Pierce here, I work at StockTwits, a platform focused on real time trader and investor idea exchange.
Collaborating with Seong Lee of Quantopian, we’ve taken a sample of over 150,000 individual StockTwits messages for three highly followed stocks ($AAPL, $TSLA, and $FB), and one ETF ($SPY), aggregated them into daily signals (call it ‘bullish’ or ‘bearish’), and back tested them over the course of a year. The results were positive, and pretty awesome, so we wanted to give you a little insight to how it works.
In any given month, individual, institutional & hedge fund managers share over 1.3 million trading ideas on StockTwits. We aggregate the data to build consumer tools as well as help quantitative investors better grasp volume and trends in the overall market.
Investors on StockTwits add “bullish” and “bearish” tags to their trading ideas, implying a specific position towards the given stock, option, ETF, currency pair, or commodity. For the crowds, this is an easy way to quickly grasp StockTwits sentiment, without having to spend resources for conducting natural language processing.
To keep the initial analysis simple, we’ve aggregated the StockTwits messages (quite literally the number of bulls and bearish signals per day) into one daily signal that we use to enter positions at the beginning of market open and keep that sentiment until that sentiment changes. The sentiment used to calculate the trade - short, long or null - is for that given trading day up until the committed trade.
Bullish/Bearish Sentiment (-1 ~ 1): This metric is calculated by looking at the number of bullish/bearish tweets for that given day. If the number of bullish tweets are greater than the number of bearish tweets, the security receives a score of 1 and vice versa for bearish with -1.
Check out the attached backtest! We’d love to see if anyone can improve the algo and still avoid the look-ahead bias. Additionally, if this limited data set proves interesting to you and you’d like to access 1-3 years of raw, historical StockTwits data, send me an email at [email protected].
Head of Partnerships, StockTwits
|Returns||1 Month||3 Month||6 Month||12 Month|
|Alpha||1 Month||3 Month||6 Month||12 Month|
|Beta||1 Month||3 Month||6 Month||12 Month|
|Sharpe||1 Month||3 Month||6 Month||12 Month|
|Sortino||1 Month||3 Month||6 Month||12 Month|
|Volatility||1 Month||3 Month||6 Month||12 Month|
|Max Drawdown||1 Month||3 Month||6 Month||12 Month|