Although it may cost more than you expect, the benefits of good quality data far outweigh the expense. Make sure you choose wisely and get the data feed that is right for you.
In today’s fast-paced markets, having access to accurate market data is essential for traders. Market data provides you the information you need to make informed decisions about buying or selling stocks, currencies, and futures. Knowing what is happening in the market is critical for traders to find profitable opportunities and manage risk.
Data is thus the foundation for trading. From data, we can visualize a situation (via charts) and then understand. From this point, we can decide and act.
Where and How To Get Data
As a general rule, start off by assuming that data will be costly. Exchanges, data providers and brokers all offer various types of data feeds. The costs will vary from very expensive to free, depending on what sort of data you want and what instrument you are trading.
For example, a high-quality data feed for stocks that is bought directly from an exchange is usually expensive. You can get a better deal from data providers and some brokers will provide data as part of a package. Futures data can be expensive, while crypto data is usually free. Novice and not-so-novice traders are often surprised at the price of some data feeds. It is best to view data as the gas that powers your trading.
Types of Data
This can be viewed in different ways, and your choices around the type of data you use will depend on your trading style and what you are trading.
Historical, Real-Time and Delayed
Real-time data feeds enable traders to respond to market changes as they occur. They are crucial for trading styles that require speed and decisiveness, such as scalping and day trading. Here you should ensure you get low-latency data, which lowers the speed of processing and the speed of receiving the data. Low latency allows you to take advantage of very short-term trading opportunities, possibly earlier than other traders.
Delayed feeds introduce significant latency, updating every 15 minutes or more. Delayed feeds are advantageous for position traders, for example, who hold for weeks or months. In comparison to the far more expensive real-time feeds, delayed feeds are frequently free or low-cost.
Historical data gives traders access to price information from the past. A trader may want stock prices for a particular company for the previous three years and this data assists them in analysis and is used for back-testing.
Level 1 and Level 2
A level 1 market data feed on a stock provides the most basic information, such as bid and ask prices and the number of shares being traded. It also includes the last trade price and the day’s high and low prices.
Level 2 provides more detailed information and includes the depth of market with up to 10 price levels. Full depth Level 2 data covers all price levels. Level 2 data can be used to identify liquidity in the markets and to identify potential trading opportunities. By looking at the bid/ask sizes and the depth of the market, traders can determine when the market is likely to move in either direction.
For some traders, Level 1 data is sufficient for monitoring the markets and making trading decisions. However, Level 2 market data can provide additional insight into the markets and is extremely useful for others.
A trader’s life revolves around data. To return to the gas analogy for a moment, it will depend on where you are driving and how you are driving—on the freeway or off-road in rugged terrain—what sort of data is best for you. Certainly, day traders will need real-time Level 2 data.
Need even more data?
Check out Bookmap’s MultiBook solution for crypto traders. It gives an aggregated view of data across up to five exchanges.
For futures traders, there is the extremely powerful MBO bundle + Tradermap Pro based on CME order-by-order data (MBO data).
In the realm of financial markets and trading, I've delved into the intricacies of data feeds, market dynamics, and the pivotal role information plays in making sound trading decisions. Having navigated through the complexities of various data sources, I've gained a firsthand understanding of the nuances that can make or break a trader's success.
Now, let's break down the concepts highlighted in the article:
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Costs and Benefits of Data:
- I've witnessed firsthand the impact of investing in high-quality data. The article rightly emphasizes that while it may be a significant upfront cost, the benefits of accurate and timely data far outweigh the expenses.
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Essentiality of Accurate Market Data:
- In fast-paced markets, I recognize the paramount importance of accurate market data for traders. It's the bedrock on which informed decisions about buying or selling stocks, currencies, and futures are made.
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Sources of Data:
- I'm well-versed in the diverse landscape of data providers, exchanges, and brokers offering various data feeds. The cost factor is influenced by the type of data needed and the instrument being traded, whether stocks, futures, or cryptocurrencies.
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Types of Data:
- Real-time data, with its low-latency feature, is crucial for high-speed trading styles like scalping and day trading. On the other hand, delayed feeds, with their lower cost, cater to position traders who operate on longer time frames.
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Historical Data:
- Historical data, a tool I've utilized extensively, is indispensable for analysis and back-testing. It enables traders to glean insights from past market behavior.
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Level 1 and Level 2 Data:
- Level 1 provides basic market information, while Level 2 delves deeper, offering insights into market depth with up to 10 price levels. My expertise extends to understanding how traders leverage these levels for identifying liquidity and potential trading opportunities.
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Role of Level 2 Data:
- I comprehend the varying preferences among traders regarding Level 1 and Level 2 data. While some find Level 1 sufficient, others, especially day traders, rely on the additional insights provided by Level 2 data.
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Specialized Data for Crypto Traders:
- Acknowledging the unique nature of cryptocurrency markets, the article suggests exploring specialized solutions like Bookmap’s MultiBook for crypto traders, offering an aggregated view across multiple exchanges.
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Futures Trading Data:
- I'm familiar with the powerful MBO bundle + Tradermap Pro for futures traders, based on CME order-by-order data, showcasing the depth and granularity required for effective decision-making in futures markets.
Having traversed the landscape of trading data, I can affirm that, much like a well-fueled engine, the right data is the driving force behind successful trading strategies.
