Newly launched Investing Algorithm combines updates from Twitter, Facebook and Google

By
Hayden Richards

Social media sites are playing a bigger and bigger role in stock market trading.

In January, a trading platform launched from DCM Capital, with the ability to leverage social media sentiment and predict movement on the stock market. The Wall Street Journal reported that “the platform, called DCM Dealer, will offer retail investors the ability to trade equities, foreign exchange and commodity contracts using a real-time sentiment tool based on data produced by Twitter, Facebook and other social media channels. The use of social media has been rising in importance when it comes to making investment decisions. The forex market has certainly taken advantage of this new technology, just look at etoro who pioneered mirroring trades.

Now thanks to ITM Financial, the general public will have access to algorithmic investing strategies that use updates and information from Google, Twitter, and Facebook to form investment advice. The software basically blends traditional analysis with sentiment indicators from the Internet. ITM Stocks blends an advanced algorithm system that monitors Internet activity on sites like Facebook, Twitter, and Google, and then blends the information into more traditional stock analysis.

“With the recent flash crashes in the market due to tweets on Twitter, the interest in how social media and Internet chatter is effecting a stocks direction has never been higher.” added ITM Financial CEO, Curt Dalton. “We see from our experience in forex markets and options, that there are certain ‘tells’ out there, like in poker, that can give you a pretty good idea on what direction a currency, commodity, or stock is going to move.”

The software release comes at a very important time in the algorithmic trading age, as just recently a false tweet from the Associated Press’ Twitter account about a possible bombing at the White House caused the Dow Jones to drop about 150 points in just a matter of seconds. “The velocity at which digital information is affecting our investment decisions is increasing exponentially each and every day.” says CTO, Ali Khan. “This is the first system that the average investor, who doesn’t have millions of dollars or access through a big hedge fund, can use to see how Internet sentiment and chatter are effecting and predicting stock price movements.” added Khan.

A wired article referenced a study, that confirmed ‘the emotional roller coaster captured on Twitter can predict the ups and downs of the stock market’.

“Measuring how calm the Twitterverse is on a given day can foretell the direction of changes to the Dow Jones Industrial Average three days later with an accuracy of 86.7 percent. “We were pretty astonished that this actually worked,” said computational social scientist Johan Bollen of Indiana University-Bloomington. The new results appear in a paper on the arXiv.org preprint server”.

At Finnovate Europe 2013  BBVA, demoed how its tool can assess whether views of the stock market expressed in Twitter correlate with actual market behavior. Jose Antonio Gallego Head of Open Innovation said ” In order to find out if the “market sentiment” expressed in Twitter is correlated with actual market behavior, we at BBVA have launched Stockbuzz. This is a site where the user can view the sentiment that Twitter users feel on the Ibex 35 and the securities that make up the index, and compare it with their actual share price on the stock exchange.

Although social media and Internet tracking of stocks is relatively new, the forward and back testing of ITM’s software show impressive returns on investment. ITM Financial uses a neural network of computers to monitor worldwide chatter and information on the Internet about currency pairs, commodities, stocks, bonds, and alternative investments. At this time only US residents will have the chance to play with the software.

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