Hi All, I wonder if anyone has any experience using Google Trend data as a trading indicator. I have previously found correlation between search terms "Bull Market" and "Bear Market" and the performance of the S&P500. I have just used the search term "North Korea" to help me identify where the public opinion. You can actually see correlation between the Google Trend Data and the price of gold, there is a slight downward trend for both over the last 2 days. To me it looks like public opinion is starting to drift. Has anyone else used any method such as this and had any success?
Yeah that's the way of how tech analysis work. Searching patterns where they can't exist. Professional money managers which bets really drive the price of gold are not likely to google north korea or kim jong un to find out what it is and then place bets. They all get it in their news feed. But searching for regularities and relationships between different things is a good direction to start research. Maybe you need to dig deeper.
Hi Doggyfx, thanks for the reply. I was recently doing some research around google trend data and found that there was correlaton between google search for the term "bear market" and the VIX volatility index. This has always interested me, perhaps the use is limited, but do you know if anyone uses anything like this in their trading strategy. See images below for search data and VIX. You will see correlation between the 2 peaks.
You just have to make sure it is a leading instead of lagging indicator. Looking at your two charts, I couldn't tell. I used GOOG real estate trend as a lead-in to invest in RE back in 2011/2012. Worked for me but RE is very slow moving so lagging is OK, not like trading VIX....
I think in the VIX case it would be a lagging indicator. Would be interesting to see if there is any way to use search data for identifying strong / weak performing quarters among online retailers. I'll have a look.
Well if we talk about statistics then your representative sample is too small (only 2 elements). Thus you can't build any substantial estimate of correlation at all. Moreover bear market is a widespread term that may be used in search inquiry just for educational purpose (or enlightenment). Volatility break happens when there are too much bulls and bears entering the market. So no correlation between VIX and bear market in the terms of common sense (or its too untraceable) Try to be more specific. Find regularities between some specific event like "Trump reforms Update" and S&P 500 market. Or Janet Yellen resignation and behavior of assets that depend much on Fed easing. Try to build connection in common sense first.
Here is an interesting article about the correlation between google trend data and the price of Bitcoin. Again, is this a leading indicator? Probably not. However, it will be interesting to see if this pattern continues. https://www.coindesk.com/using-google-trends-detect-bitcoin-price-bubbles/
I did a deep dive on this about 5 years ago. At the time I could data mine some impressive results but they never tested forward successfully. Also hard from a mechanical perspective because of how Google scaled the results, but they may have changed that.
Bitcoin is entirely different situation. It's a world of enthusiastic newbie investors while stocks and forex market is a place for professionals. For Bitcoin I'm sure using google trends makes more sense especially with some new stars on the scene like ICO coins. Rising interest obviously correlates with its price as interest+desire to earn= price hype.