Experienced traders recognize the effects of global changes in the foreign exchange (Forex/FX), stock markets and futures markets. Factors such as interest rate decisions, inflation, retail sales, unemployment, industrial production, consumer confidence surveys, business sentiment surveys, trade balance and manufacturing surveys affect monetary movement. While traders could monitor this information manually using traditional news sources, profiting from automated or algorithmic trading using low-latency news feeds is an often more predictable and efficient method of trading that can increase profitability while reducing risk.
The faster a trader can receive financial news, analyze the data, make decisions, apply risk management models and execute trades, the more profitable they can become. Automated traders are generally more successful than manual traders because the automation will use a proven rules-based trading strategy that uses money management and risk management techniques. Vionta News The strategy will process trends, analyze data and execute trades faster than an emotionless human. In order to benefit from low-latency news feeds, it is essential to have the right low-latency news provider, have the right trading strategy and the right network infrastructure to ensure the fastest possible latency to the news source in order to beat the competition on entries and completions or execution of orders.
How do low latency news feeds work?
Low-latency news feeds provide key financial data to sophisticated market participants for whom speed is a top priority. While the rest of the world receives financial news through news aggregators, bureau services or mass media such as news websites, radio or television, low-latency news traders count on lightning-fast delivery of key financial releases. These include jobs data, inflation data and manufacturing indicators, directly from the Bureau of Labor Statistics, the Commerce Department and the Treasury Press Room in a machine-readable feed optimized for algorithmic traders.
One method of controlling the circulation of news is embargo. After the embargo on the news event is lifted, journalists enter the publication data in an electronic format which is immediately distributed in a proprietary binary format. Data is sent over private networks to multiple distribution points near various major cities around the world. To receive news data as quickly as possible, it is important for a marketer to use a reputable, low-latency news provider that has invested heavily in technology infrastructure. Embargoed data is requested by a source not to be released before a certain date and time or unless certain conditions are met. The media is notified in advance in order to prepare for the release.
News agencies also have reporters in sealed government newsrooms during a designated lockdown period. Data lock periods simply regulate the publication of all news data so that every news outlet publishes it at the same time. This can be done in two ways: “Finger push” and “Switch Release” are used to set the release.
News feeds include financial and corporate news that affect trading activity worldwide. Financial indicators are used to facilitate trading decisions. The news is fed into an algorithm that analyzes, aggregates, analyzes and makes trading recommendations based on the news. Algorithms can filter news, generate indicators and help traders make split-second decisions to avoid significant losses.
Automated software trading programs enable faster trading decisions. Decisions made in microseconds can amount to a significant advantage in the marketplace.
The news is a good indicator of the volatility of a market and if you trade the news, opportunities will present themselves. Traders tend to overreact when a news report is released and underplay when there is very little news. Machine readable news provides historical data through files that allow traders to support price movements against specific financial indicators.
Each country publishes important economic news at certain times of the day. Advanced traders analyze and execute trades almost instantaneously when the announcement is made. Instant analysis is made possible through automated trading with a low-latency news feed. Automated trading can play a part of a trader’s risk management and loss avoidance strategy. With automated trading, historical backtests and algorithms are used to select optimal entry and exit points.
Traders need to know when the data will be released so they know when to watch the market. For example, major economic data in the United States is released between 8:30 a.m. and 10:00 a.m. EST. Canada publishes information between 7:00 a.m. and 8:30 a.m. Since currencies span the globe, traders can always find a market that is open and ready to trade.
- SAMPLE important financial indicators
- Consumer price index
- Employment Cost Index
- Employment Status
- Producer Price Index
- Productivity and Cost
- Real earnings
- US import and export prices
- Employment & Unemployment
Where do you place your servers? Important geographic locations for algorithmic trading strategies
The majority of news trading investors seek to host their algorithmic trading platforms as close to the news source and execution venue as possible. General distribution locations for low-latency news providers worldwide include: New York, Washington, Chicago, and London.
The ideal locations to place your servers are in well-connected data centers that allow you to connect your network or servers directly to the actual news feed source and execution location. There must be a balance of distance and delay between the two. You need to be close enough to the news to act on the releases, yet close enough to the broker or exchange to get your order in ahead of the masses looking for the best coverage.
Low latency news providers
Thomson Reuters uses proprietary, state-of-the-art technology to produce a low-latency news feed. The news feed is designed specifically for applications and is machine-readable. XML streaming is used to produce full text and metadata to ensure investors never miss an event.
