To be a better trader, one must know what triggers investors to invest. One obvious fact that psychiatrist Dr. Richard Peterson, also a Managing Partner of MarketPsych Capital, pointed out was emotions. Yes, emotions handles the “GO” button of investors.
A couple of years back, many investors have been searching for information about stocks through the internet. For Dr. Peterson, this meant analyzing dominant sentiment and buying stocks that most investors are largely cynical about. A perfect example for this was on April 25, 2009, when the W.H.O. or the World Health Organization announced health emergency over swine flu or H1N1.
That announcement, the online stock messages, specifically for investors on American Airlines indicated their worry about possible decline in airline travels. Sure enough, the stock market dropped to 13 % after two days.
Dr. Peterson said, “In the end, 75 percent of the overall strategy was based on sentiment.” His company has also developed a consulting software which is like online financial news, corporate interviews and social media. It enumerates at least 400 types of sentiments from various topics. Such emotions include anger, optimism, product releases, management changes, etc. Now this software is being sold to different financial firms and hedge funds.
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