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November 13, 2007

Dow Jones and RavenPack Join News with Algos

By James Ramage

Traders can turn headlines into trades thanks to a new program that integrates news into their algorithmic strategies. Dow Jones & Co. and computational linguistics firm RavenPack designed the Dow Jones News Analytics Developer's Kit to let traders retrieve specially tagged company news content and directly integrate it into their existing trading models.

The tagged historical or real-time news arrives in end users' automated trading systems within milliseconds of reaching the market and can be used immediately to create new algo trading models based on it. Dow Jones and RavenPack call this tagged news "sentiment," or a way of analyzing a particular story about a subject or company in terms of whether it might be positive or negative, according to Alan Slomowitz, director of institutional product development for Dow Jones Content Technology Solutions.

"You would look to see where news is potentially the leading indicator for a particular movement in pricing," Slomowitz said. "All you need is the news to lead by a very small amount of time. But if you can put that into play, then when that situation arises, you can capture the market movement and trade for it and profit on it."