Trading on Sentiment

In his debut book on trading psychology, Inside the Investor’s Brain, Rich­ard Peterson demonstrated how managing emotions helps top investors outperform. Now, in Trading on Sentiment, he takes you inside the science of crowd psychol­ogy and demonstrates that not only do price patterns exist, but the most predictable ones are rooted in our shared human nature.

Peterson’s team developed text analysis engines to mine data – topics, beliefs, and emotions – from social media. Based on that data, they put together a market-neutral social media-based hedge fund that beat the S&P 500 by more than twenty-four percent―through the 2008 financial crisis. In this groundbreaking guide, he shows you how they did it and why it worked. Applying algorithms to so­cial media data opened up an unprecedented world of insight into the elusive patterns of investor sentiment driving repeating market moves. Inside, you gain a privi­leged look at the media content that moves investors, along with time-tested techniques to make the smart moves―even when it doesn’t feel right. This book digs underneath technicals and fundamentals to explain the primary mover of market prices – the global information flow and how investors react to it. It provides the expert guidance you need to develop a competitive edge, manage risk, and overcome our sometimes-flawed human nature. 

Learn how traders are using sentiment analysis and statistical tools to extract value from media data in order to:

• Foresee important price moves using an understanding of how investors process news.
• Make more profitable investment decisions by identifying when prices are trending, when trends are turning, and when sharp market moves are likely to reverse.
• Use media sentiment to improve value and momentum investing returns.
• Avoid the pitfalls of unique price patterns found in commodities, currencies, and during speculative bubbles

Trading on Sentiment deepens your understanding of markets and supplies you with the tools and techniques to beat global markets― whether they’re going up, down, or sideways.

Table of Contents

Part 1 Foundations

Chapter 1 Perception and the Brain

Chapter 2 Mind and Emotion

Chapter 3 Information Processing

Chapter 4 Sentimental Markets

Chapter 5 Finding Signal in the Noise

Part 2 Short-term Patterns

Chapter 6 Information Impact

Chapter 7 Daily Reversals

Chapter 8 Weekly Deceptions

Chapter 9 The Only Thing to Fear

Chapter 10 Buy on the Rumor

Part 3 Long-term Patterns

Chapter 11 Trends and Price Momentum

Chapter 12 Value Investing

Chapter 13 Anger and Mistrust

Chapter 14 The Psychology of Leadership

Chapter 15 Navigating Uncertainty

Part 4 Complex Patterns and Unique Assets

Chapter 16 Optio na lity

Chapter 17 Blowing Bubbles

Chapter 18 Timing Bubble Tops

Chapter 19 Commodity Sentiment Ana lysis

Chapter 20 Curre ncy Cha racteristics

Chapter 21 Economic Indicators

Chapter 22 Sent iment Regimes

Part 5 Managing the Mind

Chapter 23 Mental Hygie ne

About the Author

Richard L. Peterson MD works at the intersection of mind and markets. As CEO of the MarketPsych group of companies (www.marketpsych.com) he directs a team incorporating psychological insights to improve individual investment decisions (MarketPsych), develop market-beating investment strategies (MarketPsy Capital LLC), provide the global standard in media sentiment data (MarketPsych Data LLC), and strengthen client relationships (MarketPsych Insights LLC).

Called “Wall Street’s Top Psychiatrist” (Associated Press), his financial psychology research has been published in leading academic journals, textbooks, and profiled in the financial media including NPR, CNBC, the Wall Street Journal, the Financial Times, and the BBC. His book, “Inside the Investor’s Brain” (Wiley, 2007), was praised as “outstanding” and a “seminal text” by Barrons. With Frank Murtha PhD he co-authored “MarketPsych: How to Manage Fear and Build Your Investor Identity” (Wiley, 2010). Both books were named top financial books of their respective years by Kiplinger’s. His new book “Trading on Sentiment” was published in March 2016 and is slated to be released in Chinese and Japanese in coming months.

Dr. Peterson earned cum laude degrees in electrical engineering, arts, and medicine (MD) from the University of Texas, performed post-graduate neuroeconomics research at Stanford University, and is Board-certified in psychiatry. He lives in California with his family.