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!

Brett

14 comments:

bruce said...

very helpful of you to do this.
many thanks.
real time heads up on when volume, big traders,sector convergence,etc coming in or leaving is just what many of us d-traders find useful.
thanks again.

Ken said...

This is going to be of great benefit. Once a learned trader, FOCUS outweighs all indicators and what you are describing will redirect my focus at the moment allowing me to make better informed decisions. We have a short window often times to catch the trade at the most opportune time. As I make a few modifications to my charting platform, it would be very helpful, if you could create a summation of the various charts, indicators and their definitions that you are using, if possible and at some point. I will set up a new account with MD this weekend to take advantage of the custom features it allows; to be in sync with your vision. Is a book purchase satisfactory compensation to you for your time and efforts? There is no question that my trading will improve as you move these ideas forward. Thank you very much!

oops said...

EXCELLENT!

I hope all trading tweets adhere to this. I have already bumped several that chat like teenage texting. Or self-promote their paid subscription services.

James Stollenwerck said...

Brett,

This is probaly a good thing...advancements like Twitter aren't going away.

TweetDeck is nice as long as it's open and I'm still trying to figure out how to use it (searches, groups...my problem). I think for now I prefer the mobile notification, which for me is always open.

What about the notion of a tweet interfering with a trade signal rather than confirming it? I interpret this as a reason to skip it, but if trading mechanically with probability skewed your way I would be in conflct.

Michele said...

I think the main benefit of Twitter in this case is that we're reading *your* posts. If I have to wade through 500 random "tweets" to try and extract some conclusion about the market, the whole effect is diluted.

Not that it's necessarily a bad idea. My online broker (IB) offers a chat room that basically performs the function you're suggesting.

S Benard said...

I received my Daily Trading Coach in the mail today. I can't wait to read it. In perusing the topics, I don't know which one I need to read first -- or most!

Thanks for your willingness to share with the trading community, Dr. Brett!

Junaid said...

Hello Brett, i am a fresher (new to the Stock Markets). I had been trading for about a year now, but i m still not able to understand these market indicators and oscillators. Could you plz help me by giving some links to the posts wherein u hv mentioned about the use of different oscillators... I would be thankful to u...!!

Junaid.

Lorenzo said...

Hello, Greetings for a Happy Easter to you and Family

Clark said...

I don't day trade but thought you all may find a tool I use useful. It's called twitterspy, and it can be used to hone in on key words and phrases all throughout the twitter world via your gmail talk application. So, for example if you'd like to track different sectors, you simply tell the client to spy "energy sector" or "materials" for instance, and everytime someone tweets on these subjects, you are notified of it via gmail...

Ian said...

Started using Tweetdeck - the good thing is that it displays a little pop-up window and sound when a new tweet comes in. The tweets are pushed to me rather than me having to refresh the page like on Twitter.

Brett Steenbarger, Ph.D. said...

Hi Ken,

Thanks for the idea; my post on AM preparation addresses many of the indicators I use. I appreciate the interest--

Brett

Brett Steenbarger, Ph.D. said...

Hi James,

Great point; the Twitter posts have to serve as background, not as competition for signals that you trust.

Brett

Brett Steenbarger, Ph.D. said...

Hi S. Benard,

Thanks; I look forward to your feedback on the book--

Brett

Brett Steenbarger, Ph.D. said...

Hi Junaid,

My post on AM preparation describes many of the indicators I look at daily; thanks--

Brett