Big Data Can Be Used to Profile From Stocks

By: rkspark

Big Data Can Be Used to Profile From Stocks

I must admit and I firmly believe that every person should invest in the stock market.  In today’s times, we have discount brokerages that are online and extremely fast wireless and wired connections for more and more people to use. Now, go ahead and team that with the rise of companies removing pensions and letting its employees manage their 401K’s, as well as more people working on contract and getting 1099s instead of W-2s, and you can see that things have changed. Now the average person must have at least some elementary knowledge of the stock market and how to take control and manage their retirement portfolio if they want to succeed financially.  Now, it’s the After Google or AG age with the ability to get information only a search away. There’s a lot of data as well as Internet Portals and companies giving people free financial data on virtually every publicly traded company.  With that in mind, I’ll give you 3 easy techniques from big data on how to make a profit from the stock market and get control of your financial future no matter if you’re a geek who knows all about technology or a novice on the computer.  My tips will make you money no matter your background.

 

Method 1: Making Money from Market Mood or Market Sentiment Trading

There’s a well-known fact, and that’s the fact that mutual fund managers, hedge funds and large banks spend lots and lots of money.  You’ll spend cash from companies that give the public data sets or data from investors. Such companies as Factset, CRSP (Center for Research in Security Prices), and Capital IQ give you datasets and data for large amounts of cash.  However, what does the everyday retail investor who doesn’t have capital or thousands of dollars to spend on the data, not to mention hire a data scientist or even a group of people to mine data before a purchase, do?

 

During the early 2000 up until 2010, there was a great gold rush.  From my hometown, across the US, and across the globe, purchasing gold or bullish gold was what the basic investor did.  Finally, I had enough money in my 401K, as well as additional cash I could use to invest, and my plan was to buy a GLD (Gold ETF), a Gold mining stock company, or some other stock related to gold.  Before I bought anything, I reviewed a chart that told me that Gold had an increase of over 2000% since the 2000 low and every person I would meet was bullish Gold.  People wanted to buy Gold at 2000 per ounce and they all felt it would continue to rise. That’s when I learned my first investment lesson and that is when everyone is bullish, you may want to be bearish. Like Warren Buffett said when he quoted a Goldman Sachs trader, “Be greedy when people are fearful and be fearful when people are greedy”.  Data has shown and it has been proven that the sentiments of the market can change with the weather, natural disasters, major sporting events and news events.  How is a retail investor supposed to profit from this sort of constant change?  I would recommend this data tool as one of the first big important ones, found at this website http://tweetchup.com/

 

where you make a profile and with the use of the analytics tool search for different hashtags for the word on Twitter for bearish or bullish market sentiments.  For additional reading, three researchers wrote “Twitter Mood Predicts the Market” http://arxiv.org/abs/1010.3003.  Yes, Twitter is popular no doubt, but I would recommend you use a tool that lets you search all the popular social media sites, such as Facebook, LinkedIn, Twitter, Stocktwits, and blogs, to determine market sentiment.  Go to Datasift (Datasift.com.)  It allows you to input date from social media and output that data to an app or tool of your choice.  Yes, this method will cost more money and yes, you’ll probably need some technical know-how, but the solution is affordable and worth it if you have the time and the money to trade based on market sentiment. In fact, there are hedge fund managers and institutional investors who use the method as described in this particular articles – (zero hedge site) It may not be the best method, but it’s an easy way for the everyday retail investor to make cash based on market sentiment and moods.

Method 2: Social Media Algorithm

Still another way to invest with market sentiment and mood is using the Finsent site – http://www.finsents.com/.   This is a site that aids investors to help them scan the financial resources to discover the market mood.  I happen to use the tool to gain insight into the mood of real estate, commodity, or some other sector I’m interested in.

image 2trading algorithm from that website.  The above figure shows how investors can get information and then with the help of an algorithmic engine come to a trading determination.  What’s powerful is that you can design your own trading algorithm derived from market sentiment from large data software. This will allow you to identify more volatile stocks according to Ultimate Stock Alerts

Method 3: Market Sentiment Trading Platform

Hedge fund companies and institutional investors with lots of capital are currently mining the web, and taking advantage of social media and blogging websites, and trading with the latest tool. So the everyday retail investor needs to do the same.  In fact, a hedge fund company called Derwent capital developed a trading platform called DCM Dealer.  It allows retail investors to trade based on market sentiment data derived from Twitter, Facebook and other social media sites.  It has an interface that aids retail investors in reviewing market sentiment and then building and trading the market sentiment of the market overall or individual equities or sectors. image 3

Conclusion:

These methods and tools are easy and you can view them as the only tool in a toolset needed to manage stocks and retirement portfolios.  With that being said, you still should research and come up with additional methods. I wrote this article so that the average retail investor can start taking control of his or her financial future and use the same tools large hedge funds and banks use to earn capitol from the stock market. I wish you the best of luck investing.

 

 

 

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