Financial Market Data information – To a successful trader.

Most marketers and the business persons understand the value of collecting financial data, but also realize the challenges of leveraging this knowledge to create intelligent, proactive pathways back to the customer. To large financial companies, financial market data is the lifeblood of the business. It is essential because predicting market changes can gain or lose massive amounts of money depending on how that market moves. Market analysts must leverage their enormous investment resources against small changes in market interest rates.

As interest rates change daily, the value of these investments grows depending on how the money is managed. The investments can be made through minute changes in bond interest rates, penny drops or rises in stock prices, small changes in the exchange rate between currencies, or even subtle changes in the value of the dollar compared to that of more precious metals like gold and silver. These investments create profit because each change in the market value of the specific currency is multiplied by the enormous size of each individual’s investment. This happens whether that investment is from a pension fund or the savings of a large investor.

Financial Market Data

If the financial market data is not organized correctly, the institutional investor can miss a single change in the market that can make the company millions simply by the volume being invested at the time. Many times, traders have misappropriated these funds or misunderstood merely a financial transaction resulting in a massive financial loss to the company.

Computer triggers designed to facilitate this trading, as well as place automatic holds on any one trade. It has failed in prior years, and cost large institutions vast amounts of capital. Such a loss has had devastating consequences not only on the investment resources. But also cost the jobs of corporate heads and the traders themselves. Worst of all, of course, is that the investment loss was a real loss to the shareholders’ assets which may have had far more significant effects on those investors than on the company employees themselves.

For these reasons, it is critical that the management of data for the purpose of investing shareholder funds be done with the highest care and intent as lives can be at stake. This is why having large data experts work in concert with market financiers who can predict market changes fairly accurately in real time. Current software programs can enable this relationship to work efficiently, but it is never perfect. Human supervision is necessary as has been shown countless times when computer programs or simulations have broken down. The danger of losing such vast sums of money so quickly requires that market analysts maintain constant vigilance over these programs.

When trading the news, there are three questions that we need to ask ourselves before every trade: Is the information important? Is the surprise large enough? And is the surprise in line with the market’s sentiment?

Is the news important?

The first task at hand is to figure out what matters and what does not. The top three pieces of potentially market-moving financial data for any country, which are the employment reports, retail sales, and manufacturing and service sector activity data. In addition to these, the Gross Domestic Product releases and the inflation reports are also tradable. What is not tradable are reports because there is no concrete number for comparison, data is released weekly.

Is the surprise large enough?

The second question is the trickiest of the three because it is subject to interpretation. But the good thing is that the market will usually make the interpretation for you. As a rule of thumb, if the number is greater or less than the forecast by more than 5 percent. It is considered a big surprise, but sometimes a 2 percent surprise is enough to elicit a big reaction in the currency. So what should you do? Just wait and see how the market responds to the release.

If the currency pair barely budge, then most likely, the surprise is not that significant. If the currency pair immediately shoots higher or falls like a rock, there is a good chance that the market was surprised. The key is to wait for five minutes before getting into the trade to make sure that the currency responds the way that it is supposed to. In other words, a positive surprise should drive the currency pair higher, and a negative surprise should drive it lower.

Is the surprise in line with the market’s sentiment?

The third question is important because sometimes the economic data is something that we would generally expect to elicit a big reaction. But for whatever reasons the rally fizzles quickly or traders just don’t care. Quantifying the prevailing sentiment in the market can be difficult, but moving averages can help because they measure the current trend in the market by averaging a certain number of past prices. If the data is good and the currency pair is trading above the 50-period moving average on a five-minute chart (or the information causes the currency to break above the moving average). Then there is a better chance that sentiment and fundamentals will support the trade.

However, if the data is good and the currency pair is trading well below the fifty-period moving average. Then it suggests that the prevailing sentiment does not support the economic surprise. In this case, we will not take the trade because we want to have as many critical variables aligned in our favor as possible.

In conclusion, it is beneficial only to trade economic data that is important, with surprises that are large enough to trigger a reaction in the currency, and just if the financial data is in line with the general sentiment in the market. With these guidelines in hand, let me show you how fast and furious news trading works. Extensive data management is essential to the profit motive of institutional investors, but only when the proper market analysis is complete.

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