Twitter, for investment traders, can be a great tool for research and building a strategy for what assets to trade and when. The likes of Ben Carlson who has 211k followers (@awealthofcs) and Cullen Roche with 73.3k followers (@cullenroche) are great examples of where to find information about investing and trading on Twitter, among many others.
Used by many traders to inform and influence their investment decisions, the social media platform plays a key role in the decision-making process of even institutional investors. A Greenwhich Associates study suggests that as many as 80% of institutional investors monitor social media throughout their workday, 30% of which use information gathered from Twitter to influence their decisions.
More widely, 55% of American Twitter users get their news from the site, according to Pew Research Center, so this would suggest investors, whether retail or institutional, would find value in Twitter data. The platform can be a very good indicator of public sentiment and even a resource for other investors’ attitudes towards a stock or fund. In this article, we set out why investment traders need Twitter data as part of their toolkit.
Table of Contents
Twitter Glossary for Traders
Cashtag - A cashtag is like a hashtag (see below) but in relation to a financial asset with the $ symbol in place of the # symbol. It can be used to link to certain information relating to a stock or other asset on Twitter. For example, $GOOG (Alphabet Inc.) or $AAPL (Apple Inc.)
Hashtag - A hashtag is a # symbol on social media, particularly Twitter, where it can be used to link and cross-reference content. For example, putting #investing into Twitter would bring up content mostly related to investment and trading.
Keywords - Keywords are single words or phrases searched in social media to find tweets and content around that keyword. Again, if you were to search “investing”, it would likely provide search results around this subject, however, it is less focused or precise than hashtags.
Hashtags are used to group topics together and for users to quickly find relevant content, however, keywords are a perhaps less reliable way to do this.
Sentiment analysis - The automation of mining of opinion, attitudes, views and emotions. This can be classified as “positive”, “negative” or “neutral” and can then be used to deduce data which can inform decisions, such as whether to invest in a brand, depending on the sentiment of tweets.
Sentiment Analysis
Sentiment Analysis can be key to making investment and trading decisions. If a product has negative sentiment on Twitter, it may indicate the beginning of a bear trend for the stock. In this case, sentiment analysis can be used as an additional reliable indicator to predict performance of a stock, alongside your several other metrics. Using cashtags, hashtags and keywords, it’s possible to find out what is being said about a certain stock and thus gauging public opinion.
Cashtags, the stock symbols but with a $ symbol at the front, can be searched on Twitter easily, using, for example, $MSFT for Microsoft or $GOOG for Alphabet Inc. An example of this can be found in the below screenshot.
Taking the five stocks from Investor’s Daily recent article “These Are The 5 Best Stocks To Buy And Watch Now”, published on the 28th June, these are ‘Northrop Grumman, Dollar General, BYD, Centene and Vertex Pharmaceuticals’ with the tickers NOC, DG, BYDDF, CNC and VRTX.
However, using cashtags, like $NOC, wont provide you with the sentiment analysis you are looking for. Most Twitter users using the $cashtag are professional traders. Using their tweets for sentiment analysis would be misleading and thus incorrect. The point here is to gauge the public sentiment, they would primarily use specific keywords and hashtags in their tweets.
twtData provides tools to allow you to download the tweets of multiple keywords and hashtags on our website. We can perform custom sentiment analysis utilising Google’s NLP (Natural Language Processing) Engine. If you are interested in our sentiment analysis service, please contact us here.
Attitudes towards stocks on social media can form a key part of your decision over what to trade and when. The Twitter effect on the stock market can swing the price of a stock one way or another, depending on the sentiment of tweets about that stock, product, brand, CEO or more. Sometimes this can be from the influence of just a few tweets from a select few people or profiles if those profiles have a large enough following to cause such a swing in price.
A few influential users can start a buzz about a certain stock and get people talking about it. Often this will be a mixture of different sentiments but there will be a majority view which can inform your strategy.
In 2015, a study found that during Earnings Announcement (EA) events, there was a considerable increase in negative or positive sentiment towards a particular stock. The study states that “significant evidence of dependence between stock price returns and Twitter sentiment in tweets about the companies”; a clear relation between shifts in stock price and Twitter sentiment.
Perhaps one of the best known instances of negative or positive sentiment on social media affecting a stock price is the many tweets of Elon Musk, particularly in his recent (now aborted, as of Friday 8th July) attempt to takeover the very platform he uses as a way to communicate with his fans. In the run up to the agreement of sale to Musk, the Entrepreneurs’ tweets caused significant fluctuations in Twitter’s (TWTR) stock price. This is covered in detail, in another article we wrote here. Of course, the situation regarding the Elon Musk-Twitter saga could all change, however, all information is correct at time of publication.
