Twitterverse Meets Forex Trading

Twitterverse Meets Forex Trading

Twitterverse Meets Forex Trading

Forex trading takes place within the world's biggest financial market place, with daily trades equating to trillions of dollars. The size of this market can be attributed to the scale and pace of global trading, with the foreign exchange market sustaining a state of constant flux as it reacts to varying changes from the global to the fractional. Such a reactionary and shifting habitat coexists with the equally rapid world of social media and status updates.

As the social media bubble grows capturing every facet of modern communication, psychologists are beginning to tap into the connection between society and finance. The world we live in is subdivided into multiple categories. These categories often seem bipolar, business and personal, mathematical calculations and literary words or stock markets and your local market place. However these categories are displaced and inter-connected under the common umbrella of society. A business is inevitably saturated with personal opinions, a statistician must explain theories using language and the financial stock markets and your local market place are both subject to conjecture and gossip mongering. We live in a connected world, isolating these connections and extracting them into an appropriate model offers a level of prediction.

It is a well regarded fact that real time global change is an intrinsic component of forex market movements. Twitter documents the changing world and psychologists are beginning to turn the pages of this social phenomenon to reveal a distinct connection between social status updates and the financial market place. Johan Bollen, Huina Mao and Xiao-Jun Zeng have done just that by creating a report into the relationship between the stock market and twitter moods'. The report from IU Bloomington's School of Informatics and Computing, aptly titled twitter mood predicts the stock market' has attracted significant interest.

A mood is a debatable term, particularly in its non-specificity. A mood is not a physical sense or an emotional outburst. Rather it is a stream of conscious thought, a culmination of ideas to suggest a certain tone. The promiscuity surrounding this term means that a report into mood' seems at first obscure. However the researchers pinned down their base for assessing mood using two existing mood tracking tools' Google profile and Opinion Finder. Opinion Finder is used to denote a positive or negative mood whilst Google Profile measures "six dimensions" of mood: sure, alert, happy, kind, vital and calm.

With the tools in place the researchers set about analyzing movements in the Dow Jones Industrial Average (DJIA) with 9.7 million tweets. The report states that movements in the dow jones could be predicted with an accuracy of 87.6 percentile, between two to six days prior to the actual movement. The prediction is based on in the general level of calmness' within the twitterverse. It is interesting that out of all the tools, calmness was the emotion which bridged finance and society. Rather than outright positivity or even negativity, it seems that a quantifiably chilled out' nation is cavorting with financial movements.

The report succeeds in supporting a hypothesis that global mood has a domino effect on financial trading and may have the potential to impact on binary options or other choice based trading decisions. The type of prediction model used, known as a Self Organizing Fuzzy Neural Network' could be integrated into mainstream trading prediction models to enhance the accuracy of results. However the nature of this report is in its raw state and Professor of Informatics, Johan Bollen has himself stated that the report offers no information on the causative mechanisms that may connect public mood states with DJIA values in this manner.'

The density of the twitterverse is an intriguing concept and matching this density of opinion with financial confidence has potential. However the density of the social universe encapsulates so many topics filtering these opinions into a clear financial movement is far from definitive, yes the report succeeds in offering suggestive movements but so does rumor.

For the latest financial resources check out, www.igmarkets.com/fx/.This site has resources ranging from financial commentary in reaction to key economic developments through to Reuters newsfeeds which alert you to market change.

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