Home Career How to Use Sentiment Analysis in Trading

How to Use Sentiment Analysis in Trading

Reading Time: 2 minutes

The rise of technology has changed the way we communicate, and transfer information. Nowadays, our communication channels often happen through correspondence on messages, emails, and posts on social networks. While it is a very convenient way to transfer information and feelings, one of the big problems with the new way we communicate through technological tools is the difficulty of understanding the tone and emotion through the written words.

As a result, the Sentiment Analysis field evolved, with the goal of understanding the motivations, and emotions that drove the writer. This is a technical process designed to extract textual information from emotional characteristics, so that, for example, one can automatically understand whether a particular email is positive, negative or aggressive. Today, there are companies that provide this process as a service, and using advanced artificial intelligence techniques, in which they can analyze, for example, public opinion from Facebook comments or identify user needs from app store reviews.

Some of the best Sentiment Analysis companies in 2020 include Gavagai, Laxalytics, Lionbridge, Scale AI, and Monkey Learn.

What is Sentiment Analysis in trading?

Sentiment Analysis, also known as Opinion Mining, is a trading method in which a computer program tries to understand the public sentiment towards certain security. Sentiment Analysis in trading usually occurs through Machine Learning algorithmic trading systems that automatically scan and analyze thousands of market news or tweets and detect successful trades.


How to Trade with Sentiment Analysis

Well, if you are not familiar with coding and algorithmic trading, you might want to find a company that offers Sentiment Analysis AI services for you. For example, HedgeChatter is an AI-Driven Sentiment Analysis tool that uses social networks analysis to predict stocks and cryptocurrencies price movements. Another way to trade cryptocurrencies using Twitter Sentiment is through eToro that provides The TIE Long Only Sentiment AI portfolio.

If you want to feel more confident and do it on your own, there’s a ‘Trading Using Twitter Sentiment Analysis‘ course on Quantra, which seems to be pretty valuable according to the reviews.

There are other ways to invest in AI-Driven algorithmic trading software. Those include Neotic, Brand24, and CryptoMood.

Sentiment analysis of financial news articles and tweets with python

If you are a python (or JavaScript) programmer and want to create an algorithmic trading strategy using Sentiment Analysis, there are several guides and code sources that can help you get started.

Obviously, you will have to find a trading software where you can integrate the algorithm and execute orders in the market. If you prefer to trade through stocks exchanges, the best option is brokers such as InteractiveBrokers that allow users to build their own automated trading algorithm using programming languages like Java, Python, and C++.

For forex and CFD trading, the best option by far is MetaTrader4, though you will have to use ZeroMQ to connect MetaTrader4/5 with Python. You can find many brokers that offer MetaTrader4 such as AvaTrade. For users in the United States, Forex.com is one of the few to offer MT4.

Follow me
Exit mobile version