Trade The News - Profiting From Trading With Low Latency News Feeds

Experienced traders recognize the results 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 Pakistan News Updates 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 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 could become. Automated traders are often more successful than manual traders because 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 than a human without emotion. In order to take advantage of the low latency news feeds it is essential to truly have the right low latency news feed provider, have a proper trading strategy and the proper network infrastructure to guarantee the fastest possible latency to the news source to be able to beat your competitors 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. Whilst the remaining portion of the world receives economic news through aggregated news feeds, bureau services or mass media such as for example news the web sites, radio or television low latency news traders count 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 approach to controlling the release of news is an embargo. Following the embargo is lifted for news event, reporters enter the release data into electronic format which will be immediately distributed in an exclusive binary format. The info is sent over private networks a number of distribution points near various large cities round the world. In order to receive the news data as quickly as you can, it is essential that a trader use a valid low latency news provider that's invested heavily in technology infrastructure. Embargoed data is requested with a source never to 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 provide reporters in sealed Government press rooms during a defined lock-up period. Lock-up data periods simply regulate the release of news data so that each news outlet releases it simultaneously. This can be done 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 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.

Automated software trading programs enable faster trading decisions. Decisions made in microseconds may equate to an important edge in the market.

News is a good indicator of the volatility of a market and if you trade the news, opportunities will present themselves. Traders have a tendency to overreact each time a news report is released, and under-react if you have 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 manufactured possible through automated trading with low latency news feed. Automated trading can play 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 have to know when the data will undoubtedly 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 find a market that's 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

Many investors that trade the news seek to have 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 perfect locations to position your servers come in well-connected datacenters that permit 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 to be able to act upon the releases however, close enough to the broker or exchange to get your order in in front of the masses looking to find 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 news feed is made specifically 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 includes a unique edge on global news in comparison to other providers being one of the very most respected business news agencies on the planet if not probably the most respected outside the United States. They've the advantage of including global Reuters News to their feed in addition to third-party newswires 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 releases data twice monthly. Thomson Reuters has exclusive media rights to The University of Michigan data.

Other low latency news providers include: Have to Know News, Dow Jones News and Rapidata which we will discuss further when they make information regarding their services more available.

Examples of News Affecting the 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 may reveal that the change isn't due to seasonal effects. News feeds reveal that buyer confidence is increasing due the decline in unemployment rates. Reports provide a strong indication that the unemployment rate will remain low.

With this particular information, analysis may indicate that traders should short the USD. The algorithm may determine that the USD/JPY pair would yield probably the most profits. An automatic trade could be executed when the target is reached, and the trade will undoubtedly be on auto-pilot until completion.

The dollar could continue to fall despite reports of unemployment improvement provided from the news feed. Investors must keep in mind that multiple factors affect the movement of the United States Dollar. The unemployment rate may drop, but the general economy might not improve. If larger investors don't change their perception of the dollar, then the dollar may continue to fall.

The big players will typically make their decisions prior to all of the retail or smaller traders. Big player decisions may affect the marketplace in an unexpected way. If your decision is manufactured on only information from the unemployment, the assumption will undoubtedly be incorrect. Non-directional bias assumes that any major news about a nation will generate a trading opportunity. Directional-bias trading accounts for several 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 hardly any folks that could argue against that fact. There's undoubtedly that the trader receiving news data in front of the curve has got the edge on obtaining a solid short-term trade on momentum trade in a variety of markets whether FX, Equities or Futures. The price of low latency infrastructure has dropped within the last several years making it possible to sign up for a low latency news feed and receive the data from the origin giving a huge edge over traders watching television, the Internet, radio or standard news feeds. In a market driven by large banks and hedge funds, low latency news feeds certainly supply the big company edge to even individual traders.