Trading on Sentiment: The Power of Minds Over Markets

by Richard L. Peterson

In his debut book on trading psychology, Inside the Investor’s Brain , Rich­ard Peterson demonstrated how managing emotions helps top investors outperform. Now, in Trading on Sentiment , he takes you inside the science of crowd psychol­ogy and demonstrates that not only do price patterns exist, but the most predictable ones are rooted in our shared human nature. Peterson’s team developed text analysis engines to mine data - topics, beliefs, and emotions - from social media.  Based on that data, they put together a market-neutral social media-based hedge fund that beat the S&P 500 by more than twenty-four percent―through the 2008 financial crisis. In this groundbreaking guide, he shows you how they did it and why it worked. Applying algorithms to so­cial media data opened up an unprecedented world of insight into the elusive patterns of investor sentiment driving repeating market moves. Inside, you gain a privi­leged look at the media content that moves investors, along with time-tested techniques to make the smart moves―even when it doesn’t feel right . This book digs underneath technicals and fundamentals to explain the primary mover of market prices - the global information flow and how investors react to it.  It provides the expert guidance you need to develop a competitive edge, manage risk, and overcome our sometimes-flawed human nature.  Learn how traders are using sentiment analysis and statistical tools to extract value from media data in order Trading on Sentiment deepens your understanding of markets and supplies you with the tools and techniques to beat global markets― whether they’re going up, down, or sideways.

Genres: Finance

368 pages, Hardcover

First published February 29, 2016

Reviews

[Tiago Quevedo Teodoro · Rating 5 out of 5]

This book can be quite helpful for those looking for trading ideas based on behavioral biases. Each chapter usually starts with a summary of relevant literature for the given topic. The chapter will then address a given dimension of sentiment (e.g., fear, uncertainty, trust, etc.) and provide examples of how the crowd behavior towards that sentiment affects asset pricing. The disclaimer here is that as Dr. Peterson runs a company that quantifies these dimensions of sentiment through news and social media, MarketPsych, the trading set ups provided in the book usually rely on proprietary data. Still, the overall ideas and trading examples are certainly helpful to become a better investor.