With the explosion of content on the Internet, particularly in real-time social media, investors are beginning to get access to tools to trade sentiment. Where old-school investors knew — and profited — from buying on the rumor and selling on the news — the participative aspect of social media is changing the ways news/rumors/sentiment is affecting investments. The rumored BIG press release is being replaced with numerous mentions on Facebook and Twitter.
Crowdsourcing — getting the masses to vote their opinions on stocks — is one way to mine for this information. The key is to then find patterns in the changes in sentiment and how these deltas affect stock prices. That’s exactly what Piqqem is doing when it launched its Sentiment Trading Indicator.
It’s also what content aggregator, Alacra, is up to in a launch of PulsePro today. PulsePro is a professional version of Alacra’s Pulse product which combines aggregation and curation into a surprisingly usable hodgepodge of stock-specific information mined for its information content and value. Users can use Pulse to monitor specific sites for information on stocks in their portfolio. The new PulsePro adds a layer of backtesting to this process to help aid actual investing off this info for institutional clients.
From the WSJ article announcing the launch:
“This is part of a larger trend to utilize unstructured content as an input for various types of trading signals,” said Paul Rowady, senior analyst at Tabb Group, a financial-markets research firm. He said while the trend began primarily with content from news organizations, social media represent “a natural extension of the trend.”
Indeed. This trend builds off of the Twitter streaming of companies like Stock Twits and the Bloomberg of Social Media, SkyGrid. Stream Base is mentioned in the article as one company to watch that provides a real-time market data management system to aid in trading decision making.
The WSJ article differentiates between creating automated trading systems around this data and just using the tradestream to make better investment decisions. As the systems get better to track the performance of trading on sentiment, look for institutional money to automate this process. Meanwhile, individual investors will get access to sweet decision support tools to help us make more accurate, profitable decisions.
[hat tip: IR Web Report]
