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A Radically Innovative Psychology Based Real Time Market Perception and Traders' Sentiment Analysis Platform

Innovation in Fintech and Artificial Intelligence

QuantGate has developed and refined over twenty years a proprietary real time market perception and trader sentiment analysis platform. The platform analyzes financial market participant activities by examining, in real time, the order book on thousands of markets simultaneously. Our approach combines distibuted computing, mathematical novelty, quantitative finance and applied psychology to learn and anticipate the upcoming market behaviour across multiple asset classes and exchanges.

Core Algorithms

TRADER PERCEPTION

“A way of regarding, understanding, or interpreting something; a mental impression.”

This unique algorithm extracts and quantifies cognitive behavioral characteristics of active market participants (traders) to provide an indication of their overall (collective) real time perception. This effectively indicates the overall perceived value of the market from the viewpoint of the currently active market participants.

Providing a real time perception of the market alleviates traders from having to make (uninformed) decisions based on their (own personal) perceived value of the market and eliminates guess work as to which direction the market will head. This also prevents traders from having to resort to outside sources of confirmation such as social media, news, or other biased interpretations of market perception.
TRADER COMMITMENT

“The state or quality of being dedicated to a cause or activity.”

Quantifies information about traders’ intentions to buy or sell a security in a market. The commitment algorithm effectively extracts trader intent and the overall commitment of the market to continue heading in the current direction. Many historical attempts have been and to quantify “The Trader’s Commitment”, and Pilot’s cutting-edge machine learning framework achieves this by quantifying the psychological state of the traders and their levels of intent (commitment) to participate in the market’s current price action direction.

The commitment algorithm extract information based on behaviour of traders as a result of other market conditions. For example, it is a well-known psychological phenomenon that the majority of traders make their buy decisions when they believe that the price has fallen too far, too fast. Conversely, they tend to sell a security if its price has risen too far, too fast. If this situation occurs, it usually manifests itself through a variety of emotional responses such as the increased number of order cancelations that are taking place on the buy or sell side by different trading groups. By measuring the relative order cancellation frequency and comparing to the trader group profile monitored over time within the market (to prevent false positives), the commitment algorithm effectively indicates the overall (collective) intent of traders in the market to buy or sell a security.
PRICE EQUILIBRIUM

“A state of rest or balance due to the equal action of opposing forces”

The Equilibrium algorithm indicates the overall deviation of the market (emotional deviation) from the market’s actual (fair) value. This enables a trader to realize the magnitude of that emotional response and size their order (risk) relative to the potential profit (reward). The basic premise behind this unique algorithm is in the fact that the market is composed or induced with an overall emotional state.

The Equilibrium’s proprietary mathematical formulae indicate this emotional state in real time enabling a trader to comprehend when a reversion to the mean is about to occur after the perception and commitment algorithms are in agreement (both indicating the same market condition).
TRADER SENTIMENT

“A feeling or emotional state as a result of one’s perception”

Each market is composed of multiple groups and types of traders that exhibit unique (and unpredictable) behavioral characteristics at different times. The complexity involved in measuring market sentiment is mainly due to multiple market participants basing their trading decisions in multiple (unknown) timeframes (and often times different time zones), and based on multiple different reasons.

The Sentiment algorithm, vividly visualized by the shape of the Sentiment Spectrum, indicates the current sentiment of all groups of market participants (traders) and their contribution to price change in real time. The color of the Sentiment spectrum indicates the (aggregated) anticipated sentiment shift of all different trading groups classified in real time the algorithm on a per market basis. This, together with the Perception, Commitment and Equilibrium algorithms all confirming (at the same time) leaves only the sentiment algorithm to indicate the final confirmation and exact (optimized) time of order entry. The Sentiment Algorithm effectively confirms the real perception of the market and enables comprehension (with ease) to accurately time order entry.