Trade The News – Profiting From Trading With Low Latency News Feeds
Traders who are experienced recognize the effects of global developments to Foreign Exchange (Forex/FX) markets stocks markets, futures and markets. Aspects like interest rate decisions and retail sales, inflation industrial productions, unemployment, consumer confidence surveys as well as business sentiment surveys manufacturing surveys and trade balances influence currency movements. While traders could monitor this information manually using traditional news sources, benefiting from algorithmic or automated trading with low latency news feeds is a more reliable and efficient trading strategy that can boost the profitability of your business while reducing risk. The quicker a trader is able to get economic news, study the data, make decisions use risk management strategies and make trades that are more profitable, the more successful they'll be. Automated traders generally are more successful than manual traders since the automated trading system employs a rule-based trading system that incorporates risk management and money management techniques. The strategy is able to process trends, analyze data and perform trades more quickly than a human , without emotion. To make the most of very low-latency newsfeeds it is crucial to choose the best low latency news feed provider, an appropriate trading strategy and the right infrastructure for network connectivity to ensure the fastest possible latency to the news source in order to stay ahead of competitors on orders and fills as well as execution. How Do Low Latency News Feeds Work? Low latency news feeds deliver essential economic information to market players who consider speed to be the top priority. While the other world gets economic news through unaggregated news feeds, bureau services, or mass media such as news web sites and radio, television or latency traders can expect lightning fast delivery of key economic announcements. These include employment figures, inflation data, and manufacturing indexes, directly through the Bureau of Labor Statistics, Commerce Department, and the Treasury Press Room in a machine-readable feed that is optimized for algorithmic traders. One method to limit the publication of news is an embargo. When the embargo is lifted for a news event, journalists submit the release information in electronic format which is immediately distributed in an exclusive binary format. The information is transmitted via private networks to several distribution centers in large cities around the world. In order to get news information as quickly as is possible, it's crucial that traders use an acceptable low latency news source that has made substantial investments in technology infrastructure. Embargoed data is demanded by the source to be released prior to a specific date or time, or unless certain conditions are completed. Media is provided with advance notice in order to prepare for the release. Also, news agencies have reporters who work in government press rooms throughout a specific lock-up time. Lock-up data periods simply regulate the publication of all news information so that each news source publishes it at the same time. This can be accomplished by two methods: "Finger push" and "Switch Release" are used to control the release. News feeds feature corporate and economic news that can influence trading activity around the world. Economic indicators are utilized to assist traders in making decision-making. The news is fed into an algorithm which parses data, analyzes, and consolidates and provides trading recommendations based on the news. The algorithms are able to filter news, produce indicators and assist traders in making instantaneous decisions to avoid large losses. Automated trading software programs allow quicker decisions on trading. The speed of decisions made in milliseconds could equate to a significant edge in the market. News is a good indicator of the volatility of a market and if you trade the news, opportunities will appear. Market participants tend to be over-reactive when a news report is released and then under-react when there is a lack of news. Machine-readable news gives archived data from the past that enable traders to check price movements against specific economic indicators. Each country releases important economic news during certain time periods during the day. Advanced traders analyze and execute trades in a matter of minutes when the announcement is made. Instantaneous analysis can be achieved via automated trading and a low latency news feeds. Automated trading can play a component of a trader's risk management and loss avoidance strategy. When trading with automated systems, the backtests of the past and algorithms are used to determine the best entry and exit points. Traders need to know when data will be released in order to know when to monitor the market. For instance, the most important economic data from the United States is released between 8:30 AM and 10:00 AM Eastern Standard Time. Canada releases information between 7:00 between 7:00 AM and 8:30 AM. Because currencies are spread across the globe and traders can always find a market that is open and ready for trading. A SAMPLE of Major Economic Indicators Consumer Price Index Employment Cost Index Employment Situation Producer Price Index Productivity and Costs Real Earnings U.S. Import and Export Prices Employment & Unemployment Where Do You Put Your Servers? Important Geographic Locations for algorithmic trading Strategies The majority of investors that trade on news sources utilize trading platforms that are located as close to news source and the execution venue as possible. The general distribution areas for low latency news feed providers worldwide include: New York, Washington DC, Chicago and London. For more detail please visit:- The most suitable locations for your servers is in well-connected datacenters that allow you to directly connect your server or network to the actually news feed source and execution venue. It is essential to find a equal amount of distance and latency between the two. You need to be in close proximity to the news in order to take action on the news releases however, close enough to the broker or exchange in order to ensure that your order is in front of others looking for the best fill. Low Latency News Feed Providers Thomson Reuters uses proprietary, state of the art technology to provide a news feed with low latency. The news feed is designed specifically for specific applications and machine-readable. Streaming XML broadcasts are used to generate full text and metadata that ensures that investors do not miss an event. A different Thomson Reuters news feed features macroeconomic news, natural disasters as well as violence in the country. A detailed analysis of the news is released. If the news category crosses a threshold the investor's trading or risk management system is notified to trigger the entry and exit date for the market. Thomson Reuters has a unique edge on global news compared with other providers. They are one of the most well-known business news outlets in the world if not the most respected out of United States. They have the advantage of including global Reuters News to their feed along with third-party newswires, as well as economic data for each of the United States and Europe. This University of Michigan survey of Consumers report is another important news event, and releases data twice monthly. Thomson Reuters has exclusive media rights to The University of Michigan data. Other providers of low latency news comprise: Need to Know News, Dow Jones News and Rapidata which we will discuss further when they make information about their offerings more accessible. Examples of News Affecting the Markets A news feed may indicate a change in the rate of unemployment. In the best case scenario, unemployment rates are likely to be positive. The analysis of the past may reveal that the changes are not caused by seasonal changes. News feeds suggest that consumer confidence is growing due to the decline on unemployment. These reports are a strong indicator that the rate of unemployment is likely to remain relatively low. This information could suggest that traders should cut the USD. The algorithm could determine that the USD/JPY pairing will generate the highest profit. A trade that is automated will be completed when the target is completed and the trade would remain on autopilot until the trade is completed. The dollar may continue to fall despite reports of a rise in unemployment reported by the news feed. Investors need to be aware that many factors impact the price in the United States Dollar. The unemployment rate might decrease however, the overall economic situation could not grow. If larger investors do not modify their view of the dollar, then the dollar could continue decline. The biggest players usually decide ahead of the majority of smaller or retail traders. Big-name decisions can impact the market in a surprising way. If the decision is based by relying on the unemployment rate, the assumption could be wrong. Non-directional bias is based on the assumption that any significant news regarding a country will create a trading opportunity. Directional bias trading accounts for any economic indicator that could be relevant, including responses from major market players. Trading The News - The Bottom Line News can affect markets, and if you invest in the news, you could make money. There are very few of us that can argue against that fact. There is no doubt that the trader who has access to news data ahead of the curve has an advantage when it comes to a successful short-term trade on momentum trades in different markets such as the FX market, Equities or futures. The cost of low latency infrastructure has dropped over the past few years, making it possible to join an extremely low latency news feed and receive the data directly from the source. This gives traders an incredible edge over traders watching television, the Internet or radio news feeds. In a market dominated by big hedge funds and banks low latency news feeds certainly provide the advantage of large companies to traders who are not even individuals.

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