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    Leveraging Twitter for Day Trading

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    Resource Nation Day trade 300x214 Leveraging Twitter for Day Trading
    We all know Twitter, America’s favorite 140 character micro-blogging site. Twitter    has quickly grown over the past 5 years to one of the most popular sites in the world, receiving over 1 billion tweets per week. With the exponential growth of Twitter, more people began looking for a way to harness all of these opinions in to something meaningful. Developers got to work developing software systems that look at factors such as emotion, tone, and content to determine opinion. Twitter originated as a rather simple idea, has now turned into a robust platform for business, news and social gathering.

    Being able to understand the opinions of a community is crucial for traders and investment bankers. Valid data gives them insights in to whether they should be against or with the current public opinion. Not to mention, it also gives independent investors a way to gather market intelligence from unknown sources, potentially giving day traders a competitive advantage in a cluttered investment landscape.

    Using Twitter to predict the stock market is a relatively new concept. There are very little publicly available tools, and many tools come with skeptics. The skeptics claim that Twitter has too much noise. There are so many tweets every second that say something; however the truth is that the majority of these tweets don’t carry much opinion. Instead tools like Opinion Finder, aggregate data from people that are tweeting words about their emotion by using words “I feel like,” “I like,” “I want to.” Even with this, they found was that their Twitter algorithm paralleled market changes and allowed them to predict changes with an 87.6% accuracy.

    Public Interest

    Twitter is a hot topic for many investment firms. Currently it hasn’t been adopted on a massive scale, making it a rare tool to gain a competitive advantage. However in the future if these stock predictors provide fruit, the competitive advantages will lie in how well they aggregate opinions and not simply using the tools. “According to Derwent Capital Markets, a London-based hedge fund set to open for public investment on April 1, has pooled together $40 million to obtain exclusive rights to the Twitter predictor, according to the Indiana Daily Student. Bringing on Bollen and Mao as personal consults, they plan to create a trading model based on the findings.”

    1. Capture daily tweets.
    2. Analyze tweets with mood-measurement tools.
    3. Determine mood content of tweets (i.e., “positive” vs. “negative” or “calm” vs. “anxious”).
    4. If mood is positive or “calm” readings jump, buy stocks, because Dow is likely to rise three to four days later.
    5. If mood is negative or “calm” readings plummet, sell stocks, because Dow is likely to fall three to four days later.
    (IU study showed 86.7% accuracy rate in predicting the direction of the Dow three to four days later.) According to USA Today

    Day trading can be an exciting mix of trial and error. It can’t hurt to try a new an emerging trend in the investment world. Even though people may be saying that “It’s a ripple, not a wave. It’s just another data source that has been popularized.” The skeptics are just less competition.

    What do you think Twitter can be a scope for the same in future? Do share your thoughts.

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    { 6 comments… read them below or add one }

    Abhishek Biswal

    Well, It’s not only Americans Fav, but they spend too many hours on Twitter. Before Blogging, I didn’t like twitter. After some time, I started tweeting links. But now I know how to use it – Twitter is not about Links but it’s a mind blowing Social Network! Nowadays I spend more time on Twitter than on Facebook! BTW, Nice Post! And I hate people who use Twitter to increase sales!

    Reply

    HackTik

    Nice and quite interesting. I have heard about the latest twitter predictor thing but not sure if it can really go that far in giving good and accurate results that can make a day trader’s life easy. Lets wait and watch.

    Reply

    Raghav

    It’s very good that 86.7 % accuracy helps to take right decisions when you are buying or selling something. Because if we don’t know the opinion of people that what they want then everyone who are working for their family, for their father’s business etc., they can’t be able to sell right products. I’m feeling happy when twitter user gives their opinion on my tweets.

    Reply

    Maninder [email protected]

    Nice and quite interesting. I have heard about the latest twitter predictor thing but not sure if it can really go that far in giving good and accurate results that can make a day trader’s life easy. Lets wait and watch.

    Reply

    Arun

    Wow you have opened a new angle to day trading. will try my hand using this on forex.

    Reply

    Sahil BJ

    you mentioned the things about analyzing the tweets, by measurement tools.. Now um not aware about this tool, can u please describe the things about it,, ??

    Reply

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