In the crypto world, this is referred to as “the Elon effect”, as it seems whatever and however Elon Musk, the very same person talked about above, talks about a specific cryptocurrency, it can influence the actions of many followers and, in turn, the price.
This happened when Musk announced that Tesla (TSLA) merchandise could be purchased with Dogecoin (DOGE). You can see the TradingView visualisation of this below, as well as his original tweet.
This is the effect it had on the price of Dogecoin (DOGE). See above
In 2017, a spike and then slump in the price of Toyota Motor Corp ADR was caused upon President Trump tweeting “Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla for U.S. NO WAY! Build plant in U.S. or pay big boarder tax”. Another example of how the sentiment of one tweet by one person can significantly affect stock prices.
Credit: Storyful
Reacting to trends in the market
Twitter is a great place to keep an eye on trends, news events, trending hashtags and more. With the introduction of Twitter Communities and being able to search for certain keywords and what others are saying about a certain stock or fund, you can correlate data retrieved from experts and stock analysis charts, giving you a full picture. On this data, traders can make a decision on how to or whether to trade a certain asset.
Follow the steps below to find Twitter Communities:
- Login to Twitter go to your main feed, should you not be there already
2. Navigate to the bar on the left-hand side
3. Click on the following icon for the “Communities” page
4. Click the magnifying glass to at the top of the page, next to the plus sign.
5. Search for the community you want and click on one
6. On the next page, click “Join” and you should then get all the collated tweets on the subject on one page.
While you can’t necessarily search within these communities, the most relevant content to, for example, stock investing, would be shown. This could likely be of some use for your decision-making.
Once you join, you can see all the tweets relating to that topic, largely from the members of the specific community. On the “About” tab, you can also see a list of members and moderators, as well as the community rules, similar to groups on other social media platforms.
Twitter Lists
Twitter Lists are good for filtering tweets for a particular topic. You can create your own list by adding specific handles or you can follow a list that someone else has created. While we talk about news feeds in the next section, they can often get overcrowded, Twitter lists help fix this.
Twitter lists enable you to group all the people and views together in one list and retrieve the output from those accounts in one place. They allow you to focus a lot more on what you are actually looking for, rather than the wide range of output from the mass media.
One massive benefit of Twitter Lists is that you can follow the tweets of everyone on the list without needing to follow each and every person on the list. A full guide on Twitter lists can be found here, including how to follow others lists. In addition, Scoutzen provide a tool to search for popular lists by keyword, where you can narrow down the best ones to follow. You can find an example for the keyword “stocks” here.
Investopedia has a list of ten accounts to follow if you are an investor, several of which are news sources. We have created a Twitter List of these accounts for you to follow, follow the ‘Investopidia's 10 Twitter Feeds Investors Should Follow’ Twitter List here.
As part of our services, you can download a variety of data for associated with Twitter Lists, its members, follower and tweets into spreadsheet format, here. This data can be very useful for your strategic planning. Please email us here to speak to us about how we can help.
Keeping tabs on news feeds
Twitter can also be a great source of news from a range of sources and being able to track news around the stock market in general and specific stocks and funds is vital to your decision making.
While the algorithm associated with what news is shown to you through their “Explore” section is tailored to what Twitter thinks you will like, limiting your exposure to other viewpoints. There are many news outlets, some of them specialist in finance, from which to get your data.
Following a broad range of these publications should keep your decision making about what to trade balanced, while also informing you on movements of the markets.
Traders Union have a useful list on the Best Twitter Accounts to Follow for Stock Markets Insights which you should check out.
The Twitter effect
Much like the “Elon effect”, a trend in discussion about a certain brand or product on Twitter can cause an upsurge in buys or sells of the relevant asset. Research by P.K. Kannan, the Dean’s Chair in Marketing Science at Robert H. Smith School of Business, identified a correlation, showing negative or positive sentiment was linked with a “variance in stock price”, however, depending on a number of factors, this impact may be only temporary.
While the “Elon effect” was dependent on the tweets of one influential individual, this phenomenon is more focused on a hive of activity around several different crypto assets. Twitter can just as easily be used to influence stock price if enough people participate. This is where bots also come into the picture but that is another discussion on another blog.
Conclusion
Given social media’s effect on the stock market, Twitter data should be in the toolkit of every trader in order to get the best returns from your decision-making.
Download tweets using keywords from our site, here, and then perform analysis the way you like. If you would like us to perform the analysis for you we are happy to help. Please email us with your requirements at sales@twtdata.com.