Crunching ‘big data’ for trading signals is real and already happening. Very few of us have the time and skill to shift through mountains of data for nuggets of golden information. The average person will have to have some basic knowledge of how the stock market works and take control and actively manage his or her own portfolio. Applying algorithms to improve your trading is far more developed. The rise of computing power lets smart companies crunch ‘big data’ — billions of gigabytes of photos, tweets and other crowd-sourced info — to dig needles of price-sensitive news out of the haystack. We are now in the AG (After Google) age and with that access to information is only a search away.
With so much data and companies and with website offering free financial data on almost every publicly traded company we will present how to use 2 simple new age data points from big data to profit from the stock market and take control of your financial future.
Social Velocity
Simply put, social velocity is the rate of change of engagement with content on social media – how many new shares, tweets and other engagements the article, video or picture is getting in a given time. Generally, social engagement is a great way to measure the impact of a story beyond page views. It shows that a story did not just draw readers in with a clever headline; it also brought about a reaction and an urge to share it with others. This will often be due to the emotional hooks in a story, a wish to spread information. By looking at the social velocity of a stock we are able to gauge overall buzz of a stock in the mass media.
Social Sentiment
Knowing the fast-moving social sentiment of a particular investment opportunity could provide a trader with that extra edge. That’s why many terminal provides subscribers with social sentiment tools, which categorize opinion and provide charts and visualizations based on this data at a very high cost. By crawling data from various mass media source and segregating it based on user sentiments as positive and negative we can establish the overall sentiment on a particular stock.
Analysing Stock Movements using Social Velocity & Sentiment
General rule of thumb
If Social Velocity Is High and Social Sentiment is high, typically the stock is moving up.
If Social Velocity is Low then Social Sentiment does not really matter.
If Social Velocity is High and Social Sentiment is low, typically you will find the stock moving down.
The biggest-hitting share traders will step away from their screens and give you their undivided attention if they think you can tell them something they don’t know about a stock. Professional stock traders spend their lives searching for even the smallest edge over the market.
One of the most profound facts is that hedge funds, mutual fund managers, and large banks spend large amounts of money data sets. These Companies sells datasets for large amounts of money but what about the average retail investor that does not have the capital or several thousand dollars to spend on this data as well as hire a data scientist or team of people to mine the data for them that they are purchasing?
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