Saturday, December 09, 2006

Two Datafeeds

Do you use one datafeed for trading and another for charting?
EG: your broker is IB, but your charts are build with ESignal data
I used to do so. I had ESignal for years, then for a time I used DTN/IQ.
Some time ago I realized that for my trading it was more important to have one reality.
Trading is stressfull enough at times. In a fast market you might want to enter now, as you got a signal, you might have to decide in a split second whether to exit or to add to your trade.
But in a fast market datafeeds tend to diverge and at times ESignal and DTN/IQ tended to diverge considerably from IB's data.
What did that mean for me?
Do nothing, I couldn't because I did not know what was real, what was the reality I could trade.
My charts showed me one reality, the reality ESignal was giving it's customers, IB gave me another reality printing higher or lower prices. Which was real? I could not decide what was real and I missed trades. In retrospect I realized that especially in fast markets IB's approach to send price snapshots instead of every tick was a lot more accurate than ESignals or DTN/IQ's approach, who are committed to give you every tick creating a backlog in fast markets, as suddenly the Internet is no longer able to transfer every tick fast enough to your computer.
I have an IB account, I trade IB prices and I realized that I could trade at IB prices even in fast markets, so why should I not trust that reality?
I use minute charts, no Tick or Volume or Range charts, because it just doesn't matter what charts you use. Minute charts don't care whether you use a real tick datafeed or a snapshot datafeed as IB provides it. The charts will look the same.
Having a backup broker, having a backup datafeed is fine and a good precaution, but I prefer to have my chart data and tradedata coming from one source. That way I don't have to question my data and worry whether the signal I got is really there or just caused by a divergence between datafeeds.