If you’re an active trader, then you know that having access to real-time market data is critical. After all, the whole point of day trading is to take advantage of short-term price movements in the market. But what happens when the data you’re relying on is delayed?
Suddenly, those short-term price movements become a lot harder to capitalize on. In this blog post, we’ll take a look at why delayed market data can be such a problem for day traders—and what you can do about it.
Why Delayed Market Data is a Problem for Day Traders
As we mentioned above, the whole point of day trading is to take advantage of short-term price movements in the market. But when your market data is delayed, it becomes much harder to do that.
What You Can Do About It
- Use multiple data sources: If you’re relying on just one source of market data, then you’re going to be at the mercy of their delays. But if you use multiple sources (e.g., two or three different providers), then you can compare and contrast the different quotes and get a more accurate picture of where prices are really at. This will help reduce the effects of any one provider’s delays.
- Switch to a different provider: If you’re using a free or low-cost market data service, then it’s probably not surprising that their quotes are delayed. After all, they’re not making much money off of you, so they don’t have much incentive to provide real-time data. In this case, switching to a more expensive but higher-quality service may be worth it if it means getting access to faster quotes.
- Use a direct connection: Many brokers offer direct connections to exchanges that can provide near-instantaneous market data feeds. Of course, this comes at a cost (usually $100+ per month), but if speed is paramount, then it may be worth it for serious day traders.’
Sometimes, even if you do manage to buy the stock at the price you want, you may end up losing money on the trade because of the delay in your data.
Also, if you see a stock that looks like it’s about to take off, but your data is delayed, then you may miss your chance to get in on the action. By the time your data finally catches up, the stock may have already peaked and started to head back down. Again, this can lead to lost profits.
Ultimately, if speed is paramount, then using a direct connection may be worth it for serious day traders.’