Experienced traders recognize the results of global changes on Foreign Exchange (Forex/FX) markets, stock markets and futures markets. Factors such as 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 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 data, make decisions, apply risk management models and execute trades, the more profitable they are able to become. Automated traders are usually more successful than manual traders since 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 when compared to a human with no emotion. In order to make the most of the reduced latency news feeds it is important to truly have the right low latency news feed provider, have an effective trading strategy and the proper network infrastructure to guarantee the fastest possible latency to the news source to be able 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 high priority. While the rest of the world receives economic news through aggregated news feeds, bureau services or mass media such as news web sites, radio or television low latency news traders rely on lightning fast delivery of key economic releases. 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’s optimized for algorithmic traders.
One method 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 is immediately distributed in an amazing binary format. The info is sent over private networks to several distribution points near various large cities around the world. In order to receive the news data as quickly that you can, it is important that a trader use a valid low latency news provider that has invested heavily in technology infrastructure. Embargoed data is requested with a source to not be published before a certain 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 have reporters in sealed Government press rooms during a defined lock-up period. Lock-up data periods simply regulate the release of most news data so that each 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 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 produced in microseconds may equate to 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 tend to overreact whenever 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 once the announcement is made. Instantaneous analysis is created possible through automated trading with low latency news feed. Automated trading can enjoy a part of a trader’s risk management and loss avoidance strategy. With automated trading, historical back tests and algorithms are utilized to pick optimal entry and exit points.
Traders must know once the data is likely to be released to know when to monitor the market. As an 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 globe, traders may always locate a market that’s open and ready for trading.
Many investors that trade the news seek to possess their algorithmic trading platforms hosted as close that you 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 ideal locations to put your servers come in well-connected datacenters that enable you to directly connect your network or servers Japanese matchmaking agency to the actually news feed source and execution venue. There must be a balance of distance and latency between both. You need to be close enough to the news to be able to act upon the releases however, close enough to the broker or exchange to really get your order in ahead of the masses looking to discover 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 headlines feed is designed designed for applications and is machine readable. Streaming XML broadcast is used to produce full text and metadata to ensure 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 has a unique edge on global news in comparison to other providers being one of the most respected business news agencies on the planet or even the most respected outside of the United States. They have the advantage of including global Reuters News to 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 be another major news event and releases data twice monthly. Thomson Reuters has exclusive media rights to The University of Michigan data.