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Trading with Sentiment

Acuity Trading produces a variety of news-based sentiment indicators for many market assets conveying different emotions. How can an automated trading strategy make use of these? In this article I’ll propose some ideas for trading with the sentiment indicators producing entry/exit signals. For almost all companies trading in the New York Stock Exchange we have at hand sentiment indicators conveying financial bullish emotions (Positivity, Certainty and FinancialUp), and we have also sentiment indicators conveying bearish emotions (Negativity, Uncertainty and FinancialDown). I propose to use them alone or combined to signal the time for taking a long or short position in the target stock, just as one would use technical analysis and stock prices. I will work out some examples and backtest my proposed sentimental trading strategies to assess their performance. I will suggest forms of visualising the results. For my experiments I use the Statistical Software R.

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