How traders need to leverage social signals to stay ahead

Edward Oliver, Vice President, Finance Sales, Dataminr

The days of reading the morning paper for stock price updates are long gone. In today’s social-first world, where speed is everything and news headlines can instantly impact share prices, traders can’t afford to wait for stories to break via traditional news sources.

The real-time news environment has never been so complex, and events often break first on social media. You can no longer guarantee who will break news first, or who might share critical information, so staying vigilant on social media has become a necessity if you want to stay ahead of the game. Nowadays it could just as easily be a member of the public rather than a journalist, who happens to be on the ground observing an event, that breaks the scoop on social media using their smartphone.

This can have a direct affect on market volatility, with unexpected news and events instantly impacting markets. As a result the need to capture information from the most unlikely of sources, in the moment, is driving traders’ decision making. According to research from Greenwich Associates[1], nearly 70% of investors believe real-time market data provides them with an edge, and 80% want greater access to alternative data sources. 

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What’s a signal and what’s just noise?

The use of alternative data is becoming ‘mainstream’ as more companies turn to these new data sets to add a layer of real-world insight, beyond market data. Having this real-time view can help traders and investors know first and act faster; allowing them to make smarter decisions, in the moment. In this way the trading paradigm has shifted with the introduction of new tools that provide real-time awareness and give finance professionals a first mover advantage.

However alternative data is often random, unstructured and can be hard to decipher in a way that is beneficial to making quick decisions. News breaks anywhere at anytime and it’s essential that traders are able to separate the signals that provide the first indication of an event happening, from the wider noise. Traders need the right tools to spot what’s important in the moment, not after the fact.

Seeing the story behind the story

Context is, and always will be, king. Correctly identifying social media signals provides real-time insight on the situation, but also a whole new level of context. Traditional sources such as news outlets can be limited in scope, especially when news is breaking and a story or event is unfolding. Having a real-time view of the social media landscape, including access to sources that traders would never have been able to follow on their own, provides a much fuller and more complete picture. In this way traders can capitalise on social media posts by going straight to the source, then using this information to inform their decisions.

However, just having access to reams of data is not enough for traders to be able to perform well. They are time poor and have a multitude of sources, screens and platforms to contend with, meaning the monitoring of profit & loss and execution management systems will often take priority over reading the headline news. This is where having the right platforms in place can allow traders to integrate all their sources through one system – giving them an instant, single view on everything that really matters. Such integration allows traders to keep focussed on the screen or application that’s most important in the moment, with the addition of real-time alerts, information and insight – helping them to make more powerful decisions even quicker by finding the needles in the big data haystack.

When time literally is money, having all the data to hand is a huge asset. Alternative data is quickly becoming the new normal for traders and is helping them make quicker, and more informed decisions, than ever before.

[1]“Alternative Data for Alpha” Greenwich Associates – Q1 2017

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