How to use Twitter for merchants
- news trading
- Twitter role
- When did Twitter become important to traders
- Examples: Twitter before traditional news
- How do you spot fake news?
- How merchants monitor Twitter effectively
- Who to Follow on Twitter
Traders on Twitter
Since the advent of social media, the 21st century trader has a new tool at his disposal. In this article, I will discuss how financial market participants can use social media, with a particular focus on Twitter as a major resource for tracking macro news vital to moving the market. I’ll go over the notable examples I’ve seen in recent years where social media has provided an advantage for traders, along with helpful insight into how to use social media efficiently and spot fake news!
Before I go any further, I’d like to make it clear that I won’t provide any insight into the Reddit retail army of WallStreetBets, mainly on the grounds that I haven’t used the blog myself (nor do I intend to). So for those of you who are looking for a Reddit guide to trading 101, this is not the report for you.
The field extensively covered by DailyFX is “Global Macro News Trading”, which correlates very well With How you can approach social media to analyze the financial markets. Therefore, it is important in the beginning to have a solid understanding of the underlying drivers of the assets you are trading and to be up to date on the current themes/combo. With this knowledge of the major market drivers, along with the current market situation/sentiment, as a trader, this will better prepare you for how the markets will react to the new information. Keep in mind that the current price of the asset reflects all available information (or so it should, according to the efficient market hypothesis). Then, whenever new information is released, whether it’s economic data or central bank rate decisions, the asset’s price usually moves to find a new price, which reflects that information.
hHowever, there is an argument that a lot of the overall news is just noise and doesn’t have much of an impact on the assets you’re trading.and me Do not sympathize with this view to some extent. WThe flow of incoming news flashes on your screen, you can break He. She down by asking two questions:
- Is this information new and if so, does it depart from the market narrative (consensus/expectations)
- Is this information noteworthy?
If your answer to both questions is “no,” you can say with good authority that new information is not moving in the market. I appreciate that this is a skill that will not be mastered right away, and quite frankly it may not be fully mastered. As is usually the case with anything you do in life, experience over time is what counts, which will go a long way in helping you absorb the main aggregate news flow efficiently.
As I mentioned above, DailyFX has covered this topic in great detail, so for a complete comprehensive guide on news tradingAnd Click on the link below.
Whether you’re a millennial on TikTok hoping to become the next viral sensation or someone who browses endlessly through Instagram, social media has fundamentally changed the way we interact with each other and post new information. Since the creation of Twitter in 2006, the micro-blogging platform has experienced exponential growth in its user base, becomingA popular source for breaking news, instantly updated by the people closest to the action, from journalists, government officials, company executives or even a bored billionaire looking at you, Elon (Who might end up owning the platform.)
Twitter by the numbers:
- Monthly active users: 330 million
- Daily number of tweets: 500 million
When Twitter became important to traders
AP “Fake” Tweet (April 23, 2013) | DJIA -1% in minutes before recovery
For me, that’s hard to pin down, given that I’ve only been in the markets since 2014. Although, looking back, it was an important moment that presented Looking at Twitter’s growing importance in financial markets came After the “hack incident” in 2013. According to the Associated Press, a false message reported that there were two explosions in the White House with the then-President, Barack Obama, injured. This saw a temporary wipe of about $130 billion from US indices before rebounding within minutes. Shortly after the false tweet, a White House spokesperson indicated that the president was fine, while the Associated Press later reported that it had been hacked. Thus, given the impact that everyone sees, a tweet can have on the financial markets, it has accelerated the process of traders adopting Twitter as a way to monitor breaking news. However, this example also highlights the fact that Twitter is an unfiltered news agency where the credibility of the news is often called into question, which I will delve into later in this report.
Examples: Introduction to Twitter from traditional news
Over the years and more recently due to high profile political events, such as Brexit and the US-China trade wars, there have been numerous occasions where Twitter has been faster at reporting macro and corporate breaking news than traditional news (Bloomberg and Refinitiv). When this happens, I judge that this provides traders with an advantage over the market. What I mean by market is algorithm trading from the headlines of Bloomberg and Refinitiv. But to save column inches, I’ll go over some noteworthy examples where Twitter has introduced a feature.
