Using Twitter as an Investment Tool

If you haven’t caught the Twitter wave yet, you may be missing out on a valuable investment tool. Originally developed in 2006 for a narrow purpose—to provide status updates for a delivery business—Twitter has expanded worldwide in record time. Users can post 140-character messages known as “tweets,” social-networking style.

So, what does this have to do with investing?

With Twitter, investors can trade ideas even easier than trading stocks. What’s more, investors can “listen in” on the ideas of others without having to contribute. When Twitterers, as they are known, post tweets, they can be seen by all of their followers. To follow someone, all you have to do is click “follow” on the person’s page.

To participate in the investment community, you have to build a network of followers. To get followers, you have to build a solid reputation with other Twitterers. This is done by making worthwhile posts such as links to interesting articles or helpful tips. If the links and tweets you provide are useful, you will gain followers.

So what use is this in the investment world? Well, imagine you hold 100 shares of Company X. While on Twitter, you see several tweets from those you are following mentioning a report coming out that Company X is considering a merger with Company Y. That is valuable information to you. Because Twitter is real time, it’s as if you are eavesdropping on a large conversation and can benefit from what you overhear. Maybe the information you get inspires you to buy; maybe it inspires you to sell.

Twitter also has niche communities that help to filter the glut of information transmitted. For investors, StockTwits is touted as “Bloomberg for the little guy.” This community allows users to follow other traders in a real-time environment. Users can use filters to weed out the good from the bad. Traders gain a reputation based on performance, not holdings, and users can choose who to follow and who not to follow.

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