Trading algos now target social networking

We've been talking about the rise of algorithms that use machine readable news to generate automated trading advice for some time. The idea is compelling, obviously you want to stay ahead of the news, and this is one way to get an edge. So is social networking the next logical step in this arena?

There are those who think the blogosphere is meaningful in this regard. There are certainly enough pundits, traders, journalists and others on the likes of Twitter and Facebook who are worth following in some fashion. Alacra's PulsePro technology suite has garnered attention in this emerging area. According to Dow Jones, the product only looks at blogs the company found to be "credible." These blogs are combined with articles from traditional media--in total about 3,000 sources. It reads the text for such things as quotes from Wall Street analysts and top executives and generates sentiment ratings.

The firm has found that its ratings "can lead movements in stock prices by about one to three weeks" for large-cap. This would appear to be an interesting addition to any trader's arsenal.  We'll see how this develops and whether the big boys, like Thomson Reuters, decide to work blogs and related media into their services. My guess is that they will. 

For more:
- here's the Wall Street Journal article

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