Reuters taking news trading to a new level

Interesting article I read today how Reuters are going to be offering hedge funds to take news trading to a new level through algo trading:

Now, simple words like “excellent” or “disappointing” in news stories will be enough to trigger massive gains or losses in a stock. The power of the press, baby.

Reuters Group PLC will begin selling a computer program today that will scan news articles, measuring whether companies are getting positive or negative news coverage and triggering stock trades based on the information.
The product, which will initially track only stories appearing on Reuters news wires, will soon include others, with the aim of helping hedge-fund and bank-trading-desk clients make faster decisions.
The product seeks to tap into algorithmic trading, in which computers decide when to buy and sell shares without direct human involvement. On many global stock exchanges, as much as half of the trading volume is generated this way. Based on a list of 20,000 words and phrases, the new Reuters program will score news articles based on how frequently words such as "excellent" and "disappointing" appear. If favorable articles are written about a company, it gets a high score and vise versa. It also looks for new information in articles, alerting investors to reporters' scoops.
The information can be fed directly into trading computers, which can use it to buy or sell shares. Reuters will charge about $200,000 to more than $1 million for the new product, part of its NewsScope products. "The computer can respond very quickly to news -- in milliseconds -- before a person has even had a chance to the read the article," said Rich Brown, a business manager at Reuters.

Excellent post- the only thing to realize is that this kind of thing has been goping on for awhile now. Bloombergs have been plugged into algos for a while.

What's intersting too is that Hedge funds don't trade currencies thru brokers, they trade thru banks. Banks tend to keep prices as tight as a camel's butt in a sandstorm during news releases, locking everyone else out.

Still, it looks to get harder and harder for people trading immediately after news. That's why it's even more important to be able to identify longer term trends-and trade positions that allow you to stay in these trades thru the inevitable re-traces.

interesting stuff. data/metadata mining. saw one of the linked news bytes here at FF reference the change in number of raw search results for 'carry trade' from google as an indicator a few weeks ago and thought it a bit odd. seems scarily primitive to not have any human contextualization of search results.

Who cares really? The big money is not made from trading short term in the stock market. The big money comes from value investing aka Graham and Dod and then you might keep the stocks for several years.