As a beginner investor, you may feel overwhelmed and alone. Not only is the United States stock market a complex system made up of a long list of moving parts, but most people in American society have learned not to talk about their finances. So, there aren’t many people to talk to about the challenges you face when investing.
The whole situation is pretty ironic.
According to a 2020 Gallup poll, 55% of Americans own stock. That means 55% of Americans have at least some knowledge of investing and how the stock market works. While the majority of Americans own stock, the vast majority don’t talk much about it openly, leaving beginners to fend for themselves.
However, technology has changed the world in many ways. One key technological innovation in terms of human communication is the social network. Social networks have made it possible to catch up with friends from grade school, keep in touch with distant family and friends, and meet new people.
Stocktwits took this concept one step further by creating a social network specifically for investors.
What Is Stocktwits?
Stocktwits is a social network that was designed with the investor in mind. Founded in 2008, Stocktwits was created in an effort to build a community where investors, traders, and others with interest in the stock market could find like-minded members of the community.
Today, Stocktwits is a massive network of investors. According to TechCrunch, the social network had grown to attract more than 1.5 million active users by July of 2016. Today, the social network boasts more than 3 million members who generate a total of 5 million messages every month.
Stocktwits solves several problems for investors with a host of useful features.
1. A Platform for Relationship Building
Stocktwits gives beginner investors access to experts who aren’t just in it for themselves. The vast majority of members on the network are happy to answer questions about any stock you’re interested in. All you have to do is cashtag the question.
You read that right — it’s a “cashtag.”
Cashtags on Stocktwits work a lot like hashtags do on Twitter and Facebook. All you need to do is type the dollar sign immediately followed by the stock ticker. For example, if you want to know where to find the latest press release from Apple, you would write a message in the network to the tune of:
“Does anyone know where I can find the most recent press releases from $AAPL?”
Because you’ve cashtagged $AAPL, your message will be shown to all members of the community who follow Apple stock and be displayed on the Apple message board. You’ll likely be surprised at how many people answer.
Small conversations like this often lead to new relationships between investors on the social network by connecting investors with similar interests. Relationships are some of the most valuable assets that you will ever have. This is the case in investing and in life.
2. The Stocktwits Heatmap — Harness the Power of Social Volume
When something good happens to you, it’s natural that you want to share it. For example, when you got home from your most recent vacation, how many people did you show pictures to?
The same goes for investing.
When investors find what they believe to be a great investing opportunity, they like to talk about it. Because Stocktwits has become the social network of choice for investors, many of these conversations happen here.
Stocktwits saw incredible value in social volume — a measure of the rate at which investors and traders were sharing information about a stock on social media — and decided to build a tool surrounding it. That tool is known as the Heatmap. Seen in the screenshot above, the Stocktwits Heatmap consists of several colored boxes, with colors ranging from light green to dark green, gray, dark red, and light red.
There are two main factors to pay attention to when it comes to the Stocktwits Heatmap:
- Box Size. When you first load the Heatmap, you’ll see several larger boxes labelled by sector. The larger the box, the more investors are talking about stocks within that sector. Once you click the sector you’re interested, you’ll see several boxes of different sizes and colors, labelled by tickers. The larger boxes are stocks that are being talked about the most while the smaller boxes are the stocks that are talked about less. Ultimately, the larger the box, the larger the social volume, and if lots of people are talking about a stock enough to make for a large box, there’s likely big news surrounding that stock.
- Box Color. The color of the box makes a big difference too. Light green boxes are the big gainers of the day, with current session gains of greater than 3%. A dark green box means that the stock has generated current session gains of less than 3%. A gray box means that the stock is trading flat. A dark red box means that the stock is experiencing losses of less than 3%, and a light red box means that the stock is experiencing significant declines of more than 3% in the current session.
Both of these indicators have incredible value if you’re looking for an opportunity in the stock market for multiple reasons:
- News. High social volume is a signal that there is big news surrounding a stock. Oftentimes, the stocks that see the highest social volume are at pivotal points in their growth, representing strong buying opportunities.
- Liquidity. Liquidity is an important aspect in any investment. The more liquid a stock is, the easier it is to recover your money if you need to make a quick exit. When social volumes are high and price appreciation is taking place, liquidity is also high.
- Momentum. Finally, many investors search for high-momentum stocks for quick gains. Of course, any quick gains come with a high level of risk, but this is a strong strategy for investors who know market patterns well. Stocks that see high social volume on Stocktwits are generally experiencing momentous moves in one direction or another.
Although the Stocktwits Heatmap only provides price movement information based on the current trading session, this information can prove useful when searching for investing opportunities. It’s never a good idea to bet against the trend. So, when looking for investment opportunities, it’s best to look for stocks that are experiencing an upward trend. Green boxes on the Heatmap offer up several stocks to look into for further due diligence based on price appreciation.
Moreover, if you notice that a stock you’re invested in is trading in the red, it’s smart to review that stock and make sure that it still represents a strong investment opportunity.
3. Ticker Pages Give You Access to a Large Accumulation of Data
If you were to ask a successful investor about the most important aspect of investing, they would likely answer with one word: research. The most successful investments happen to be the most educated ones.
Stocktwits is a great place to find the information you need.
