How to Trade News with Textual Analysis Methodologies? Here's the Key

How to Trade News with Textual Analysis Methodologies? Here's the Key

By CFO Tech Outlook | Tuesday, July 02, 2019

With financial markets working at a breakneck rate, social media and crowd-sourcing techniques have become the chosen toolkit for savvy investors seeking company trends and acting on breaking news stories at the time.

FREMONT, CA: Recently, scientists have begun to determine news sentiment automatically to explain movements in inventory prices. Interestingly, in explaining stock returns, this so-called news sentiment operates relatively well. Trading strategies use textual news to make a profit from new data entering the market. To carry out extensive and comparative research on how company-related news factors anticipate or reflect the stock trading quantities and economic returns of the business, we use quantitative media information produced by a large-scale natural language processing (NLP) text analysis scheme. We, therefore, suggest methods based on monitored and reinforced learning for automated decision-making. We can show together how news-based information can be integrated into an investment scheme.

A Decision Support System (DSS) is a collection of associated computer programs and the information required to help in analyzing and making decisions. The news trading scheme for textual analysis utilizes a DSS to continually scan incoming news and create trading choices based on the information's sentiment rating, going long when highly favorable feelings are identified.

The news trading strategy and the mixed news trading and momentum approach are both rules-based and cannot thus adapt to arbitrary patterns inherently. Strategies for learning machines learn from information patterns and can manage non-linearity. The writers acknowledge the potential dilemma created by influencing the next one by each trading decision. Consequently, they use a technique of reinforcement learning called state-action function to identify the expected value of each possible action in each state.

The results of the news trading scheme for textual analysis indicate favorable, statistically significant performance. The findings of the mixed news trading and momentum approach indicate somewhat surprisingly reduced efficiency than the news trading strategy alone. The diverse approach, however, offers less volatility as a tradeoff.

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It may be a way to decrease volatility for traders looking to adopt a news trading strategy, including a momentum filter. A reinforcement-learning model can deliver a lower risk than a supervised learning model for those who implement a machine learning scheme to automate their news trading scheme.

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