Sentiment Analysis

What is Sentiment Analysis? 

Sentiment analysis is the process of using natural language processing (NLP) and machine learning techniques to determine the emotional tone behind words and texts, often to gauge market sentiment.

Explanation: 

In trading, sentiment analysis involves analysing news articles, social media posts, and other textual data to identify whether the general mood is positive, negative, or neutral. Traders use this information to predict market movements and make informed decisions.

Practical Example of Sentiment Analysis: 

A trader uses sentiment analysis software to scan Twitter for mentions of a specific stock. The analysis shows a surge in negative sentiment due to a recent product recall, prompting the trader to short the stock.