Architects of Electronic Trading: Technology Leaders Who Are Shaping Today's Financial Markets

CHAPTER 16

Social Media in Trading

Making Sense of It

Many market participants are turning to data for their next source of edge, as we saw in the previous chapter on Big Data. As solutions emerge that help them extract value from massive amounts of data, market participants are able to consider more data sources as inputs to their models. One such source of data that could prove to be extremely valuable for trading and other firms is social media. In this chapter, Joe Gits of Social Market Analytics, a firm that produces trading signals based on social media, discusses what insights social media can offer and how market participants can separate meaningful data from the noise.

With over 500 million tweets per day, everyone, active user or not, knows that social media is where highly relevant private and public conversations are taking place. Social media in itself needs only the briefest introduction: Users post private and public commentary online for the benefit of an audience that includes both “friends” and the wider public. See Figure 16.1.

Figure 16.1 Reprinted with permission of www.dreamgrow.com, www.dreamgrow.com/top-10-social-networking-sites-market-share-of-visits/

Monitoring these conversations and the massive quantities of data that they entail in the search for the mention of corporate names has been the key area of activity for many social market entrepreneurs. ...