Understanding the Impact of News on Stock Market Trends Using Natural Language Processing and Machine Learning Algorithms

Short-term trading, specifically day-trading involves a high risk concerning monetary resources. Investing money becomes risky without adequate know-ledge and understanding of factors governing the market, some of which include public sentiment, commodity prices, political stability, etc. News is a common way via which people get updates about the latest happenings around the world and hence form opinions about industries, companies, stocks, etc. This affects their trading decisions; substantially impacting their chances of making a profit. Our research focused on building software models that could analyze general news during trading hours and predict the probable stock index closing trend for the end of that day. We used top 25 articles from the Reddit World News Channel and tried to correlate their impact on the DJIA in this study. Using two approaches to the process the text and further deploying machine learning models, we achieved fairly acceptable prediction accuracies.