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How to use Twitter for traders

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How to use Twitter for traders

  • News trade
  • The role of Twitter
  • When Twitter became important to traders
  • Examples: Twitter is ahead of traditional news feeds
  • How to detect fake news
  • How traders effectively control Twitter
  • Who to follow on Twitter

TWITTER TRADERS

Since the introduction of social media, the 21st century trader has received a new tool at his disposal. In this article, I discuss how financial market participants can use social media, with a particular focus on Twitter as a key resource for tracking vital macro news moving in the market. I’ll review notable examples I’ve seen in recent years where social media has favored traders, along with a useful understanding of how to effectively use social media and detect fake news!

Before I go any further, I would like to state that I will not give an idea of ​​Reddit’s army of retailers WallStreetBets, mostly on the condition that I myself have not used the blog (and am not going to). So, for those looking for a Reddit Trading 101 guide, this is not a report for you.

BROADCAST NEWS

The area that was widely covered by DailyFX is “trading global macro news”, which is quite well connected with how you can turn to social media to analyze financial markets. Therefore, it is important that you first have a solid understanding of the underlying factors of the assets you are trading, and are constantly aware of current topics / stories. With such knowledge of key market factors, as well as with current market positioning / sentiment as a trader, it will better prepare you for how markets will react to new information. Keep in mind that the current asset price reflects all available information (or so it should be, according to the Efficient Market Hypothesis). In the future, whenever new information is released, be it economic data or central bank rate decisions, the asset price will usually move to find a new price that reflects that information.

Xhowever, there is an argument that a lot of macro news is just noise and does not have a significant impact on the assets you tradeand me to some extent sympathize with this view. Inif incoming news flashes on your screen, you may break it is down by asking two questions:

  • Is this information new, and if so, does it deviate from the market narrative (consensus / expectations)
  • Is this information worth noting

If your answer to both questions is “no”, then you can say with confidence that the new information is not moving to market. I appreciate that this is a skill that will not be mastered right away, and frankly, may never be mastered completely. As is usually the case with everything you do in life, experience over time is what matters that will help you master the main macro news effectively.

As I mentioned above, DailyFX covered this topic in great detail, so for a complete comprehensive guide to news trading, click on the link below.

THE ROLE OF TWITTER

Whether you are a millennium at TikTok, hoping to become the next viral sensation, or someone who endlessly scrolls Instagram, social media has fundamentally changed the way we interact with each other and spread new information. Since the creation of Twitter in 2006, the user base of the microblogging platform has grown significantly, becominga well-known source of the latest news that is instantly updated by those closest to the event, from journalists, government officials, company executives and even boring multibillionaires looking at you, Elon (who may eventually become the owners of the platform.)

Twitter in numbers:

  • Monthly number of active users: 330 million
  • Daily number of tweets: 500 million

WHEN TWITTER BECAME IMPORTANT FOR TRADERS

AP «Fake» Tweet (April 23, 2013) | DJIA -1% minutes before the persecution

How to use Twitter for traders

Source: Bloomberg

For me, it’s hard to determine, given that I’ve only been in the markets since 2014. Although, looking back, the key point that gave is serious look at The importance of Twitter in the financial markets is growing came after the “hacking hack” in 2013. According to the Associated Press, the false report said that two explosions erupted in the White House when President Barack Obama was injured at the time. As a result, about $ 130 billion was temporarily erased from US indexes before rolling back in minutes. Shortly after the false tweet, a White House spokesman noted that the president was all right, and the AP later said they had been hacked. Thus, with the impact seen by all that tweet can have in the financial markets, it has accelerated the process of adoption by Twitter traders as a means to monitor the latest news. However, this example also highlights the fact that Twitter is an unfiltered news feed where the authenticity of news can often be questioned, which I will delve into later in this report.

EXAMPLES: TWITTER BEFORE TRADITIONAL NEWS

Over the years and recently given notable political developments, namely Brexit and the US-China trade wars, there have been many instances where Twitter has been more likely to report breaking news on macros and companies than traditional news feeds (Bloomberg and Refintiv). When that happens, I guess it gives traders an edge over the market. By market I mean trading algo with the headlines Bloomberg and Refinitiv. But to save an inch of the column, I’ll consider a few noteworthy examples where Twitter favors.

STATEMENT 1: OIL MARKET, APRIL 2020

Butter prices fell when traders reacted to the beginning of the coronavirus crisis with the first wave of global blockades, which led to a drop in oil demand by 1/3. The situation in the oil market has deteriorated: oil has fallen to an 18-year low after Russia and Saudi Arabia entered a price war.

