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View Full Version : Wall St catches up with Horse Racing


misscashalot
12-21-2010, 10:38 PM
http://www.nytimes.com/2010/12/22/technology/22trading.html?_r=1&hpw

The number-crunchers on Wall Street are starting to crunch something else: the news.

Math-loving traders are using powerful computers to speed-read news reports, editorials, company Web sites, blog posts and even Twitter messages — and then letting the machines decide what it all means for the markets.

The development goes far beyond standard digital fare like most-read and e-mailed lists. In some cases, the computers are actually parsing writers’ words, sentence structure, even the odd emoticon. A wink and a smile — ;) — for instance, just might mean things are looking up for the markets. Then, often without human intervention, the programs are interpreting that news and trading on it..................

Saratoga_Mike
12-21-2010, 10:42 PM
Computational linguistics - been around for a few yrs. Reuters sells a newspackage just for this purpose - it's very expensive.

PaceAdvantage
12-22-2010, 02:55 PM
I think it's the other way around...automated trading has been around forever...

chickenhead
12-22-2010, 03:17 PM
if we start having more of those "flash crashes" based on some a-hole on twitter using the wrong emoticon, God helps us all....

Saratoga_Mike
12-22-2010, 04:06 PM
I think it's the other way around...automated trading has been around forever...

Agreed, but this is a much more advanced approach than pure quant or technical trading, although quant and technical factors can be used to enhance a computational linguistics approach. With computational linguistics, you're essentially using artificial intelligence to react to news flow in milli-seconds. For example, let's say during market hours it hits the tape that the US tariff on Chinese tires has been lifted. With computational linguistics, the program would almost instantaneously short a tire company like Goodyear. Obviously a human trader would have the same reaction, but humans can’t process language as quickly as computers. And that’s a fairly crude example. The approach can be used to execute third or fourth derivative trades almost instantly, much quicker than a human can process information. Of course just like with human directed trading, not all the trades work as planned.

PaceAdvantage
12-23-2010, 04:04 AM
My reply was in response to the thread title....

Saratoga_Mike
12-23-2010, 10:24 AM
My reply was in response to the thread title....

Sorry about that!