The Alivia Technology Blog

Big Data : Leveraging Unstructured Data in Trading

Posted by Mo Saeed on Thu, Jul 19, 2012 @ 13:07 PM

The importance of social media chatters cannot be ignored anymore when making trading decisions.  Since the beginning of  time, traders  relied on ‘whispers’ and ‘rumors’ for trading….stocks got bought on rumors and sold on news…that’s  how the market worked before the introduction of  electronic trading.


All of a sudden there was a race to capture and analyze market data, write algos and put servers next to exchanges for the speedy execution of trades .Whoever could shaved off few milliseconds and got to the exchange first could make money….than the technology that allowed firms with deep pockets to developed expensive trading infrastructure got cheap, really cheap…. now anyone can set up a HFS in their bedroom and do program trading…trouble is no one can make money when everyone does the same thing. Advantages of HFS and program trading are pretty much gone.  They are utilities now.

In the old days, majority of news and rumors came from the trading floors, nearby coffee shops and bars.

Today, it is coming from all over the world through social media chatters and blog posts. The process involves assessing the sentiment of the content, for example, whether comments are positive or negative regarding a particular company; sector or industry.  The relevance of the content, for instance whether a company is the subject of a news article or blog, who is writing the blog, how many followers chatting and retweeting the blog.

This is a frontier territory for most, but not for the technically advanced firms…they are using big data technology to sniff and capture investors, workers and consumers sentiments. All in real time from  hundreds of thousands of blogs, chats from social media sites and then capturing and neatly bundling them with other trading utilities and creating real time trading signals.

Now we have come full circle. Traders again try to capture sentiments before anyone one else can. However this time, they can combine trading utilities with unstructured data and can take advantage of a whisper 10,000 miles away from  an Indian village where someone just tweeted about how a clean tech company’s product is improving lives….a company that happens to be on your watch list.

Next post: will discuss tools of the trade

Topics: Big Data, Financial Services, Trading, Stocks, Social Media, Data, HFS, Technology