April 2, 2020 at 15:30 GMT CNBC posted a tweet below. In the next 42 seconds Bloomberg published the original tweet, and at 15: 34.49 a flashing red BBG headline appeared. Refinitiv, on the other hand, posted a full tweet at 15: 32.39. During the 8-minute period from Tweet to the peak of Brent crude oil rose by more than 37%.

How to use Twitter for tradersHow to use Twitter for traders

Source: ICE, DailyFX

STATEMENT 2: TRADE WAR, AUGUST 2019

In the tradition of social media politics, market participants have become accustomed to following former US President Donald Trump’s Twitter account for changes in the political message market, which has largely focused on trade wars with China.

On August 1, 2019, U.S. President Trump intensified tensions in the trade war with China by announcing that the U.S. would impose a 10 percent tariff on $ 300 billion worth of Chinese products. Before the tweet hit the traditional news feeds, USD / JPY fell from 108.14 to 108.00, while the next move after Bloomberg reported that a tweet was seen USD/JPY extend the movement below to reach a low of 107.26 in the next 30 minutes.

How to use Twitter for tradersHow to use Twitter for traders

Source: Bloomberg, DailyFX

STATEMENT 3. BREXIT, OCTOBER 2020

During the Brexit saga, the first point of communication for many political correspondents was Twitter. This meant that traders who followed high-ranking journalists, who usually received the latest information from Westminster Halls, had an advantage in speed over the owners of BBG / Refinitiv. The example below shows one of many instances where Twitter was more likely to report the latest Brexit news. Of course, the risk was the authenticity / reliability of the headlines, but it largely depended on the journalist who wrote the report.

On October 1, 2020, a political correspondent wrote on Twitter that the probability of a Brexit agreement had changed from 30% to 70%. So, for the next 4 minutes before the tweet crossed the wires (Refinitiv), GBP / USD rose from 1.2841 to 1.2871 and then rose again from 1.2871 to 1.2976 36 minutes after the tweet was picked up by Refinitiv.

How to use Twitter for tradersHow to use Twitter for traders

Source: Bloomberg

HOW TO PRESENT “FALSE NEWS”

The only obvious flaw of Twitter is the spread of misinformation or, as Donald Trump likes to say, “fake news”. Newsflow via Twitter is generally less reliable than more traditional news sources (WSJ, Sky News, BBC, CNBC). However, there are a few steps you can take to help identify fake news:

  • Or a verified account, in other words, is there a blue tick on the account? If so, it enhances the authenticity of this account’s tweets.
  • The ratio of subscribers and subscribers. An account that presents news will usually have few subscribers relative to subscribers.
  • Error writing in the title of the profile and biography is common to fake accounts, especially those that impersonate other accounts with letters replaced by numbers (“O” and “0”).
  • Date of joining Twitter. A fake account is usually on Twitter for a short period of time as they tend to be suspended fairly quickly. This is also due to the number of tweets, which in fake accounts are much less than in the official news, which write tweets 24/7.

How to use Twitter for traders

HOW TRADERS CAN EFFECTIVELY MAKE TWITTER

An effective way to track macro news on Twitter is to use tools like Tweetdeck. This allows users to filter out noise and focus on news related to the assets they trade. What’s more, Tweetdeck provides an effective way to stay up to date with the latest news, which is important for global macro-based traders who trade on the short term. The great thing 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 via columns using customized lists, making the platform an effective news streamer for quickly discovering the latest news.

How to use Twitter for traders

Source: Tweetdeck

Who to follow in TWITTER

Network: Watch out for those who add value to your network, and by value I mean promising insightful commentary. You can even ask who are the top analysts on macro / currencies, commodities, stocks to follow on Twitter.

Create a list and divide them by topic (important for Tweetdeck): As I mentioned above, creating your own lists can help you weed out noise. But remember, update your lists often when the market story changes.

  • Fast News Outlets, UK Politics, #OOTT (Organization of Oil Traders on Twitter)

Turn off noise: Now that Twitter has a lot of experienced and smart people, there is also a lot of noise coming from such as permabears. Avoid them, as time is very rarely spent well. One who warned of the impending collapse of the market and offered for a long time gold for several years not good for your trade. Don’t believe me, just open the gold chart and S&P 500 over the last decade.

https://www.dailyfx.com/forex/market_alert/2022/05/10/How-To-Use-Twitter-For-Traders.html

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