Five reasons Twitter is the darling of financial services

The financial industry is based upon quick decisions and reactions. On the stock market, traders must make decisions in an instant that affect the bank balance of them and thousands of others. So how do they get their information? Traditionally, old media and personal connections would have been the way people go their tips but now with the proliferation of social media, and Twitter in particular, it’s much easier for those in the industry to get information. We’ve taken a look at five reasons why Twitter has become an invaluable tool for those in financial services.

1. It’s quicker than anything else

Twitter uses short sentences that are easily transmittable and to digest. In traditional media like newspapers and even on blogs stories are heavily researched and rewritten to be officially published. Twitter on the other hand is immediate, stories can be summarised and posted as they happen. Now there are inevitably downsides as stories may be released without enough research bit in an industry based upon calculated risk social media means those in the industry can get information quicker than ever. In the world of sport indeed users can now keep up to date with minute by minute updates.

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2. All the experts use it

As with any industry in order to keep informed with relevant information you need to keep an eye on what the experts are saying. All of the major publications, experts and industry heavyweights use Twitter. Zak Mir of Spreadbet Magazine explains ‘If you follow the right 20 - 30 people in the trading and financial markets area then you should be fully informed in terms of what to think, what to trade and when to trade it. Yes, Twitter is that good’.

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(From l-to-r) Financial Times (Business and economic news), Nouriel Roubini (Professor of Economics), Spread Co (Daily Market Updates and Financial News), Jim Cramer (Host of ‘Mad Money’), Dina Medland (Journalist for Independent/Jorbes)

3. It can give you insight in to public opinion

As of May this year, Twitter has as 302 million monthly active users, and that doesn’t even account for the millions of others who sign up just to read others tweets and never send their own (total registered users are around the billion mark). That’s a serious community of people that you can use to gauge public opinion. This should be taken with a punch of salt though as there have been instances of skewed perceptions of events due to twitter demographics. For example during the Scottish Referendum sentiment seemed far in the favour of a ‘yes’ vote but it was in fact a decisive ‘no’ vote.

4. It can actually affect the stock market

As well as its use as a tool for gauging public opinion there is also some evidence that Twitter as well as being a useful and quick source of information for the industry, can actually affect stock prices. A study by Data Sift in 2012 found that changes in sentiment towards Facebook on Twitter mirrored the share prices. Now it isn’t clear if this means traders are looking towards Twitter sentiment as an indicator of confidence and public opinion or that it is merely a reflection of public opinion.

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5. You can get all your information in one place

Traditional media is often unknowingly biased and you may have to use many different sources of information in order to get a balanced view of a situation. This is particularly important in finance when different media sources may have different political agendas. With Twitter you can follow all the major news sources, influencers and public opinion. This all may be a bit much to sift through which is why tools like Tweetdeck allow you to split up your timeline into specific focused sections so you can easily cut through the irrelevant subject matter.

Five reasons Twitter is the darling of financial services