Can Social Media Help Your Trading?

10/19/2012 6:00 am EST

Focus: TOOLS

Steven Spencer

Partner, SMB Capital

With the ubiquitous presence of social media in our lives today, veteran trader Steven Spencer of SMB Capital offers an example of its useful function.

The lifeblood of a trading desk is the flow of relevant factual trading information. We spend time training our traders from Day 1 on how to gather and share information, so we can all make more money. We build tools that pump out important information on In Play names all day. We have a chat room where traders can share information as well.

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Today I was watching the StockTwits “suggested” stream and at 10:30 am, a message on DECK caught my attention. It said that OTR Global made some positive comments. Their Web site indicates that they are a research firm that issues reports based on channel checks. Of course this has nothing to do with why the message caught my attention. DECK is a stock that has been hammered for the past year and recently the price action was showing signs of bottoming.

After I saw the message on StockTwits I immediately typed in DECK to my trading platform. The multiple charts that appeared showed me very clearly that it had just moved up quickly to a multi-day resistance level and was not a good risk/reward trade at that point. So I set a price alert for above the multi-day resistance.

I did the Live From The Floor show, and then left the desk to attend to some firm business. When I came back to the desk my price alert had triggered in DECK so I said “DECK new high above morning resistance”. My job as a trader on a desk is to share this information. It is the job of other traders on the desk to decide what to do with this information.

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I offer this anecdote because it truly amazes me the new ways trading information flow has evolved in the 16 years I have been trading. When I started, the only large trading chat room was on Yahoo! Finance, and it was a cesspool of penny stock promoters and other low lifes who added zero value to the trading community. Today we have StockTwits that somehow manages to filter all the BS, and actually curates a “suggested” stream for me, greatly enhancing my own filtering process.

At least one trader on our desk that I know of got long DECK after my call out prior to it trading higher more than one point. He took in my information, and then through his own analysis, determined that there was a good risk/reward trade to be made.

By Steven Spencer, Co-Founder, SMB Capital and SMB University