Real-time data shows the updated price or volume information on a tick-by-tick or minute-by-minute basis for a stock that trades on the exchange. Every time someone buys or sells a stock, the price at which she received that execution will print to the tape. In effect, this shows how the the value of that stock fluctuates. Real-time stock market data is useful to traders who buy and sell securities during the day and have to make quick decisions on price moves.
Real-time data is extensively used in many trading applications to create charts that allow traders to monitor moves or directions in a stock's price. Technical traders, for example, rely heavily on such charts. Trading on any stale data can be costly if a trader is too late to detect a bullish trend or a bearish fall within a stock. Real-time charts provide updated information on reversion points that tell traders when the stock is starting to lag or when it is about to break into a bullish run.
Profit and Loss
Real-time data is also sent as a feed to trading applications so they can show the value of a trader’s existing stock positions. For example, a trader can use the real-time data to show the potential profit or loss he can incur if he tries to cover any of his long or short positions at the current moment. The profit and loss will update with every tick in the stock’s price, and this information is especially useful to a trader who needs to cut his losses on a stock by selling out of a previously long position or one who needs to buy back a stock that was previously sold short.
Real-time data includes stock volumes that are traded during the day; it is not restricted to stock prices. The real-time volume can also show the number of participants in the market who are interested in buying or selling a particular security. Technical traders rely on volumes data to indicate how seriously they should consider a upward tick in a stock’s price. If that tick is accompanied by larger volumes, it can be assumed that the price will move even higher as those volumes continue to push the stock’s price.
Real-time data is most useful to the hands-on minute-by-minute trader who is glued to the trade screen. This trader can observe and react to stock news as the story breaks. Delayed data, on the other hand, can be relegated to fundamental investors who take a longer-term position on stocks. These investors rely more on company valuation than minute-by-minute price changes to make trading decisions. They can hold a stock for weeks, months or years depending on the perceived potential of a company stock.
Victor Rogers is a professional business writer who started his career as a financial analyst on Wall Street. He later expanded his experience to content marketing for technology firms in New York City. Victor is an alumnus of St. Lawrence University, where he graduated with honors in economics and mathematics.