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Paul Hawtin made headlines two years ago when his hedge fund Derwent Capital Markets became the first to use Twitter data to make investing decisions. The fund had a 1.85% return in its first month, seemingly proving the power of social media as a trading tool, but it shut down shortly afterwards as investors were hesitant to sign up.
Now Hawtin is back with a new tool called DCM Dealer that hopes to turn Twitter into a stock trading tool for the masses by providing average investors with real-time sentiment analysis for stocks based on tweets.
DCM Dealer, which launched Monday, receives a pipeline of Twitter data from social data platform DataSift and uses several algorithms to weigh the meaning of the tweet for the stock, including analyzing keywords, looking at the number of followers the user has and his or her relationship to the company in question and factoring in how old the tweet is. The end result is a Twitter sentiment score of 0 to 100, with the higher numbers being more positive.
The sentiment score isn't the only metric in the tool — there are other features like a built-in news feed for stocks and tools to manage your stock portfolio — but it's clearly the centerpiece that differentiates it from other trading platforms.
"Investors have long accepted that the markets are driven by greed and fear, but how do you quantify that? Now we have so much data, so much valuable information. You can listen to what hundreds of millions of people are saying," Hawtin told Mashable.
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