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.
