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 Experienced traders recognize the effects 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 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 could increase profitability while reducing risk small business signs.

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 generally more successful than manual traders as 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 when compared to a human with no emotion. In order to make the most of the lower latency news feeds it is essential to really have the right low latency news feed provider, have a suitable trading strategy and the right network infrastructure to guarantee the fastest possible latency to the news 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. While 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 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 method 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 that will be immediately distributed in a proprietary binary format. The data is sent over private networks to many distribution points near various large cities around the world. In order to receive the news data as quickly that you can, it is essential a trader work with a valid low latency news provider that has invested heavily in technology infrastructure. Embargoed data is requested with a source never to be published before a specific date and time or unless certain conditions have already 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 definite 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 done 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 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 prevent substantial losses.

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

News is a great 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 almost no 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 enjoy an integral 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 must know when the data will be released to learn 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 planet, 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 that 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 place 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 has to 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 ahead of the masses looking to find 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 news headlines feed is designed especially for applications and is machine readable. Streaming XML broadcast can be used to create full text and metadata to ensure 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 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 has a unique edge on global news in comparison to other providers being one of the very respected business news agencies in the world or even the absolute most respected outside of the United States. They have the advantage of including global Reuters News to their feed along with 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 shall discuss further when they make information regarding their services more available.

Examples of News Affecting the Markets

A news feed may indicate an alteration in the unemployment rate. For the sake of the scenario, unemployment rates will show an optimistic change. Historical analysis may reveal that the change is not as a result of seasonal effects. News feeds reveal that buyer confidence is increasing due the decline in unemployment rates. Reports provide a solid indication that the unemployment rate will remain low.

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

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

The big players will typically make their decisions prior to the majority of the retail or smaller traders. Big player decisions may affect the marketplace in an unexpected way. If the decision is manufactured on only information from the unemployment, the assumption will 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.

Trading The News - The Bottom Line

News moves the markets and in the event that you trade the news, you can capitalize. You can find not many folks that could argue against that fact. There's no doubt that the trader receiving news data ahead of the curve gets the edge on obtaining a solid short-term trade on momentum trade in several markets whether FX, Equities or Futures. The price of low latency infrastructure has dropped over the past few years which makes it possible to sign up for a low latency news feed and receive the data from the foundation 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 provide the big company edge to even individual traders small business signs.