Just 18 months after it shut down its nascent Twitter-based hedge fund, Derwent Capital Markets is back with its new offering—with the launch of what it says is the first social media-influenced trading platform.
The new spread-betting platform, called DCM Dealer, which went live from this week, includes a feature that calculates a real-time sentiment rating for individual stocks based on the millions of tweets that are generated on Twitter every day.
This scraping of social media sites to help traders predict the direction of markets is beginning to take off in the finance world, although London-based DCM says that theirs is the first such trading platform to be launched.
“Investors have already accepted for some time that financial markets are driven by greed and fear,” Paul Hawtin, founder and chief executive of DCM Capital, told Markets Media.
“What it will effectively do is allow a trader and investor for the first time to see underlying sentiment in that instrument in real time.”
Of the 8,000 equities, FX and commodities instruments that it follows, DCM Dealer gives each a rating of between zero and a maximum of 100.
“If someone is interested in Vodafone shares, we search for every single tweet with anything to do with Vodafone in it,” said Hawtin. “So the keyword is Vodafone, or any of the senior management team, and then what we do is we have a waiting system.
“So tweets that have more relevant keywords have a higher rating than tweets that would be less relevant—such as someone tweeting about their poor Vodafone reception, for instance, which would have a low rating.
“What we do is combine all of these tweets and we have an easy-to-understand output to make a decision from which is just a signal rating from zero to an extreme positivity of 100. It’s constantly fluctuating and updating every second so you can see sentiment changing.
“The whole concept of using social media to benefit your trading positions is gaining traction. Traders can get information overload and all sorts of analysis, but at the end of the day you need to make a binary decision whether to buy or sell. So we’ve tried to make it as simple as possible.”
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