Experienced traders recognize the effects 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 details 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 will 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 can become. Automated traders are often more successful than manual traders because 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 when compared to a human with no emotion. In order to take advantage of the low latency news feeds it is important to really have the right low latency news feed provider, have an effective trading strategy and the right 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 high priority. While the rest of the world receives economic news through aggregated news feeds, bureau services or mass media such as for example news the websites, 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 definitely an embargo. Following the embargo is lifted for news event, reporters enter the release data into electronic format which will be immediately distributed in a private 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 as you are able to, it is important 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 to not be published before a certain 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 likewise have reporters in sealed Government press rooms during a definite 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 news headlines 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 to avoid substantial losses.
News is an excellent indicator of the volatility of a market and in the event that you trade the news, opportunities will present themselves. Traders tend to overreact when a news report is released, and under-react if you find 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 made 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 select optimal entry and exit points.
Nearly all investors that trade the news seek to possess 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 ideal locations to put your servers are in well-connected datacenters that enable 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 need to be close enough to the news in order to act upon the releases however, close enough to the broker or exchange to really get your order in prior to the masses looking for the best fill.
Another Thomson Reuters news feed features macro-economic events, natural disasters and violence in the country. An analysis of the news is released. Onc real raw news e 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 in comparison to other providers being one of the very most respected business news agencies on earth if not probably the most respected not in the United States. They’ve the main advantage of including global Reuters News to their feed along with third-party newswires and Economic data for 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.
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 show that the change is not as a result of seasonal effects. News feeds show that buyer confidence is increasing due the reduction in unemployment rates. Reports provide a powerful indication that the unemployment rate will remain low.
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 unexpected way. If the decision is made on only information from the unemployment, the assumption will soon be incorrect. Non-directional bias assumes that any major news about a nation will generate a trading opportunity. Directional-bias trading accounts for all possible economic indicators including responses from major market players.