Further, due to bandwidth limitations, some data services will use "data queuing" methods so that data will not be lost when the incoming data rate exceeds the available circuit bandwidth. Others will not and ticks may simply fail to reach your computer.

End-of-Day Data

Providers of EOD data obtain their market information from the exchanges themselves, or from other data providers. Most use two sources to double-check the accuracy of their data. Nevertheless, faulty data manages to slip through the cracks from time to time.

Typically, these data errors emanate from either a problem in the providers transcription process, or the inability on the part of the provider to detect a stock split. In the case of the latter, some data services calculate the daily standard deviation of each stock, and then flag any issue that substantially exceeds this range. This flagging alerts a data clerk to the possibility of a stock split or an erroneous data set.

Some end-of-day providers employ a mechanism that, in the event an error is detected after the days data is made available for download, will automatically correct a data set. Then when users download the next days data for the security, they will unknowingly retrieve, as well, the newly corrected data for the previous day.

Conclusion

The vast majority of computerized traders will find medium class real-time data to be most suited to their needs. Such needs encompass the ability to interface with many software packages, reliability of transmission, and price. Neither premium- nor budget-priced data services fit this bill. The medium-class data service does.

For end-of-day data, the computerized trader will need to assess which data service accommodates the file format of the charting software to be used. The other principal consideration is whether the need for historical data on compact disk is essential. If so, it will be necessary to use a data service that will interface with such a disk.

EOD data is now considered a commodity. Even the price range of monthly download services among various vendors has narrowed. Consequently, the only other qualitative measure of value worth mentioning is accuracy.

Whether it is real-time or end-of-day, one thing is for certain: the computerized trader will surely appreciate the importance of a robust, accurate, and trouble-free securities database.

Appendix

Finding the Best Data

Data is essential, and the more you have to analyze the better your chances of success. Well, up to a point. First, you will need historical data to test your systems. Then you will need timely and reliable data to trade. Both versions must be accurate and complete.

As data vendors begin to proliferate, on and off the Internet, you need to be very selective in choosing your supplier. Some offer extremely high quality at a price that only banks and institutions can afford. Some offer data so cheap and dirty that any money you might have saved buying it would likely be lost on the time you spend cleaning it up. Some offer a service that never fails to deliver, and some drop quotes like theres no tomorrow. You will need to select your vendor carefully; else you could be paying big time for large fees or large losses.

This appendix is not intended to be anything like a Consumers Report on financial data. There are no tables of comparative numbers. Instead, it is written to educate you on most aspects of financial data creation, packaging, transmission, reception and processing. Once you have the big picture in mind, you can be a smarter consumer by asking the right questions and cutting the right deals.

The material in this appendix is divided into six parts: Data Production, Data Transmission, Data Reception, Data Storage, Data Analysis, and Other Considerations. The parts chronicle the life cycle of a price quote, from its creation at the exchange to its analysis by the users charting software.

All material for Appendix was obtained from various sources on the Internet, and almost exclusively from moderated forums listed in the Preface of this book. Forums tend to have more knowledgeable members than nonmoderated Usenet bulletin boards.

NOTICE: Futures trading is risky business. Prior to entering any contract, verify all information before relying on it. Although my sources for the material in this chapter were assumed reliable, financial information vending and its related technology is a fluid market) and changes do occur. Therefore, I make no warranty of any kind regarding the material contained herein. In addition, all product and business names mentioned herein are copyrights and trademarks of their respective owners.

Glossary

AMEX American Stock Exchange Chicago Board Options Exchange