Twitter & Trading

03/18/2014 9:20 am EST

Focus: TRADING

Brian Shannon, CMT

President, AlphaTrends.net

Market analyst and trader Brian Shannon discusses what he sees are the pros and cons of traders using social media.

ROB:  I am here with Brian Shannon of alphatrends.net, and Brian, you have been an active participant in social media; the Twitter – as my mom calls it – and other types of social media websites in the past.  Does it still play a role in your trading and analysis, or has it dropped off over time?

BRIAN:  Can I go back and forth on Twitter?  Sometimes I really get on a roll with it, and sometimes I just kind of leave it alone for whatever reason.  It has become a little bit less manageable as it gets bigger and there are so many people on it to really filter through and find where the value is.  I think a lot of people have difficulty with that.  I got involved early and kind of made a name for it by getting involved with stocks so it’s being an investor there.  I use it, though, to find ideas and to share ideas.

ROB:  Do you find that, for a new trader, that it’s too much of a flood of information, or is there some way they can cut down through that mass of information?

BRIAN:  It definitely can be.  There are so many people on Twitter and a lot of good quality information as well, but the key is to find out, what is that good quality information?  So stocks, which do a great job of culling through and having a recommended list of day traders, swing traders, forex, whatever; so that’s a great place to start, but it can be overwhelming, and you have to spend some time with it.  I think the biggest mistake that some people make is to go in there and expect to just buy something because somebody said so on Twitter.  It’s a resource.  It’s a tool.  It’s not; it’s like picking up the paper and saying okay; well, someone wrote bullishly about IBM; I’m going to buy IBM.  You should use that as a starting point and then do some research based on what you typically look at. 

ROB:  I’ve noticed that Twitter is a great sentiment indicator as well.  You can see when people are really, really getting enthusiastic and maybe unusually enthusiastic about a particular instrument as well.

BRIAN:  Yeah, when it gets that way, I like to go with the Grateful Dead.  When life looks like easy street, there is danger at your door, and just sometimes you see again, a little bit giddy and whenever I see that sentiment kind of just getting; you know, everyone’s making money, feeling good.  It tells me there is maybe a little bit of bumps ahead, because the market doesn’t like to treat everyone that well for too long.

ROB:  Those are some great social media trading tips.  Thanks, Brian.

BRIAN:  Thanks, Rob.

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