Trading on Sentiment: The Power of Minds Over Markets (Wiley Finance)
comments:
If you want to understand how some people make money trading stocks, see
https://www.sciencedirect.com/science/article/pii/S0304405X9...
(obsolete because HFTs are doing something similar)
Look at algorithms used in "automatic market making". Also this book
https://www.amazon.com/Trading-Sentiment-Power-Markets-Finan...
is by some people who did something a lot of us thought about circa 2010 but they really did it and succeeded. Also
https://www.amazon.com/Hedge-Funds-Perspective-Financial-Eng...
Like the first article the last book describes a strategy which has long burned out but if you are making money by quant trading today it's because you discovered a strategy like that which hasn't burned out yet.
Personally when I look at charts I see levels of support and trends (doesn't there have to be someone who thinks that $40 is a bargain and buys heavily when it dips below that?) but the literature doesn't support it. On the other hand I don't believe in the occult but I am still really good at Ouija boards, talking to fox spirits and stuff like that.
I never took "head and shoulders" and other patterns like that seriously.
I made a ‘financial sentiment index’ based on news stories from Yahoo Finance. At the time I watched a lot of CNBC if you do that it is easy to believe that some days have a lot of positive stories and the stock market goes up, some days it seems the other way around.
I found no correlation between sentiment and the S&P 500, VIX, Gold, bond funds and a few other things, neither in a predictive or retrodictive sense.
I later found this book
https://www.amazon.com/Trading-Sentiment-Power-Markets-Finan...
By some folks who did manage to make money trading based on sentiment analysis.