Experienced traders recognize the results 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 this information 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 may increase profitability while reducing risk.
The faster a trader can receive economic news, analyze the data, make decisions, apply risk management models and execute trades, the more profitable they could become. Automated traders are often more successful than manual traders because the automation will use 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 the usual human with no emotion. To be able to make the most of the lower latency news feeds it is vital to truly have the right low latency news feed provider, have a proper trading strategy and the proper network infrastructure to guarantee the fastest possible latency to the news source to be able to beat your 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 rest of the world receives economic news through aggregated news feeds, bureau services or mass media such as for instance news web sites, radio or television low latency news traders rely on lightning fast delivery of key economic releases. These generally include jobs figures, inflation data, and manufacturing indexes, matchmaker japan 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 can be an embargo. After the embargo is lifted for news event, reporters enter the release data into electronic format which can be immediately distributed in an exclusive binary format. The data is sent over private networks to several distribution points near various large cities round the world. To be able to receive the news data as quickly as you are able to, it is vital that a trader use a valid low latency news provider that has invested heavily in technology infrastructure. Embargoed data is requested by way of a source not to be published before a specific date and time or unless certain conditions have now been met. The media is given advanced notice to be able to prepare for the release.
News agencies also provide reporters in sealed Government press rooms during a precise lock-up period. Lock-up data periods simply regulate the release of all news data so that each news outlet releases it simultaneously. This can be done 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 is fed into an algorithm that parses, consolidates, analyzes and makes trading recommendations based on 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 produced in microseconds may equal an important 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 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 created possible through automated trading with low latency news feed. Automated trading can play 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 be released to understand when to monitor the market. For example, 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 look for a market that’s open and ready for trading.
Many investors that trade the news seek to own their algorithmic trading platforms hosted as close as you are able to 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 should be a balance of distance and latency between both. You have to be close enough to the news to be able to act upon the releases however, close enough to the broker or exchange to get your order in in front of the masses looking to find 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 feed was created specifically for applications and is machine readable. Streaming XML broadcast can be used to produce full text and metadata to ensure 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. Once the category reaches a threshold, the investor’s trading and risk management system is notified to trigger an entry or exit point from the market. Thomson Reuters includes a unique edge on global news compared to other providers being one of the very most respected business news agencies in the world or even probably the most respected outside of the United States. They have the benefit of including global Reuters News for their feed in addition to third-party newswires and Economic data for both 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.