The Power Of Social Media: Influencing Trading And The Markets

 Chris Cote
  Sep 20, 2018

There is no person in the business world today who is not familiar with the power of social media. The social media platforms, which started as simple networking sites, have become ubiquitous with business. The platforms are personal, far-reaching and used by people of all generations. There are a number of companies today that control a great share of internet users. Platforms like Twitter, Facebook, and Instagram among others command such a substantial power that they cannot be ignored. But how much really do they influence trading and the markets in general? Let's take a look at the power of social media in business and trading.

The power of instant news

Trading relies heavily on news. Information is at the heart of making quick moves that are ultimately commercially valuable. In the modern day, there is no faster way to share news than through social media. Whether by chance or on purpose, all sorts of news spread quickly through social media.

In fact, the industry of viral content has become so huge that all businesses today consider it a vital strategy as part of promotion and marketing efforts. Considering this reality, a simple tweet from a major shareholder about a particular asset is enough to send shockwaves around the market. This has indeed happened several times in the recent past. News about major accidents and incidents lead to the loss or gain of shareholder assets within a matter of minutes. In such cases, the power of social media is not just about moving markets - it is about how fast social media affects markets. Nowadays, all major events are more or less enough to determine the level of trading. All this is through the power of social media.

Social media as a catalyst for electronic trading

Electronic trading has come a long way, and there is still a huge journey ahead. However, the power of social media is already evident in online business. Not only do people use social media to learn about their favorite brands, but companies also use social media to learn about their customers. Indeed, social media pages are now part of most companies' strategy when it comes to getting data. This is true for both electronic and offline companies.

Platforms like Facebook and Twitter, which have a combined user base of over a billion users are essential for most businesses today. Companies learn a great deal about their customer views and preferences through social media. The convergence of both companies and customers on these platforms has only increased the importance and power of social media. The data online is indeed great for all kinds of business. For the trading realm, the power of social media is felt in:

  • Spreading awareness about the trading market
  • Helping traders establish trends in the market
  • Monitoring the behavior of various stocks
  • Establishing the general mood of the market

Most people today learn how to trade forex and about the forex market from social networks and sites. Traders also use social media to confirm trends and so do brokers. Even on days where the market is unpredictable, social media sites can help determine the overall mood of the market.

How price and retail trading are affected by social sites

Price is a factor in the markets that is vastly affected by sentiments. In the past, mainstream media was the only means of transmitting news. This mode of information dissemination was unidirectional and thus not as emotive. Online social networks are the opposite. When information comes out, it is discussed, analyzed and reacted to in real-time on platforms like Twitter and Facebook. This has enhanced the level of sentiments in the market. Page likes, mentions and retweets are all aspects of social media which have a real effect on price today. Retail trading has also been affected by these dynamics. Retail traders are now capable of using social media as opposed to actual professional networks to determine the direction of their trade. The easy sharing of portfolios between online professionals has completely transformed retail trading.

In summary

The power of social media in the trading realm can only continue to grow. With companies like Twitter taking actual steps in ensuring that their users get more functional use of the data, the markets can only expect to be influenced more by social media. The information on social media platforms might be rather disorderly for now, but definitely not so in the near future.

The Power Of Social Media: Influencing Trading And The Markets

Chris Cote

Chris Cote is a marketing specialist and a writer. He lives with his wife and two children on the sunny shores of Australia, but dearly misses his home in the cold German north.

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