Twitter Trumps Traditional Media When it Comes to Investing

NEW YORK (Real Money) -- Social media, Twitter  (TWTR) in particular, gives the public an unprecedented, unfiltered and nearly instantaneous way to communicate directly with the universe.

Self-directed, proprietary traders like me can now communicate to analyze, share, and act on breaking news without media lag time or spin. This played Tuesday, April 28 at 3:07 p.m. ET when Selerity, a self-proclaimed "financial intelligence platform" took center stage on Twitter and reported the company's earnings numbers a full 53 minutes ahead of the market close.

Within minutes of the tweet, Twitter's stock began to react violently. This gave interested traders an information time edge over the less tech savvy. Twitter's stock traded on this news for 20 minutes before being halted by the New York Stock Exchange (see below for a timeline of events and corresponding price action).

* Data taken from Think or Swim Platform set to 1-minute candlestick-style chart.

But this newfound free flow of information does have drawbacks. On April 23, 2014 at 12:07 p.m., the Associated Press Twitter account was hacked and a false terror attack report was posted stating: "Breaking: Two explosions in the White House and Barack Obama is injured."

Within seconds, automated algorithmic trading platforms used the report to send the S&P 500 index tumbling by 14 points, or 1%, temporarily erasing $136.5 billion in value before recovering swiftly once the report was dispelled. The recovery likely didn't make up for traders who use stop-loss orders that were triggered by the sudden price decline. Their financial loss was real.

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