Trade Ideas Adds StockTwits, Heatmaps to OddsMaker Event Analysis Tool

Encinitas, Calif.-based idea generation and market scanning technology provider Trade Ideas has rolled out new social media analytics and functionality for the execution algorithm evaluator in its Trade Ideas Pro stock scanner platform, providing clients with additional filters for generating and identifying opportunities to improve their trading strategies.

Trade Ideas is leveraging its existing connection to the API of investing social media community platform StockTwits, to capture its feed of targeted conversations about financial markets, and the volume and frequency of mentions for each stock on StockTwits. As a result, Trade Ideas can now provide a baseline of the normal volume and frequency of StockTwits mentions for each security so that users—primarily proprietary traders—know when these are higher or lower than usual.

The vendor maps StockTwits mention rates against daily and five-day stock price movements as a proxy for sentiment, to help users see what impact chatter on StockTwits has on the price of a stock. For example, high volumes of mentions on StockTwits together with a rising stock price indicates positive sentiment, says David Aferiat, managing partner of Trade Ideas.

In addition, traders can leverage the new analytics to gain first-mover advantage by detecting other patterns, such as a lack of mentions on Twitter in conjunction with other data. For example, traders can search for stocks with significant price movements but low trading volumes and no StockTwits mentions, which could be a contrarian indicator that traders can take advantage of—such as by short-selling—before volumes and market chatter lead to a price correction, Aferiat says.

To enable traders to test their hypotheses around such events, the vendor provides a back-testing tool, dubbed OddsMaker, which it has also recently upgraded, allowing the tool to scan the entire market to find stocks matching events specified by traders—based on filters such as price movement, fundamental data, trading volume and social media statistics—and test the performance of trading plans based on that event, rather than testing a specific stock or basket of stocks, Aferiat says.

Profit Optimization
OddsMaker now includes a Calendar Heatmap for displaying back-test results to help users quickly identify the days on which a particular strategy was profitable, and then query the results to determine what made the strategy profitable or not. The vendor has also added an optimizer tool that suggests—based on any of the available filters—how users could tweak their strategies for the highest probability of profit.

“Maybe I have a string of four or five days that were very profitable. I can focus on that and look deeper to see what price range I was most profitable in, and tweak my strategy to, for example, apply it only to stocks above $50,” Aferiat says. “We can show you any of our filters—even if it was not part of the original event—so if you see that stocks that performed well had a lot of mentions on StockTwits, you can go back and add that filter.”