Sentiment analysis is a powerful edge when combined with price and fundamental signals. It helps capture momentum initiated by news flow before it becomes consensus.
What Sentiment Measures Best
The strongest signals come from corporate announcements, management commentary, and earnings updates — not from generic social chatter.
How to Weight Sentiment Signals
- Source credibility: regulatory filings and major news outlets should carry more weight.
- Recency: news from the last 24–48 hours matters more than older headlines.
- Signal clustering: multiple positive/negative articles in a short window strengthen the signal.
Practical Use Case
In MicroStocks, sentiment signals are used to adjust conviction and timing, not to override fundamental or liquidity filters. A stock with positive sentiment but weak liquidity remains a watchlist candidate, not an active trade.