News as a Circuit-Breaker
By Chris on June 30, 2010
[Cross-posted from Predictive Signals]
While researching another project, I ran into these two posts discussing news analytics.
One quote that particularly caught my attention was this:
“If something big comes out on a company, computer traders can set up a sort of circuit-breaker which trips and pauses the computer trading programme.”
This echoes something we’ve been hearing a lot from the people we speak to. A first approach to taking advantage of news and pre-news (government filings, twitter, etc) may be in using these signals to alert a trader that their trading strategies might be inappropriate for a given time period. Perhaps if you know that a major product release, government approval or court case is being announced on a specific day, its not a day you trade that stock with your established trading strategies. At least until after the initial activity around the event.
Since assessing future events is one of the things we do, we’ll be taking a closer look at this in a future blog post.