Sentiment-Based Trading Platforms Catching Fire? Acuity's CEO Explains

Acuity's Andrew Lane Brad Alexander share their perspective on the new London office and future of sentiment-based trading systems.

Trading technology is constantly advancing and the need to decipher and process large swaths of information and data is hugely instrumental for traders in the financial industry.

Finance Magnates spoke with Andrew Lane, the CEO and Founder of Acuity Trading, a comprehensive developer of trading and sentiment-based strategies, for his perspective on the firm’s new office in London and incoming personnel.

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Andrew Lane_SquareAcuity Trading was founded in 2013, however, “We only went to market in 2014 so we are still relatively new. We were successful in securing funding earlier this year, which was a critical impetus behind the backing of our new office in London and the hire of our newest executive, Brad Alexander,” noted Mr. Lane.

Last week, Acuity Trading appointed Brad Alexander as its newest Vice President (VP) of Sales. In his new role as the VP of sales, Mr. Alexander will be based out of the firm’s new office in London. He will be tasked with spearheading all sales efforts at Acuity Trading, whilst distributing the firm’s sentiment-based product suite to retail trading outlets in both the UK and Europe, Middle East and Africa (EMEA) region.

Mr. Alexander joins Acuity with a wealth of knowledge and expertise with trading systems. According to Mr. Lane, “We already have an exciting line up of developments coming this year and Brad’s trading knowledge will be instrumental in supporting these efforts. The feedback we have received so far on these has been overwhelming positive and Brad’s hire will help us meet demand in the coming months.”

The sector itself is quite difficult to gain traction in – there are no shortage of companies attempting to utilize sentiment-based trading systems or those that rely on channels such as social media. However, “I know how difficult it is to make a go of it in this sector with a few companies trying to get in to this space over the past 2 years. Indeed I was one of first to make a foray into this field back in 2005 and I understand the sector’s pitfalls.”

Overall, “There are a number of reasons for this I believe, however the greatest challenge has been in the lack of visualization of the data and in understanding how the data can be useful to the end users. This is something that has been at the forefront of our product development and a major feature of our new product coming to market later this year.”

brad“From my perspective, I have been pleasantly surprised with the successfulness of our data – not just from my perspective as the Vice President (VP) of sales but I’ve been a trader for a long time myself. I learned very quickly that many products and services are too complicated and over-engineered for retail traders meaning that adoption is very low. The products by Acuity Trading have tackled these problems head on,” reiterated Mr. Alexander.

Andrew Lane_SquareThe challenges to improve upon traders’ performance and experience are manifold, however a simplified strategy is generally preferred. According to Mr. Lane, “First and foremost retail traders need confidence. If something is too hard to understand, they simply won’t use them but beyond this, we want to give brokers the opportunity to differentiate themselves and increase trading volumes.”

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Industry Headwinds Looming?

Regulation is pushing the broker industry to consolidate, creating larger principle players. This lessens the overall amount of clients for companies like Acuity Trading, but we have also seen these clients invest more in their product and services, which creates an opportunity. For some time brokers have been offering similar services such as news and calendars, and the time is ripe to disrupt this and offer something truly fresh and unique. “The challenge for Acuity is in educating the end user to the huge potential of using sentiment in their trading strategies, just like technical analysis 20 years ago,” Mr. Lane added.

As for sentiment specifically, “There has been a focus among some companies to create products based on the data from social media alone. However, what we have found and continue to identify from our research is that social media on its own lacks the volume and context needed and is therefore relatively limited in being able to predict financial markets compared to other sentiment-based systems.”

More specifically, according to Mr. Lane, “Twitter for example is very US and UK centric and as we know, there is a bigger market out there than just those two. We have found that the more we rely on an amalgamation of sources the better our product performs.”

Product Focus: Natural Language Processing

“Our product suite relies on a utility known as natural language processing (NLP), coupled with a sophisticated type of machine learning. By utilizing this method we have three unique advantages. Firstly, we can capture larger amounts of data, based on the construction of advanced algorithms. The algorithms originally used in this area were much more detailed and simply couldn’t pass as much volume, mitigating their performance.”

Secondly, “Our machine learning allows our computers to learn irrespective of the language. We don’t tell them what is English, Spanish, German, etc., instead, we mine in any language we choose, and subsequently define a target language.”

Lastly, “We have been able to create multiple unique sentiment types that help identify specific trends that users would like to monitor. A lot more companies and news companies are doing this, however instead of just focusing on positive and negative outcomes, we also isolate for fear and joy – it’s quite interesting and the interactions we have seen have given us greater latitude for analysis,” he noted.

For example, “When negativity heightens you would expect fear to rise concordantly as well. However, when you divide financial negativity by fear you see acute spikes, showing heightened negativity. In total, Acuity Trading utilizes around twelve seperate sentiment indicators with NLP experts combing our data streams for the best combinations.”

bradAs such, “We are continuously looking to develop our products and we have definitely got some exciting things coming up in H2 2015, specifically for brokers who are keen to differentiate their offering. As a trader, I understand the need to keep things simple and to grant traders a utility to help them trade in a streamlined manner, which should have positive knock-on effects for the brokers,” concluded Mr. Alexander.

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