I'm looking at all the options available for connecting my computer to a broker dealer for daytrading...normal dial up via modem, DSL, cable modem, ISDN, dedicated frame relay, dedicated T1/T3 connections etc. The price range of these different options are huge...$20 up to $2500 month. My question is where is the point of diminishing returns? I want the fastest connection possible assuming the cost benefit is there. At what point do I not get any bang for my additional speed bucks?
a simple cable modem is fine It will probably be just as fast as your quotes. Just make sure you ahve the RAM to handle whatever you get.. if you want to spend $ for an investment... Get a few hundred bucks worth of ram
Just to put things into perspective, for a while in the early days of my trading I was unable to get DSL or cable modem service in my area, and was forced to use a 56K analog modem for my trading. I was trading and receiving data through Realtick, with up to 4 Level II windows open with time and sales and charts, as well as several other data windows, and never had a problem receiving my data or placing my trades. The advantages of higher bandwidth connections are better stability (i.e. not getting disconnected) and more data "headroom" in case you need it. However, as my experience with an analog modem proved, you don't need a T-1 or highest speed DSL connection to be able to trade just as well. A medium speed DSL connection, costing from $20 to $40 per month is plenty, in my opinion and experience. The bigger issue is to make sure you go with a reputable and stable service provider.
jwbryant, I am at a disadvantage living in the UK ISPs are just too lazy to lay down fast cable lines so the fastest possible connection I can get is an ISDN 64k whoo hoo, the only advantage in this slightly quicker line is being able to connect in a second instead of durrrr dum dum ding ding ding crshhh aaaahhhhss ahhhhh, click (restarts). Unless you are into downloading big MB files don't bother paying $$ for a line because it just won't make a difference, you can only receive the data as fast as it is been transmitted and because you can't receive the data any faster than real-time a 56k will run just as fast as a cable.
jwbryant: You are really shopping for bandwidth (capacity), not speed. The answer to your question depends on the feed(s) and software to which you intend to subscribe. Some feeds/software are efficient (Townsend Analytics) and some are bandwidth hungry (eSignal). Contact your intended broker and data vendor and ask what the typical data throughput is in Kbps, both peak and average. In addition to the feed and software, demands on bandwidth vary depending on how much data you request at one time. Peak demands occur on startup (initial load), at market open, upon symbol change, and when displaying a very rapidly traded stock. Also, if you maintain a large table of stocks or run multiple programs simultaneously, those demands will require increased bandwidth. At non-peak times, the bandwidth demand will be a fraction of peak. For my use, I find a 768Kbps DSL connection to be adequate, and I could certainly do well with less. I meter bandwidth and find that average RealTick data throughput on any one PC seldom exceeds 40-50Kbps for a moderately-traded stock, however, high-volume stocks can average 150Kbps, and peak demands will momentarily use the entire bandwidth capacity. When running multiple programs (i.e. eSignal with Metastock and IQChart), I've seen throughput run up to a constant 400-700Kbps on one PC, with peaks using the entire bandwidth. With slow stocks on Realtick, I've seen throughput drop to as low as 20-25Kbps. Really, it is non-trading uses that benefit by more bandwidth. If you do a lot of file downloads, play online MP3s or uncompressed radio or video, etc., you'll benefit with a larger pipe, but for trading, huge bandwidth is not needed. Overall, for all-around use I'd say a DSL connection of 384-768Kbps is a good size. For trading, connection reliability is really more critical than bandwidth size. Go with the most reliable ISP. If that happens to be your cable provider, then a cable connection is fine. You don't need dedicated frame relay or a T1. Also, don't sign up for a limited throughput plan that limits you to a certain GB throughput per month. I run about 1GB of data through per day, and that would be expensive if not on an unlimited plan. On the PC hardware side, you'll need adequate capacity there as well. Be sure to install 256MB of RAM, and install the fastest CPU possible. Realtime data handling is very CPU intensive, particularly at peak times, and if your CPU is undersized, you will experience bottlenecks at the CPU that create more problems than an undersized internet connection (100% CPU utilization, command delays, lockout, lockup, etc.). Good luck.
