Is Google Trends reliable for trading

Online trading is an activity that involves implementing different strategies to achieve success. Investors thus make it their duty to use various tools for optimal market analysis.

Today, we are particularly interested in Google Trends. Would this feature powered by the Moutain View firm be reliable for trading?

Google Trends, what reliability?

When you talk about Google, you immediately think of its world-renowned search engine, which is particularly effective when you are looking for information. Or its famous Google Maps, which offers the possibility to explore every corner of the planet in a few clicks. But there is also Google Trends, a tool that would allow you to speculate more efficiently in the financial markets.

At first glance, one can only be sceptical since traders spend long hours conducting market research using various analytical tools. Nevertheless, there is no point in deciding too quickly and ignoring this tool, which could be interesting. Especially when you discover the study undertaken by American and British scientists from the Universities of Boston and Warwick respectively.

A tool not to be neglected

First, it should be noted that this study is not the first of its kind. Indeed, in 2012, the scientific journal PLoS One had already revealed similar research that concluded that some requests provided a small idea of the volume of stock market speculation at the time.

Then comes the second study that interests us, which also dates back a few years (2013). After various analyses, researchers who have studied the issue have realized that studying the most common keywords in Google helps to predict how financial markets will evolve.

Analyzing the various requests of Internet users on Google would thus make it possible to predict stock market fluctuations. These scientists even extrapolated by arguing that it would be possible to use Google to anticipate a stock market crash.

Google trend interface

More specifically, it would be to use “Google Trends”, a tool that evaluates the number of searches for a given keyword over a specific period of time. Since we are interested in finance, we would then closely monitor changes in research on keywords such as “inflation”, “debt” or “profit”.

Moreover, the analysis of the evolution of requests in this category between 2004 and 2011 is particularly evocative. In particular, with regard to the keyword “debt”, there was a peak in requests in the months preceding the “big” crisis of 2008.

Ultimately, Google Trends can be used by traders, but not exclusively. The analyses carried out with this instrument must be combined with the usual tools and data from your broker such as Interactive Option, not to mention the study of current financial news.