Wall Street traders mine tweets to gain a trading edge

by Adam Shell, USA TODAY

#Tweet this: To gain a trading edge, Wall Street traders are now using clever computer programs to monitor and decode the words, opinions, rants and even keyboard-generated smiley faces posted on social-media sites like Twitter.com.

Human emotions, such as greed and fear, have always moved markets. Money can be made betting with or against the crowd, so measuring the mood of the masses online can be just as valuable as tracking price-to-earnings ratios, corporate profits and interest rates. The new trend on Wall Street for deciphering if the populace and investing public is in a positive or negative state of mind is computer-driven text analysis of the millions of real-time tweets and posts that flood social-networking sites.

Online surveillance of social-networking sites is emerging as a must-have tool for hedge funds, big banks, high-frequency traders and black-box investment firms that run money via computer programs. The goal: to gather market intelligence from previously untapped sources……

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Popular Mechanics cites this type of digital surveillance, which it dubs complex-event processing, as one of the “10 Tech Concepts You Need to Know for 2011.” The magazine notes that there is a lot of noise in the data-rich digital world, which makes it harder to unearth relevant information. But it stresses that “a new generation of software” is shifting the focus from “data,” or a record of what’s happened, to “events,” or “what’s happening right now.”  Read the report.

DCL: after reading this you’ll really know what CEP is!