Friday, April 10, 2009

Refining Twitter as a Decision Support Tool

I recently outlined ideas for using the Twitter application as a daytrading analyst. Experience with the tweets and especially the feedback of subscribers has proven quite helpful in shaping this resource. What I'm finding is that the tweets that are most helpful are those that highlight market conditions that are not readily visible from charts and popular indicators.

For example, it was useful in yesterday's trade to recognize the mixed market strength early in the day in the S&P 500 Index, but the underlying buying interest in the broad market (very positive NYSE TICK, strong small caps). It was also quite useful to track the behavior among the financial shares, as their turnaround midday led both the large caps and the broad market higher into the close.

When commuters travel to and from work during rush hours, they commonly listen to the radio for traffic reports. Those reports of road and traffic conditions help drivers take the best routes to their destinations. A driver may be headed toward a variety of destinations for a number of purposes, but the traffic reports can be useful for almost any commute.

Similarly, reports on market conditions can be utilized by a variety of traders, from short-term, intraday participants to longer-term portfolio managers seeking good execution of their ideas. Just as a radio announcer will update which roads are moving and which are not, intraday tweets can shed light on markets and sectors that are moving--and the factors responsible for the movement.

The key to making such reports work is keeping them brief and timely, so that users can quickly absorb the information that they need and don't become bogged down with irrelevant data. Importantly, the tweets need to stay at a descriptive level, not a proscriptive one, so that traders can make their own unbiased buy and sell decisions. I will be implementing these modifications next week.

I welcome further feedback and suggestions on the tweets via comments to this post. I also encourage interested traders to look into mechanisms for receiving the tweets, such as Tweetdeck, so that they can receive information in a timely fashion. Subscription to the Twitter feed is free; readers of the blog can always pick up the most recent five tweets on the blog page under the heading "Twitter Trader".

Thanks for the interest and support!