Signals provided by sentiment analysis are becoming more mainstream for both equity and forex traders
The use of sentiment analysis indicators has been an ongoing trend within institutional trading circles for many years. It was all the way back before the tick of the millennium, when it all started with now renowned and successful hedge fund Winton Capital pioneered using computers to scour the online world for collection of market sentiment data. As the industry evolved, in 2005 Reuters and the Dow Jones Newswire have started offering similar solutions.
The mainstream has remained untouched until recently, since the costs associated to the online sentiment tracking software were quite hefty. Only institutional investors could afford the fees at the time. During the past couple of years the landscape has been rapidly changing with Reuters and Bloomberg recently entering the online sentiment tracking landscape.
Recently Reuters has incorporated its already existing Twitter sentiment analysis tool into its widespread offering for retail investors Eikon. With the service effectively becoming free for all users of the platform it is gaining traction fast and increasing awareness about sentiment analysis tools amongst retail investors.
The newest kid (oh well, maybe a grownup) on the block is Bloomberg that has just launched its social sentiment analytics tool called Bloomberg Social Velocity. It is scouting through Twitter and StockTwits for the cash hashtag that is usually preceding news about stocks. The sentiment is analyzed by the company’s software and presented to customers. A similar service is offered by the StockTwits platflorm, however it only tracks messages within its own pages.
There is one big problem with sentiment tools that are actively tracking Social Media – the biggest market players are often ignoring these tools. Compliance departments across the industry have all prohibited the use of social media in the workplace and for distributing information, as it has already lead to improper use and has caused lawsuits and regulatory scrutiny.
Let’s remind our readers that the recent forex fixing manipulation scandal has been largely exposed through messages that were sent using the Bloomberg Terminal chat communications system. The Wall Street Journal and The Financial Times have prohibited their journalists to post information without it passing through editorial review, or have themselves taken control of their employees’ accounts. Bloomberg employees are forbidden from distributing content through their personal accounts.
So, if the biggest market players do not express their sentiment through social media channels, where can we find it and how can we obtain it? A new start-up company based in Spain, might have an answer. Acuity Trading has been developing a couple of tools that might help retail investors cover a huge amount of data.
LeapRate has contacted the company’s CEO Andrew Lane with a couple of questions and he was happy to hint that the company is about to launch services incorporated within some brokers’ feeds in the coming months. He shared that the tools which the company is developing are scanning the whole web and are not limited to social media only. He has also shared a link to his sentiment analysis indicator performance for the FTSE 100 on the company’s blog page, which you can find here.
Stay tuned to LeapRate for more information on sentiment tracking indicators and on Acuity Trading’s solution.