Experienced traders recognize the results of global changes on Foreign Exchange (Forex/FX) markets, stock markets and futures markets. Factors such as for example 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 records manually using traditional news sources, profiting from automated or algorithmic trading utilizing low latency news feeds is a generally more predictable and effective trading method that can 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 generally more successful than manual traders as 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. In order to take advantage of the lower latency news feeds it is vital to really have the right low latency news feed provider, have a proper trading strategy and the correct network infrastructure to guarantee the fastest possible latency to the news headlines source in order to beat your competitors 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 example news those sites, radio or television low latency news traders depend on lightning fast delivery of key economic releases. Elena Moussa These 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 is optimized for algorithmic traders.

One way of controlling the release of news is an embargo. After the embargo is lifted for news event, reporters enter the release data into electronic format which can be immediately distributed in a private binary format. The info is sent over private networks to many distribution points near various large cities round the world. In order to receive the news headlines data as quickly as possible, it is vital a trader make use of a valid low latency news provider that has invested heavily in technology infrastructure. Embargoed data is requested by way of a source to not be published before a specific date and time or unless certain conditions have been met. The media is given advanced notice in order to prepare for the release.

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

News feeds feature economic and corporate news that influence trading activity worldwide. Economic indicators are accustomed 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 headlines, produce indicators and help traders make split-second decisions to avoid substantial losses.

Automated software trading programs enable faster trading decisions. Decisions produced in microseconds may equal a significant edge in the market.

News is an excellent indicator of the volatility of a market and in the event that you trade the news headlines, opportunities will present themselves. Traders tend to overreact each time a news report is released, and under-react if you have very little 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 manufactured possible through automated trading with low latency news feed. Automated trading can play an integral 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 understand 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 planet, traders may always look for a market that is open and ready for trading.

Where Do You Put Your Servers? Important Geographic Locations for algorithmic trading Strategies

Nearly all investors that trade the news headlines seek to possess their algorithmic trading platforms hosted as close as possible 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 best locations to position your servers have been in well-connected datacenters that enable 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 must be close enough to the news headlines in order to act upon the releases however, close enough to the broker or exchange to really get your order in in front of the masses looking to discover the best fill.

Low Latency News Feed Providers

Thomson Reuters uses proprietary, state of the art technology to make a low latency news feed. The news headlines feed is designed especially for applications and is machine readable. Streaming XML broadcast is used to make 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 headlines is released. 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 on earth or even the absolute most respected not in the United States. They’ve the advantage of including global Reuters News for 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: Have to Know News, Dow Jones News and Rapidata which we will discuss further if they make information regarding their services more available.

Examples of News Affecting the Markets

A news feed may indicate a big change in the unemployment rate. For the sake of the scenario, unemployment rates will show an optimistic change. Historical analysis may reveal that the change is not as a result 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 absolute 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 to fall despite reports of unemployment improvement provided from the news headlines feed. Investors must bear in mind that multiple factors affect the movement of the United States Dollar. The unemployment rate may drop, but the entire economy might not improve. If larger investors do not change their perception of the dollar, then the dollar may continue to fall.

The big players will typically make their decisions just before the majority of the retail or smaller traders. Big player decisions may affect the marketplace in an urgent way. If your decision is manufactured on only information from the unemployment, the assumption will soon be incorrect. Non-directional bias assumes that any major news about a nation can provide 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 in the event that you trade the news headlines, you can capitalize. There are very few folks that can argue against that fact. There’s undoubtedly that the trader receiving news data in front of the curve gets the edge on getting a solid short-term trade on momentum trade in a variety of markets whether FX, Equities or Futures. The price of low latency infrastructure has dropped within the last couple of years which makes it possible to sign up to a low latency news feed and receive the info from the origin giving a huge 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 supply the big company edge to even individual traders

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