Another Thomson Reuters news feed includes macroeconomic events, natural disasters and domestic violence. An analysis of the news is released. When the category reaches a threshold, the investor’s trading and risk management system is alerted to trigger an entry or exit point. Thomson Reuters has a unique advantage in global news compared to other providers in being one of the most respected business news agencies in the world, if not the most respected outside the United States. They have the advantage of including Reuters world news in their feed in addition to third-party news wires and economic data for both the United States and Europe. The University of Michigan Survey of Consumers report is also another major news event and publishes data twice a month. Thomson Reuters has exclusive media rights to the University of Michigan data.
Other low-latency news providers include: Need to Know News, Dow Jones News, and Rapidata, which we’ll discuss further when they make more information about their services available.
Examples of news that affect markets
A news feed may indicate a change in the unemployment rate. For the sake of the scenario, unemployment rates will show a positive change. Historical analysis can show that the change is not due to seasonal effects. The news shows that buyer confidence is rising due to declining unemployment rates. The reports provide a strong indication that the unemployment rate will remain low.
With this information, analysis may indicate that traders should short the USD. The algorithm can determine that the USD/JPY pair will yield the most profits. An auto trade will be executed when the target is reached and the trade will be on autopilot until completion.
The dollar could continue to fall despite reports of improving unemployment provided by the news feed. Investors should keep in mind that many factors affect the movement of the United States dollar. The unemployment rate may decrease, but the overall economy may not improve. If larger investors do not change their perception of the dollar, then the dollar may continue to fall.
Big players will usually make their decisions before most retail or smaller traders. Decisions by big players can affect the market in unexpected ways. If the decision is made only on information from unemployment, the assumption will be wrong. Non-directional bias assumes that any major news about a country will create a trading opportunity. Directional bias trades account for all possible economic indicators, including responses from major market players.
Trading the News – The Bottom Line
News moves the markets and if you trade the news you can capitalize. There are very few of us who can argue against this fact. There is no doubt that the trader who receives news data ahead of the curve has the advantage of achieving a stable short-term trading on trading dynamics in various markets whether in FX, Equities or CME. The cost of low-latency infrastructure has come down in recent years, making it possible to subscribe to a low-latency news feed and receive data from the source giving a huge advantage over marketers watching TV, Internet, radio or standard news. In a market driven by big banks and hedge funds, low-latency news feeds certainly give the big firm an edge over even individual traders.
The Benefits of Alternative News Sites
Reading the newspaper online and following 24-hour news sites is becoming more and more popular. This is because it is cheaper and you get more news. You can see what’s happening in the world as it happens. You don’t have to wait until the next newspaper comes out like you used to.
Remember when the war in Afghanistan started and we were able to watch the first invasion live on the news? This is how things have become current and we have never been more in touch with world events than today.
However, it is better for people to get the best news on alternative news sites. This is because they are not biased. They are not affiliated with any political party and can choose their own news and which articles to publish. There is no agenda in their articles.
Therefore, it is important to know some of the advantages of reading news on alternative news sites.
- As mentioned above, they have the power over what articles they publish. The only purpose they serve is to break the news. We are not fed news that has a political flavor and does not prejudge anything. The news you read on their websites is purely for news purposes.
- They choose their topics. They may have articles on their website that other news stations and websites may consider newsworthy. Moreover, they don’t just focus on the bad news. You will be able to read cheerful things in news and some of their articles are truly educational.
- They don’t try to sell you stuff. Sometimes when a newspaper talks about a product or a special offer, they are trying to sell you something. However, with most online news sources, they try to educate you. When we were doing the research for this article, there was a link to an alternative news site about how to buy phones cheap. Clicked and just assumed it was going to be a trick or ask for money. But the link actually took you to an article, which showed you how to get cheap phones, but then also warned you about the dangers of auction sites and scams. The article was not linked to any auction site. It was purely educational.
- Another good thing about alternative news sites is that they don’t get stuck regurgitating things over and over again. If you turn on a news channel or look at one of the well-known news sites like Sky News, the only thing they will talk about is how cold it is in America, there are other things in the world right now. There are other things going on in America. We all know the weather is bad and people are suffering, but that doesn’t mean we should ignore everything else.
- Alternative news sites try to comment on everything. They have sections on celebrity news, breaking news and even have sections on funny videos and the latest in technology and business. We don’t need to hear or read the same things over and over again. We know murders are happening and the economy is bad and those are things we should be aware of, but what about everything else? CES 2014 is happening right now and there has been almost no news coverage. These are things that are going to affect us in the future and we know next to nothing about them.
