PsychSignal Gives Hedgies, Traders Insight Into Real-Time Market Sentiment

Mar 20 2015 | 7:21am ET

For centuries, people have been using crystal ball to predict the future. Now some techies and statisticians are taking a more scientific approach. PsychSignal aims to give quant funds, hedge funds and investors a real-time look at public sentiment about stocks and other financial securities in anticipation of price moves.

Name: PsychSignal
Location: Miami Beach, FL
Website: www.psychsignal.com and www.stocktwits.com/PsychSignal
Twitter: @psychsignal
Sector: Financial Data & Analysis
Year formed: 2011
No. of employees: 6
Stage: In-Revenue
Notable investors: WorldQuant Ventures LLC

Pitch: PsychSignal is the world's leading provider of real-time social media derived financial sentiment about stocks and other financial securities.

Tell us a bit about your company and what it does?

PsychSignal is the world-leading provider of social media derived financial sentiment. Also known as 'opinion mining,' our product’s core technology is a proprietary natural language processing engine and associated application program interface (API) that filters through the millions of tweets and messages issued by Twitter, StockTwits, T3Live chat rooms and other social media sources to give our customers a powerful window into the public’s mood about specific stocks and financial securities.

Our product arms quant funds, hedge funds and investors with the public’s real-time opinions about stocks and other financial securities in anticipation of price moves, to enable their trading desks to make better informed decisions.

How is different than other companies in the same space?

PsychSignal’s natural language recognition processing system is unique in that it is very easy to use, and is a quantitatively deeper and more powerful tool than any of the alternative solutions available today. Since our inception in 2011, we have been building, testing and adjusting our models to increase the accuracy and relevance to make the API more robust every day. In fact, during our 2013 testing, we were able to successfully predict Gallup polls one day in advance, by May 2014 were able to get independent confirmation that a volatility prediction model created by BigML.com performed much better than random guessing with an average accuracy of more than 64% with a 5-fold cross validation, and during early testing with Deltix Lab, their conclusion was that there “is sufficient evidence of alpha generation potential in the PsychSignal data feed for it to warrant additional research effort in trading strategy development on a stand-alone basis and/or as a signal modifier on trading strategies…” We think we have a winner on our hands, and the word is getting out.

What is your revenue model? How will the company make money?

Our revenue model is pretty simple. We work with quant funds, hedge funds and trading desks to license them access to our API outputs, giving them a powerful tool to aid their daily decision-making and investment management activities. Our licensing packages are available custom-tailored to our clients needs and at a reasonable monthly access fee.

Who is your target market? How big is the opportunity?

Our target markets are quant hedge funds, standard hedge funds, trade execution platforms, chart platforms, investment advisory firms and traders. The opportunity is massive. For example, later this year, we are deploying with YahooFinance.  For perspective, YahooFinance alone has over 50MM users. Also, here in the USA there are an estimated 2MM active traders, and we have identified 1,500 hedge funds who are already using a quantitative approach. Each one of these markets is extremely compelling, and we believe each one can benefit from our product.

Why are you and your team capable of succeeding?

We believe we are in a very good position because the field of Natural Language Processing specifically targeting Wall Street is still in its infancy, and our product is being independently verified way ahead of the trend. Also, the fact that our core team has a history of entrepreneurial wins, and that with our 100% virtual workspace allowing us to live and work anywhere on the planet, we basically get free rent and can use currency arbitrage by having two of our guys working out of Rio de Janeiro with a dollar that’s 3 to 1. Being pure virtual allows us to put all of our ammo into funded research, product development and R&D.  In short, by building the company completely six-sigma from the start, we are ruthlessly efficient in our capital expenditures and we’ve been able to build it debt-free and without unnecessary CAPEX exposure. This makes the company profitable almost immediately with very little risk, a serious competitive advantage over the rest of the field.  Each member of our team has a proven track record of previous entrepreneurial successes and at least a decade of personal experience to draw from. For PsychSignal, our advisory panel is comprised of leaders in the fields of data-mining, securities trading, crowd and individual psychology, data analytics and linguistics, and our CEO is a former wall street founding team member of Broadway Trading which pioneered direct access electronic trading. We work and play well together and everyone has been chosen on account of their merits and execution ability. We’re light, fast, nimble and smart. That’s a good combo.

What is your company’s next target/milestone?

We’re demoing at Finovate Spring 2015 in May where we will roll out some fantastic new features for traders and investors, and at the same time, we are gearing up for increased strategic public awareness campaigns over the coming months.  At present we are backtesting our systems with a handful of data analytics professionals and quant funds and ramping up our business development efforts over the coming months.  We see good things happening and interest is picking up quickly.

Can you tell us one unusual fact about your company?

PsychSignal is a portmanteau we created to illuminate our technology’s core value, gleaning Signals from collective crowd Psychology to predict future moves. We chose the name because through listening to the crowd’s conversation online, we can use our natural language API to filter out the signals from the noise and predict which way the stock will move based on the bullish or bearish tones expressed online, and the volume of conversations being had about each topic / stock. 

We’re actually using our own product and making some killer moves in today’s crazy market which is good considering macro banking seems to think that up is down and the dollar is going into the stratosphere which is going to have untold consequences for corporate earnings in Q3-4 this year… It seems there should be some interesting tweets in the not so distant future to run through the algorithms as the currency markets keep going crazy. We’ll be ready watching the signals, will you?


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