Can you predict the market? New technology could give you a ‘competitive edge’
Trading.co.uk was set up three years ago and is used by 4,000 investors but these numbers could swell as it officially launches on Monday 25 April.
Its aim is simple: to provide investors with early warning signs from digital content, empowering them to act on the algorithms to either buy or sell shares. The technology behind it is less simple.
Chief executive Gareth Mann claims that while polls suggested there would be a hung parliament in the 2015 UK election, by reading the sentiment on social media, Trading.co.uk rightly predicted a Conservative win.
Its algorithms also detected issues at Alton Towers last summer which gave investors a two-hour window to sell their shares in Merlin before the tragic news of the roller coaster accident was reported in the media.
So how does it work?
The site monitors 10 different social networks and watches over 9,000 equities per second. It tracks both financially driven data, such as whether a stock goes up or down in value, and the brand, such as Apple.
It keeps an eye on key people within that brand, the sentiment around the brand and the people. Each public conversation is weighted so that more influential people and brands are weighted higher than someone with less followers.
Trading.co.uk uses Artificial Intelligence to collect and analyse around 250,000 online messages per second – more than 22 billion per day – and filters these to produce stock market data.
Once the data is aggregated, a score is given and it creates a ‘pulse’ which gives investors information about the equity. Users of the free site can create a watchlist to check the relevant data but Mann adds that once the site is pushed out of testing mode, they hope to create email, text, app and instant messenger alerts.
However, there is a big disclaimer on the site: it’s up to you, the trader, whether you act on the data supplied.
“If there’s a lot of negative noise you have time to decide whether to take up the data – as a trader you would want to know. Trading.co.uk isn’t predicting an event. It’s telling you ‘this is what’s happening right now’, allowing you to have a competitive edge to help predict an outcome. Trading is still risky and negative sentiment isn’t always for obvious reasons. There are certain market events you can’t control,” Mann says.
He adds that Trading.co.uk doesn’t check the authenticity of posts or tweets. “Incorrect statements can also move markets,” he adds which is why all the data is weighted.
Mann is also keen to point out that Trading.co.uk doesn’t profit from the data: “Ethically as a journalist you don’t shy away from reporting tragic news and that’s what we do. We don’t profit from it ourselves. We don’t sensationalise the data – we need to be impartial and we have internal ethics and standards.
“We supply traders with better quality data but we’re not Big Brother. People have strong voices and they’re heard on social media.
“Social media needs to be taken seriously as an investment tool, and those who aren’t considering it will, frankly, fall behind. This is the new wave of big data monitoring, and it allows us to translate – and make sense of – an incredible mass of information to ensure traders stay on the front foot. We’ve tweaked and perfected our platform and are now in a position to move forward with our solution; to refine and make sense of all the chatter and create tangible take-outs that businesses, and investors, can work with to make vital decisions.”
Who is it aimed at?
Mann says there are three core users:
The occasional trader: For those who want to keep an eye on their pension holdings, for instance.
The light trader: For those who will use the tool to help validate their decision.
The day trader: For those who will use the platform for opportunities.
What’s the current sentiment around Brexit and Trump?
Based on current algorithms, Mann says the vote’s currently 59% in favour of the UK staying within the EU.
And with the upcoming US elections, Mann says the platform’s actually seen a fall in popularity for presidential hopeful Donald Trump.