Blogs & Comment

Algo trading for the masses

Free iPhone app forecasts stock price movements by analyzing online market news and opinion.

(Photo: Getty Images)

Calling all day traders. Now you can ignore market fundamentals just like the sophisticated algorithmic trading crowd that helps some hedge funds print money, at least when they are not losing it. All you have to do is grab an iPhone or iPad and download a new application called Wall St. Scanner.

The free app provides a forecast of next day price directions for U.S. stock indexes and equities using text analysis and proprietary algorithms to analyze and encapsulate the online sentiment of publicly traded companies from seven million web pages published by over fifteen thousand sources, including news outlets, financial analysts, corporate websites and social networking sites such as Twitter and Facebook.

Sentigo, the privately held Israel software development company behind Wall St. Scanner, calls it “a secret tool” every investor must have. “Our mission is to revolutionize the way the public consumes financial information, making it easily accessible and actionable,” said company founder and CEO Gadi Shvadron when launching the app. “Our learning machine algorithm integrates structured market data with unstructured crowd-sourced opinions to identify the bottom-line intelligence regarding stocks.”

Greg Newman, a wealth management advisor and associate director with ScotiaMcLeod’s Newman Group, is cautiously optimistic about the benefits of this so-called secret trading weapon. “I’ve not yet seen this app,” he says, “but it sounds like it could be a useful tool.  Stocks move according to mass sentiment and any further clues on what the pulse of that sentiment is will be helpful.”   

That said, Newman warns trading will always be a risky profession because “markets are often very counter intuitive.”  Simply put, he says gauges of momentum like Wall St. Scanner are helpful, especially when they help confirm other data about a stock.  “But without the proper approach, understanding and respect for markets, I doubt it will make a positive difference for inexperienced day traders over a market cycle.”

The usefulness of Wall St. Scanner, of course, will be easy to judge for anyone who uses it for more than one trading day. According to the software, which lists news and analyst consensus and offers market “buzz” and “mood” meters, two stocks on my watch list—LinkedIn and Canadian autoparts maker Magna International—will fall tomorrow along with the Dow Jones Industrial Average while the S&P 500 rises.

Until then, the software deserves credit for making clear stock price forecasts, despite the fact that they are watered down by legal speak that calls them “decision support” tools, not trading recommendations.