Spin-out harnesses social media for stock trading
University of Glasgow spin-out company Scoop Analytics has launched an online tool which leverages the power of social media to help traders make better decisions.
The system does not use retweets as an indicator of the worthiness of breaking news, but instead analyses the text within a tweet, making it faster and more effective at highlighting relevant information.
“In a sense what we’re offering traders is a glimpse into the future – a chance to see news as it’s broken on alternative data sources, such as social media, and before it reaches mainstream media outlets,” co-founder Dr Phil McParlane said.
“It may only be a few minutes before the information makes it to the news, but a smart trader can use that time advantage to make more informed trading decisions ahead of the curve.”
In July, Scoop’s system identified rumours of a merger between JP Morgan and WorldPay 60 seconds before the news broke, increasing WorldPay’s share price by around 14 per cent.
The next day, Scoop picked up details that the merger had fallen through, Four minutes after the alert, WorldPay’s stock dropped 18 per cent.
According to the company, a trader who acted on both tips and bought £1,000 in shares ahead of the WorldPay stock rise and then sold them again before the drop would have made £248 before trading fees were deducted – a return on investment of 24.8 per cent.
Co-founder James McMinn said: “The underpinnings of our algorithm are a closely-guarded secret, but what we can say is that Scoop Markets looks at thousands of tweets every second to pull out data which is relevant to a trader’s area of interest.
“We've put a lot of time and effort into fine-tuning the system since Scoop was incorporated in 2015, and we’re confident that Scoop Markets will provide retail traders with a real advantage.”