Case Study 1: Oil Market, April 2020
Oil prices collapsed as traders responded to the onset of the coronavirus crisis with the first wave of global lockdowns slashing demand for oil by 1/3. Things only got worse for the oil market with oil dropping to an 18-year low after Russia and Saudi Arabia got involved in a price war.
On April 2, 2020 at 15:30 GMT, CNBC posted the tweet below. In the next 42 seconds, Bloomberg posted the original tweet, while the flashing red BBG headline appeared at 15:34.49. On the other hand, Refinitiv ran the full tweet at 15:32.39. In the 8-minute period of the Tweet to the peak, Brent crude is up more than 37%.
Source: ICE, DailyFX
Case Study 2: The Trade War, August 2019
In the tradition of politics in the age of social media, market participants used to monitor the Twitter account of former US President Donald Trump for market-influencing political ads, largely centered around trade wars with China.
On August 1, 2019, US President Trump escalated trade war tensions with China by announcing that the US would impose 10% tariffs on $300 billion worth of Chinese products. Before the tweet hit the traditional news, USD/JPY fell from 108.14 to 108.00, while a subsequent move after Bloomberg reported on the tweet saw the USD/JPY pair extend lower to hit as low as 107.26 in the next 30 minutes.
Source: Bloomberg, DailyFX
Case Study 3. Brexit, October 2020
During the Brexit saga, she was the first point of contact for many political correspondents via Twitter. This means that traders who follow high-profile journalists who usually receive the latest news from the Westminster halls have the advantage of speed over BBG/Refinitiv owners. The example below illustrates one of the many occasions Twitter was faster at reporting Brexit news. Of course, the risk was the veracity/reliability of the headlines, however, this was largely dependent on the journalist who tweeted the report.
On October 1, 2020, a political reporter tweeted that the probability of a Brexit deal had shifted from 30% to 70%. As such, in the roughly 4 minutes before the tweet crossed the wires (Refinitiv), the GBP/USD pair rose from 1.2841 to 1.2871 before rising again from 1.2871 to 1.2976 in 36 minutes after Refinitiv picked up the tweet.
How to spot “fake news”
The only obvious flaw in Twitter is the spread of misinformation or, as Donald Trump likes to say, “Fake News”. nTwitter news flow is usually less credible than traditional news sources (WSJ, Sky News, BBC, CNBC). However, there are several steps you can take to help identify fake news:
- Has the account been verified?In other words, does the account have a blue tick? If so, it increases the authenticity of that account’s tweets.
- Follower/follower ratio. Usually the account that provides the news has a low following account in relation to the followers.
- cacophony In profile name and bio is common for fake accounts, especially those that impersonate other accounts with letters replaced with numbers (“O” and “0”).
- Join Twitter. The fake Twitter account is usually on for a short period of time as it gets suspended fairly quickly. This also correlates with the number of tweets, which is much lower on fake accounts than on official news accounts that tweet 24/7.
How Traders Can Monitor Twitter Efficiently
One effective way to monitor overall news on Twitter is to use tools like Tweetdeck. This allows users to filter out the noise and focus on news related to the assets they are trading. Furthermore, Tweetdeck provides an efficient way to stay on top of breaking news, which is important for global macro-based traders who are trading the short-term horizon. The most fun part about Tweetdeck is that it’s free to use, all you need is a Twitter account.
As shown in the image below, Tweetdeck can be monitored across columns using custom lists, making the platform an effective news broadcasting medium for quickly discovering breaking news.
Who to Follow on Twitter
NetworkFollow who in your network adds value and by value I mean insightful, forward-looking commentary. You can even ask the question, who are the best macro/forex, commodity and stock analysts to follow on Twitter.
Create a list and separate them by topic (important for Tweetdeck): As I mentioned above, creating your own curated lists can help you scrutinize for noise. But remember, update your listings frequently as the market narrative changes.
- Fast news outlets, British politics, #OOTT (Organization of Oil Traders on Twitter)
Noise cut-off: Now while there are plenty of experienced and intelligent people on Twitter, there is also a lot of noise, stemming from the likes of permabears. Avoid them, because time is rarely spent well. A person who warned of an imminent market crash and suggested buying long-term gold for several years will not be helpful in your trading. Don’t believe me, just open a chart of gold and the S&P 500 over the past decade.