The social network offers a ticker page for every stock listed on the major exchanges, including the Nasdaq and New York Stock Exchange. The ticker page for a stock on Stocktwits is where all posts with that stock’s cashtag end up.
The vast majority of these posts are investors sharing their personal opinions about the stock the page is centered around, but there’s also other valuable information that’s easy to dig up on these pages. This information includes:
- Investor Opinions. No matter how well a company is doing, investor opinion is ultimately what drives price movement. If the overall opinion of the investing community surrounding a stock is bullish, there’s a strong chance that the stock will experience growth ahead. Conversely, if the investing community has a bearish opinion, the stock will likely realize declines ahead.
- Analyst Opinions. There are several websites that track changes in analyst opinions. Unfortunately, keeping an eye on all of these websites is nearly impossible. Nonetheless, when analysts initiate coverage or their opinions change, there’s an extremely high likelihood that the change in opinion will be shared on the Stocktwits ticker page for that stock.
- Fundamental and Technical Data. As is the case with analyst opinions, there are several websites that track fundamental and technical information surrounding stocks. When substantial changes happen within this data, those changes are generally shared via Stocktwits.
- Expert Content. If you plan on selling art, you’ll likely join art websites, go to art shows, and network within the art community. The same is true for investing experts. With Stocktwits being the largest online community designed specifically for investors, experts often share their articles, videos, and other online content in their Stocktwits portfolios with cashtags that result in these posts being shared on ticker pages. This ultimately leads to a large accumulation of content from experts to dig into when doing your research prior to an investment.
4. The Daily Rip Sets the Stage
Members of Stocktwits will receive a daily email known as the Daily Rip. The email is filled with valuable insights and actionable information, including:
- Coverage of the Day’s Biggest Stories. In the email, you’ll find a quick recap of some of the biggest stories in the stock market. In particular, the stories covered are generally about big changes in large-cap stocks or movement in stocks with high levels of social volume. Due to the popularity of the stocks covered, it wouldn’t be surprising to see a name or two that you invest in at least once a week, making the Daily Rip a great way to keep up with the times in the stock market.
- Coming Earnings Reports. Publicly traded companies are required to keep investors up to date in terms of financial performance. The Securities and Exchange Commission (SEC) requires publicly traded companies in the United States to report their financial results both quarterly and annually. These reports are generally released in strict adherence to a schedule and act as major catalysts. If a company generates more revenue, earnings, or a mix of the two than analysts expected to see, investors generally react in a positive way. Conversely, if analyst projections are missed, declines are often the result. Earnings reports are also packed with key information pertaining to operations, management, and all major aspects of the company. As a result, paying attention to earnings reports is an action that can lead to increased profits in the market. The Daily Rip email from Stocktwits provides a list of companies that are expected to release their earnings reports over the next three trading sessions.
5. Earnings Calendar Points to Coming Catalysts
If you’d like to have a little more time leading up to earnings reports, Stocktwits has the answer for you. The social network provides an in-depth earnings calendar, pointing to earnings reports that are weeks or even months ahead.
The data is provided by Benzinga and is also available on its site. However, Stocktwits provides a clearer and more user-friendly display of coming earnings reports.
Stocktwits was one of the first social networks to cater specifically to the investing community. As a pioneer, there are several major advantages to using the social network:
- A Large Community. As one of the first social networks designed for investors, Stocktwits has attracted a massive community of users, ranging from the novice to the expert. With such a large community, investors can not only connect with others and learn from them, but also get an understanding of the overall opinion of market participants.
- Free to Use. Everything offered by Stocktwits is free for the user. The website is 100% advertising supported.
- Intuitive Tools. The tools provided by Stocktwits give you detailed information about the stocks you’re considering investing in. Moreover, the tools offered provide users with a way to pinpoint stocks that are moving and have the investing community behind them.
There are few disadvantages to such an intuitive free tool. However, some users have experienced a rub with the following:
- Major Exchange-Listed Stocks Only. Stocktwits only provides information on stocks that are listed on major stock exchanges, such as the Nasdaq and New York Stock Exchange. So, if you’re looking to find information on over the counter stocks, bonds, and other investment vehicles, Stocktwits isn’t the place for you.
- No Social Network Should Be Your Only Point of Research. Anybody can post information on Stocktwits. Much of what you will find is speculation and opinion. As a result, it’s important to do your research through trusted sources like Forbes, the New York Times, and other well-known media outlets. Investors should also take the time to read press releases and dig through SEC filings to get the full story of the company before making an investment.
Social media is just one of many ways that technological innovation has changed the way consumers live, breathe, and communicate. However, social networks are not just a neat way to connect with old friends from school or keep in touch with family members abroad.
With the introduction of Stocktwits, social media quickly became a way to connect with other investors, gauge overall market activity, and find stocks with high social volume and big news.
When looking for new investment opportunities, Stocktwits is a great place to start. However, it’s important that you never take anyone’s word for the direction a stock is headed. While Stocktwits is a great place to find opportunities and look for expert opinions surrounding the stocks you’re interested in, you should always take the time to dive into SEC filings, investor relations websites, and other resources when doing your research. Nonetheless, Stocktwits is a compelling tool that complements just about any investing strategy.