April 22, 2019

Analytics Insight

Forecasting upcoming changes in any market has become increasingly easy over the years, with the introduction of new technologies and processes that can analyse data on our behalf. One such development is Big Data – now more than ever before, businesses and individuals alike collecting an abundance of data throughout the day, and it’s this information that can help us to make more accurate predictions of what to expect in any one stock.

With that in mind, we’re exploring what Big Data is in more depth, and precisely how it can be used in trading.

What Exactly Is Big Data?

The storing and collection of mass amounts of data has been going on for centuries, but until recently, there was no particular name for the process. Recently, however, the term Big Data has been coined to describe data collected for analysis. It came about when Doug Laney, an industry analyst, described Big Data using the ‘three Vs’:

Volume – Data is collected from a wide variety of sources across any period of time for the business or individual.

Velocity – The collection of data is fast, streaming in at incredible speeds and dealt at a substantial speed too.

Variety – The information comes in a range of different formats including structured, unstructured, numeric and text-based documents. Data can also come as audio, videos, financial transactions and stock tickers.

Collecting and storing all of the information is easy and a standard part of business, but putting all of this together in order to analyse and use the data is where this term comes into play. For businesses, this analysis can help them make better decisions for their next steps but for those us within the stock markets, it can offer a whole new way of determining what our next trade move may be.

How Can It Be Used To Forecast Markets?

As we all well know, stock markets can be volatile and so determining potential trends using indicators is a valuable tool that can’t be missed. With the use of Big Data, everything from moving averages to Bollinger bands can be calculated with relative ease, offering traders a more in-depth and detailed analysis of just how a market is set to perform. Markets are always moving and so by consistently taking in this information and analysing the movements, traders or their trend indicators can better predict the next move of any one stock. While this could never be 100% accurate for every market, this method offers traders the opportunity to make more informed decisions without having to analyse every bit of data themselves.

With the use of big data, forecasters and researchers alike can craft models of what a stock may look like in the coming days, weeks and sometimes months. While the accuracy may be compromised with unforeseen changes to external factors, by utilising data spanning back just as long, or further, it becomes possible to determine when a similar movement is likely to happen again. By blending Big Data and machine learning into any one forecasting process, it can provide real-time insights about where a market may be headed and, in some cases, even offer insight into how it may behave when these unforeseen changes happen.

The potential behind Big Data analytics is huge. The collection and analysis of data have been a common process for countless businesses and entrepreneurs but only when this is utilised properly can it reach its full potential. In trading, going in blind can lead to poor transactions and movements within a market, but with big data and the relevant trend indication tools, these technologies are opening up stock trading to a much wider and more informed audience.