have to know when the data will soon be released to know when to monitor the market. For instance, important economic data in the United States is released between 8:30 AM and 10:00 AM EST. Canada releases information between 7:00 AM and 8:30 AM. Since currencies span the world, traders may always find a market that’s open and ready for trading.

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 you possibly can to news source and the execution venue as possible. General distribution locations for low latency news feed providers include globally: New York, Washington DC, Chicago and London.

The perfect locations to place your servers are in well-connected datacenters that permit you to directly connect your network or servers to the actually news feed source and execution venue. There has to be a balance of distance and latency between both. You need to be close enough to the news in order to act upon the releases however, close enough to the broker or exchange to truly get your order in prior to the masses looking to find the best fill.

Low Latency News Feed Providers

Thomson Reuters uses proprietary, state of the art technology to generate a low latency news feed. The news headlines feed is designed designed for applications and is machine readable. Streaming XML broadcast is employed to produce full text and metadata to make sure that investors never miss an event.

Another Thomson Reuters news feed features macro-economic events, natural disasters and violence in the country. An analysis of the news is released. Elena Moussa When the category reaches a threshold, the investor’s trading and risk management system is notified to trigger an access or exit point from the market. Thomson Reuters includes a unique edge on global news in comparison to other providers being one of the very most respected business news agencies in the world if not the most respected outside the United States. They have the advantage of including global Reuters News with their feed in addition to third-party newswires and Economic data for both the United States and Europe. The University of Michigan Survey of Consumers report can also be another major news event and releases data twice monthly. Thomson Reuters has exclusive media rights to The University of Michigan data.

Other low latency news providers include: Need certainly to Know News, Dow Jones News and Rapidata which we will discuss further once they make information regarding their services more available.

Samples of News Affecting the Markets

A news feed may indicate a change in the unemployment rate. For the sake of the scenario, unemployment rates will show a confident change. Historical analysis may reveal that the change is not because of seasonal effects. News feeds reveal that buyer confidence is increasing due the decrease in unemployment rates. Reports provide a powerful indication that the unemployment rate will remain low.

With this particular information, analysis may indicate that traders should short the USD. The algorithm may determine that the USD/JPY pair would yield the most profits. A computerized trade will be executed when the target is reached, and the trade will soon be on auto-pilot until completion.

The dollar could continue steadily to fall despite reports of unemployment improvement provided from the news feed. Investors must bear in mind that multiple factors affect the movement of the United States Dollar. The unemployment rate may drop, but the overall economy might not improve. If larger investors do not change their perception of the dollar, then your dollar may continue steadily to fall.

The big players will typically make their decisions just before most of the retail or smaller traders. Big player decisions may affect the market in surprise way. If your decision is created on only information from the unemployment, the assumption will soon be incorrect. Non-directional bias assumes that any major news about a country will create a trading opportunity. Directional-bias trading accounts for many possible economic indicators including responses from major market players.

Trading The News – The Bottom Line

News moves the markets and if you trade the news, you can capitalize. You will find very few folks that could argue against that fact. There’s without doubt that the trader receiving news data prior to the curve gets the edge on obtaining a solid short-term trade on momentum trade in various markets whether FX, Equities or Futures. The price of low latency infrastructure has dropped over the past several years rendering it possible to sign up for a low latency news feed and receive the info from the origin giving a tremendous edge over traders watching television, the Internet, radio or standard news feeds. In a market driven by large banks and hedge funds, low latency news feeds certainly give the big company edge to even individual traders

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