Bandwidth not important? That's BS here is a copy of my friend's article. I've seen it once I have seen it a thousand times. Today's trading action with the surprise resignation of Treasury Secretary Robert Rubin, was a day traders dream come true. However, traders with slow quote feeds missed huge trading opportunities. Around 6:45 AM PST the bond market suddenly dropped sharply, I shouted it out to our 11 traders here in the San Diego office; "Sell short whatever you can!". One of the traders who also uses a cable driven quote feed for his charts only said: "What are you talking about? The bonds are trading sideways." Wow, his data feed was at least 5 to 10 seconds behind, that is an eternity. Of the eleven traders in our office who all saw the move only 3 were able to get short, and make about a point and half on their short sales. Why only 3? That is the other part of the story. Forget about the traders who sit at home with their cable/internet quote systems and discount brokerage accounts, they never had a chance. Analysis, reaction, experience, high speed quote network and super fast typing are what separates profits from missed opportunities. Newer, less experienced traders frequently have not been exposed to high volatility trading and are unsure how to react. That only comes through experience, it cannot be taught. In fact, one of our traders who was only 1 second behind me in entering her short sale order missed out on the trade completely, 1 second! I write this as a valuable lesson for aspiring day traders. If you plan on doing this for a living, do it the right way. Invest in a fast, reliable quote system that is transmitted by a dedicated line or satellite, if you don't, you can't possibly trade profitably on high volatility days. This is from a guy who uses a T4 line. My coach uses Microwave signals for his trading (the best around but hard to find) To the traders who think a 56K line is sufficient you are wrong. I've done demo's at workshops having to use 56K modems because the hotel didn't have high speed access. We found the data getting heavily back logged. It makes a huge difference in your pipeline. A 56K doesn't cut it swing trade or position trade with that speed. 3 seconds to 3 minutes behind makes a huge difference. You are probably the guy buying while the market is crashing as your quotes are behind. Sure makes it easier on me. Check your time and sales with the time of the market. If you don't have your clocked in sync with the NYSE download this http://www.philex.net/clock this is a freeware program to allow your clock in sync with the exact time the govt has. Pre2 is right though memory is the next step. But the biggest pipe is worth it to sum degree. It depends on the amount of captial you are working with. A phone modem won't due. Usually you can get by with DSL or cable. Rtharp http://communities.msn.com/rtharpsland
rtharp: I'm not sure who your post is directed at, but I'll clarify a couple things if something I've said is misconstrued. Bandwidth is certainly important, you just don't need to invest in a 36" pipe to carry water at 1 cfs. The pipe is sized for the load. Once the load is established, then the question is what kind of pipe is adequate. I find that my DSL pipe is adequate (ping times of 40-60ms typ. during regular market hours). I could probably pare those ping times down, but at great expense and no practical benefit. Regarding delayed data, that is an issue distinct from bandwidth. Assuming adequate bandwidth for the throughput demand, if I saw delayed data like you describe, I'd look at the data provider, route latency, and packet loss. There is a difference in data delivery speed between data providers, and there is a difference in latency between ISPs, backbones, and the modem hardware at the PC end. (For example, a 56k modem alone adds around 100ms to latency.) Bottom line: New traders should get the bandwidth needed, but not more. Unused bandwidth is not going to increase speed. The effort should be put into finding a fast and reliable data provider and ISP according to the trader's need. A pro-trader at GSCO can probably justify a 10GB time-warp photon plasma hyperlink, but jwbryant sounds like he's just starting out. Regarding time synchronization, if that referral was directed to me, I've not used Philex, but I do use AboutTime: http://www.arachnoid.com/abouttime/index.html There are a ton of these utilities around, and it is important to use one. Hope this helps.
rtharp, While I agree that it is optimal to have the best connection that is feasible, and the use of an analog 56K modem should be considered substandard as a rule, I must disagree with the assessment that you need a T-4, microwave, etc. connection to be successful. As I mentioned in my personal experience, I traded for several months quite successfully on a 56K analog modem, and in extremely volatile markets. I was using Realtick III, with 4 to 5 Level II windows open simultaneously, order entry, market minder window, and real time intraday charts, and my orders were executed just fine. I also can say that I know my data was not behind, since I got filled on orders I placed based on my quotes, and had my data been behind, I wouldn't have gotten the instant fills I got. I also would sometimes place an order away from the market and see my order appear right away on Level II, further confirming the timeliness of my data feed. That said, I don't advocate or recommend anyone trading on a 56K analog connection. I do relate my experience to point out, however, that in my opinion it is unnecessary to spend exorbitant amounts of money per month for super high end connections such as T-4 or microwave connections, when for $40 or less per month you can get 768-1.5 Mbps DSL, which is plenty. That is what I currently use now, and have absolutely no problems getting the fills I want and continuing to be successful with my trading. Truth be told, I also haven't noticed much difference in the speed of my orders or accuracy of my data than I did when I traded with a 56K modem.
my statement was directed towards everyone. 56K isn't enough. I did edit the original post though as it was a little bit strong. I find my quotes get backlogged during heavy market hours sometimes with DSL and Cable. I'm downloading a lot of data though. I usually have to delete a few charts. Some of my other trader buddies have had expereinces due to having slower quotes. The cable modem didn't allow a trader to see that the bonds were starting to drop. While the T1 did allow the trader to take advantage of the opportunity. IS a T1 line worth it if you can make an extra 2000 per month? Well if it cost you $1500 than yes, if it cost you $5000 no. It is possible to get partial T lines built in. The download link was just for whoever doesn't have their computer clock in sync with the exchanges. To figure out how delayed your quotes are-- sync your clock than watch time and sales. Just trying to be helpful Robert T
Rtharp, On a 56k "his data feed was at least 5 to 10 seconds behind" err no! Come on, I am using a 56k and have been for 3 years actively trading and like zboy I have 4 charts with t/s & l2 large quote screen + IB for executions and there is no delay at all my isp is also AOL, sounds like a receipt for disaster but I've had no problems getting a fill in and out quickly. Remember when the fed came out during the day and cut rates unannounced, your charts went all fat and crazy, I was able to get in and profit from it, so nuff said. No way would I chose this set-up over a high speed cable, and I will upgrade when they lay them down over here just saying you can get away with it.