Recently I was reading a retail FX CEO response to an FT article. FT Alpha was asking about the activity of traders and the simple answer the CEO gave, was that volumes increased when there was an increase in news events. Think BREXIT-GREXIT, kicking sleepy day traders into action all of a sudden.
Now here lies the overwhelmingly simple problem for a broker; they can’t rely on a steady flow of market moving news. Even Mario Draghi has to have a holiday from time to time. However, the good news is that according to Acuity’s research, even at the quietest of times we still have an overwhelming amount of lighter news that can be traded on. For example, more than 200 articles are written every day on the EUR/USD in the low season alone. But how does a broker turn this relatively small amount of news into a volume generating opportunity?
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The answer lies in relatively new technology called News Analytics, where algorithms measure the tonality of a news item towards a given currency pair. Do this to all 200 articles at the speed of light, and you have a program that splashes out regular positions on the mood of the market. You can then correlate this with market movements, visually demonstrating to your clients how price reacts to an uptick in sentiment. This is at the heart of what Acuity Trading does.
What’s more is that you can go one step further and advise clients on new changes in market mood, warning them about potential price changes and trading opportunities by comparing current mood changes to past changes.