What’s a few more data points among trader friends? The team behind a new venture that aims to measure market participants’ sentiments about their markets think that, in their case, a few more data points could add up to a lot.
The goal of The Daily Delphi is to capture the “wisdom of the crowds,” so to speak, to gauge market sentiment in specific trading markets. Then, using algorithms based on game theory, The Daily Delphi will let traders who sign up to use it know the forecasted daily closing price for a specific market, the degree of conviction the market participants have in their forecasts and the range and distribution of the forecasts.
To gather the data, The Daily Delphi will use mobile applications to solicit feedback from a select group of traders who have been screened based on various factors including their expertise, their trading frequency, the specific markets they trade and the number of lots they trade. Then their responses will be weighted based on the persistence and intensity of their forecasts. Once churned through the proprietary algorithms, the resulting notification of market sentiment will be sent to Daily Delphi subscribers.
Jeff Joseph, one of the founding partners of The Daily Delphi (and former managing director of HedgeWorld Capital Markets, way back in the day) said the technology underlying the business taps into game theory, social gaming, social investing and crowd wisdom to give traders another key data point in their decision making process.
Joseph is joined by Dave Karnes, a 17-year trading veteran; Matt Fleming, a technology specialist; and Daniel Diermeier, a chaired professor at Northwestern University’s Kellogg School of Management and an expert in decision theory and game theory. Maybe “expert” doesn’t quite cover it. Joseph said Diermeier is in his weekly poker group and he knows enough to not sit at Diermeier’s table, at least to start.
Joseph said one of the principles behind The Daily Delphi is an understanding that in some markets, traders are the market, and what’s in their heads affects the market outcome.
“If a number of people at the county fair can guess the weight of an ox, a thousand traders offering their opinion on the closing price can have a meaningful predictive use for various markets,” Joseph said.