How social media sentiment can affect markets

On a daily basis over 140 million users of micro-blogging service - Twitter are generating a collective 340 million small text messages. This abundance of data contains a multitude of patterns hidden within. But can this data predict whether the stocks go up or down? Can it really assist traders on making calculated, informed and successful trades?

I think it is a fact that the media, both online and offline are able to influence the financial market and generate both positive and negative outcomes on market price. It is also said that investors are not the only subject to the sentiment of related news articles but also the public opinions.

The challenge is how to quantify such sentimental information to predict the movement of the stock markets, so say the researchers who mined the twitter data anyway.

In other words, the most important problem in modern finance is finding efficient ways to summarize and visualize the stock market data to give individuals (e.g. the traders) useful information about the stock market behaviour for investment decisions. Trading with a knowledgeable broker such as Magnum Options who has professional traders training customers, and are involved in these types of sentimental arenas and trade themselves – is an effective way of both learning this information, processing it, and gaining access to it through a reliable source.

Data mining

Data mining is the science and technology of exploring data in order to discover certain unknown patterns. This is part of the so-called Knowledge Discovery in Databases (KDD). In today’s computer driven world these databases contain massive quantities of information regarding whatever topic you can think of case of our subject Twitter. The hard thing is to extract the required information from this data punch.

The research conducts the following data mining systems:

  1. Application of decision tree in stock market
  2. Application of Neural network in stock market
  3. Application of clustering in stock market
  4. Application of associating rules in stock market
  5. Application of factor analysis in stock market
  6. Application of time series in stock market

Not only do we want to predict the stock market using this information, also a timeframe should be applied to that information. A trader should be able to benefit from very subtle patterns with a short life time, and incorporate the impact of market players on market regularities.

Conclusion

There is a critical need for automated approaches to effective and efficient use of financial data to support companies and individual traders in strategic planning and making investment decisions.

One question remains:

If we could predict the financial market. Will there still be a financial market? When all traders will know what the markets will do, what benefit would there still be? And, maybe even more importantly, will trading still be fun and exciting?

To find out the answer to these questions, how to combat these potential negative outcomes and use the research systems explained in order to create profitably trading opportunities – open an account today at Magnum Options and benefit from their unique and free 1 on 1 training sessions with expert trading professionals.

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9 thoughts on “How social media sentiment can affect markets

  1. This post reminds me of a Fox Business interview with a kid who developed a program to count the number of times a word was used on social media platforms. He said it could predict, with a great degree of accuracy, branding selection, presidential election outcomes, earnings, etc. I really wish I could remember the college kid's name. It was a very interesting segment.

  2. Read,sift and digest and may be you make some profit.For now I expect rather brutal corection DOWN.Have a nice day.Martin

  3. Social media was viral on this generation, even it will predict or not the current market, it is still an important factor on the market and it is how the analyst do their rules to go beyond what will work in the current-future market.

  4. Being Canadian, I am confused about your Gov't.
    The Congress Won't approve the budget, so 15% of the civil servants are "Furlowed"
    This means laid off, But Congress votes to pay them in full for the time lost....???? Why are they not working
    if they are going to be paid??? ...ONLY IN THE EXCITED STATES OF AMERICA !!!!

    1. I would not not say that we should be confused about the government. They decided on the health care law with common agreement all over parties some years ago, because that's a national duty to improve it. But the new law had a predecessor: Mitt Romney’s insurance expansion bill in Massachusetts.
      The only thing of disagreement is just rather an ideological, that the law is not implementened under the name "Romneycare", but "Obamacare". I hope, and there is certain confidence, that Republicans and Democrats find back to the common way, for which they were elected: doing the best possible for the nation. Obama is not working against ppl of America.

  5. A clear pediction of markets can not be made or even is impossible. But if you try to analyse fundamental data, compared with sentiments, especially from social media, like twitter, at least a probalility in which direction market might move, can be given. But all this remains a bet.

  6. It's been awhile since I've seen any new articles on INO. Has anyone seen anything recent as to upcoming catalysts, rebutals to Cramer's Dead Cat Bounce analysis etc.?

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