Is Twitter and Stock Trading A Real Strategy?
Public sentiment is always an important short-term driver of asset prices, and social media can prove to be the canary in the coal mine (or for more positive news flow) that individual investors can catch just as easily as larger institutions and hedge funds. In a sort of sense, social media can level the playing field across investors of varying sizes. Even stock exchanges have started to analyze Twitter data to try and discern whether there is predictive value on share price volume from tweets. This could help them better prepare for trading volume rushes, or volatility that may trip trading volume circuit breakers.
The Internet and digital information have been ripe for analysis and an attempt to use data to profit with stock-trading strategies. Social media represents the most recent incarnation of electronic data. Since it is in its infancy, the potential is probably greatest to exploit inefficiencies, be it data miners that wish to sell their data, or individuals and institutions that want to make money from it.
Ryan Fuhrmann can be contacted at Rational Analyst