Relying on Low-Quality Data Feeds Could Be the Costliest Mistake in Your Trading Career
Choosing the right data feeds can be the difference between winning and losing in futures trading. Let me share some insights, stories, and practical advice that could totally transform how you approach data feeds.
When I first started trading, I built strategies using TradeStation data, which has awesome historical data. I also traded on their platform. It worked well at first, but then I wanted more advanced features to manage my portfolio.
That’s when I found MultiCharts. It offered better portfolio management features, but switching to my new preferred broker, Interactive Brokers, for trade execution came with problems. Their historical data wasn’t great, making it almost impossible to build effective strategies.
I needed a solution. At first, I thought about using TradeStation’s historical data while executing trades through Interactive Brokers. But after some trial and error, I found something better.
I decided to use DTN IQFeed’s historical data for strategy building and their real-time data for automated trade execution. This setup allowed me to use the best of both worlds: high-quality data for strategy development and reliable real-time data for trade execution. MultiCharts made this possible by letting me use different data feeds for strategy execution and trade management while using Interactive Brokers as the account broker for executing trades.
Here’s how you can avoid some unnecessary pitfalls and get started:
List the types of data you need. Are you focusing on historical data to test your strategies, or do you need real-time data for immediate trading decisions?
Prioritize these data types based on your strategy. Historical data is key for backtesting, while real-time data is essential for trading.
Research available data sources. Look for providers that offer comprehensive, reliable data.
Make a checklist to evaluate each data source. This will help you make a smart decision.
As I got deeper into trading, I realized how important it is to evaluate data feed providers carefully. You might want to pick a provider based on cost alone, but that can be a risky move. It's crucial to consider reliability, speed, and customer support.
In trading, every millisecond counts, especially for high-frequency traders. The speed of data transmission directly impacts trading decisions.
Testing the new broker's historical data feed was a valid approach to verifying data quality. At first, using their data seemed like a smart move, but soon, I realized the data quality wasn’t good enough to build strategies. This experience made me rethink my options, and I looked for a more reliable provider despite the higher cost. The result was a big improvement in my trading strategy-building performance.
Here’s how you can evaluate providers:
Make a list of potential data feed providers. Include well-known names like Interactive Brokers, TradeStation, and DTN IQFeed.
Research each provider’s reputation. Look at user reviews and expert opinions.
Compare the features offered by each provider. Check reliability, speed, and customer support.
Create a comparison chart. This will help you see the strengths and weaknesses of each provider.
Select the provider that best meets your needs. Choose the one that offers the best mix of features, reliability, and support.
Ensuring data accuracy and completeness is another crucial aspect. Inaccurate data can lead to bad trading decisions and big losses. In my experience, consistent and clean data is essential for effective trading strategies.
The practice of data cleaning, which started in the 1970s, remains essential today. Setting up automated data validation checks, regularly auditing your data feeds, and keeping a log of data issues can help ensure your data is solid.
I learned this during the transition to the new broker. At first, I didn’t do regular data audits because I was confident in my systems. It wasn’t until I noticed a mismatch between testing on historical data and paper trading from the same period that I realized that not all data is created the same. Implementing strict validation processes brought back stability and confidence in my strategy execution. Proper risk management strategies and a period of paper trading before live testing further protected me from abnormal losses.
To put theory into practice, let’s look at some use-case examples of data feed providers. This part of the journey is about finding the right mix that works for you.
Interactive Brokers is a great broker choice. I've used Interactive Brokers with both MultiCharts and their IBKR Trading APIs with my own coded platform. However, the history going back 10 or more years was not the best for building algorithmic trading strategies.
TradeStation is awesome for traders who need advanced charting and analytics tools built into a single platform, combining their data feed with their broker. It's perfect for those who trade through TradeStation, benefiting from its strong platform features.
DTN IQFeed is known for its high-fidelity data, low latency, and high accuracy. It’s particularly useful for high-frequency trading or strategies that rely heavily on precise data.
Combining providers can offer significant advantages. For example, you can use IQFeed to build strong trading strategies with high-quality historical data. IQFeed’s real-time data can then be used in custom-coded frameworks or platforms like MultiCharts to trigger trades from strategies in your portfolio, which are sent to a separate broker, such as Interactive Brokers for execution and management. This setup ensures consistency and reliability.
Using the same data feed for both building strategies and executing trades is crucial for consistency and accuracy. Early on, I tested the broker’s historical data and found it to be sub-par, realizing I needed a better data feed. During this testing phase, I didn't incur large losses, as the testing helped me determine the broker data wasn't suitable for a live environment. Realigning my data sources brought back the effectiveness of my strategy and improved my trading outcomes.
Choosing the right data feeds for your futures trading is a journey. By understanding your data needs, evaluating providers carefully, ensuring data accuracy and completeness, and leveraging the strengths of various providers, you can build strong and effective trading strategies. Apply these tips, avoid common pitfalls, and optimize your trading performance. Share your experiences and insights in the comments section—I’d love to hear from you!
Yorumlar