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Over the years I’ve seen practically every industry out there start to understand the value of social media. Social networks earned approximately $8.3 billion from advertising in 2015. Also, 38% of organizations across a wide range of industries plan spent more than 20% of their total advertising budgets on social media channels in 2015.
In an article published by the University of Pennsylvania: “Since 2008, many firms have begun to use Twitter as a form of communicating news to consumers and investors because of its appeal and focus on the 140 characters enabling people to communicate concise, valuable information.”
For traders, there are specific reasons why they are willing to put their money into their social media mouths.
Being part of the online word brings a trading company closer to the community of target customers. Becoming active within that community means tapping into useful information about that audience, the environment, and the competition. Plus, it provides a way to interact directly with those desired customers to start building a trusting relationship.
Moreover, traders who are able to engage in social trading networks want to gain an edge by using “the wisdom of crowds.” Why? Sharing ideas and past experiences help increase everyone’s learning curve. Developing this trading literacy can lead to mutual success for everyone involved.
David Lojko, cofounder of Earn2Trade, believes the impact of social media on traders and markets is so vast. He noted that to call it revolutionary is an understatement. “Social media has completely changed the way traders engage with consumers,” said Lojko.
Closer to the Clients’ Needs
Intelligent investors have discovered how social media can help identify, understand, and address clients’ needs. The goal is to be aware of what the masses are looking for from a particular company. Being involved in social media gives traders a way to have their fingers on the pulse of how their target customer and existing client base react to certain news or market events. When a trader can do this while the competition lags on their digital transformation, they can gain the advantage. In fact, the ability to take this understanding of their customer and the market and predict what is likely to happen can generate real gains for clients, going beyond expectations.
Additionally, developers who work with various businesses have designed complex programs that analyze millions of Twitter or LinkedIn posts in real time. By doing so, they can uncover significant insights that could be relevant to their financial institution.
For example, keywords, such as sectors or names of other businesses, are added into the program.
When something pops up related to that keyword on any social media conversation or post, that investment firm gets an alert. Companies that use these programs also can receive a greater context from the information. This means they can look at who wrote the post or if other people are talking about the topic. The result is a broader perspective on a particular issue for enhanced products and services.
The trading business can get complicated. This is especially the case when users have to contend with the full institutional experience. That institutional experience is rife with jargon, complex explanations, and a lack of solid evidence for certain trading decisions.
Drazen Baletic, CEO at Agea, noted, “Many traders in the international markets have limited experience, and some platforms are overcomplicated for that target market. This can result in mistakes for the trader and limited usability.”
However, social media and specialized trading websites are making the exchange industry more accessible and approachable. They are helping to simplify terms and conditions. Also, these online social communities of traders are offering support where necessary to educate their audiences.
Andrew Thomas from Coinzy, a curated newsletter of information about the cryptocurrency world, says social media has made unusual investment opportunities more accessible to the masses: “Social media has made the conversation about things like cryptocurrency mainstream, which has helped water down the terminology and concepts associated with it, making people feel it’s something they can understand and manage. That wouldn’t have been possible in the pre-social media world.”
Social Media Enhances Electronic Trading
With so many advantages for traders to leverage on social media, it has become into a natural “home.” For example, since Facebook introduced the Zecco Wall Street application, which allows potential investors to like, track, and buy their desired stocks, users can access a wider range of market information than ever before.
There is no doubt that the speed and scale of social media can make big waves in the world of trading. One classic example illustrates this. In 2013, one tweet from billionaire Carl Icahn was all it took to see Apple’s stock soar. In fact, the stock gained $17 billion in a matter of minutes.
This article originally appeared on Forbes.