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 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 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 could become. Automated traders are usually more successful than manual traders because the automation will work with 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 without any emotion. In order to make the most of the low latency news feeds it is important to really have the right low latency news feed provider, have a suitable trading strategy and the proper network infrastructure to ensure the fastest possible latency to the headlines source in order 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 top priority. As the remaining portion of the world receives economic news through aggregated news feeds, bureau services or mass media such as 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 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 is immediately distributed in a private binary format. The information is sent over private networks a number of distribution points near various large cities round the world. In order to receive the headlines data as quickly as you can, it is important a trader work with a valid low latency news provider that’s invested heavily in technology infrastructure. Embargoed data is requested by a source not to 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 all news data so that each news outlet releases it simultaneously. This can be achieved 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 headlines is fed into an algorithm that parses, consolidates, analyzes and makes trading recommendations in relation to the news. The algorithms can filter the headlines, produce indicators and help traders make split-second decisions to avoid substantial losses.
Automated software trading programs enable faster trading decisions. Decisions manufactured in microseconds may mean a significant edge in the market.
News is a good indicator of the volatility of a market and if you trade the headlines, opportunities will present themselves. Traders often overreact each time a matchmaker japan 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 once the announcement is made. Instantaneous analysis is manufactured 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 got to know once the data will undoubtedly 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 globe, traders may always find a market that’s open and ready for trading.
Nearly all investors that trade the headlines seek to possess their algorithmic trading platforms hosted as close as 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 allow 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 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 for the best fill.
Low Latency News Feed Providers
Thomson Reuters uses proprietary, state of the art technology to produce a low latency news feed. The headlines feed is designed especially for applications and is machine readable. Streaming XML broadcast is employed 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 headlines is released. Once 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 has a unique edge on global news in comparison to other providers being one of the very respected business news agencies on earth if not the absolute most respected outside 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 the United States and Europe. The University of Michigan Survey of Consumers report is also another major news event and releases data twice monthly. Thomson Reuters has exclusive media rights to The University of Michigan data.