When Facebook began in 2004 and Twitter started in 2006, platforms such as these were seen as a bit of fun to help the digital-savvy generation to connect with one another. Yet, it quickly emerged that these sites, in particular, had the ability to disrupt the existing order – bringing a new focus to the worlds of advertising, marketing, and publishing. By 2010, Facebook has overtaken Google as the most visited online resource, paving the way for the era of social media dominance.
That dominance was soon felt in the world of trading too. Indeed, Investopedia notes that by 2011 it could already be seen that social media was starting to determine trading strategies and having an impact in the way that the markets operate. At just five years old, Twitter had come of age. But how does this and other platforms actually have an influence?
Swift dissemination of news
One great strength of social media is its speed. After a few seconds of typing out a tweet and pressing send anyone can publish a message to a potential audience of millions. That’s been transformative for ‘breaking news’ events from news outlets and journalists and the impact has been especially keenly felt in the world of trading – where the reaction to major events can be instant.
Website Finance Magnates showed how the speed and scale of social media can make big waves in the world of trading. It noted how, in 2013, one tweet from billionaire Carl Icahn was all it took to see Apple’s stock soar, gaining $17 billion in a matter of minutes. It also shows how CSX Corp lost $500 million within 90 minutes of a train collision in Maryland.
Events such as these have always had the ability to move the markets – but now they have the chance to move them within a matter of minutes. Indeed, these days it’s possible to see a live graph looking at the impact of a speech from a major politician such as Donald Trump or when Theresa May discusses her plans for Brexit.
Data, data everywhere
The daily deluge of posts on social media creates a vast chunk of data that, in the right hands, could be a goldmine for market analysts looking to gain the mood and sentiment surrounding companies, countries, and sectors.
When this was first spotted, Twitter hedge funds were even set up – using algorithms to mine and translate social media sentiment directly into investment decisions.
Some experts have even set up websites to harness the ‘wisdom of the crowds’ and think that the collective power of people on social media can actually be of greater worth that the analysts from Wall Street and the City of London.
Networks of traders
This leads us neatly onto the third point – interconnectivity. Traders can gather on their platform of choice, share ideas in an instant and watch on as their friends and associates make trades – learning what does and doesn’t work. There’s even a chance to road test theories and ideas, with the ability to set up a forex demo account and build confidence and knowledge before dipping your toe into the market for real.
A highly connected world, driven by data and instant communication, has shaped trading significantly in recent years. There’s no reason to think that this fast-moving world will stand still either. The markets move with the times so, as technology develops, expect this world to continue to be at the forefront of change.