In this article we discuss whether social media is good or bad for your trading in the financial market.
The social media revolution and your trading and investing in the forex, futures, and stock market
Most expert traders at our online trading academy started their career in the financial markets learning from former floor traders at the Chicago Mercantile Exchange and Wallstreet. And we are grateful for this. An important lesson we learned is how money is transferred from a trader’s account to another. Through profits and losses, retail traders’ accounts are often transferred into market marker accounts, institutional accounts, etc. daily. When markets decline to price levels where institutions bought – i.e., real demand, wholesale price – investors and retail traders would sell largely due to the reduction in price and bad news associated with a drop in prices.
While institutions buy at demand, retail traders would sell, causing the rallying of prices and the account transfer going underway. The price rally results in green candles filling trading screens worldwide. At this point, good news starts creeping in, with continuous buying taking place, which leads to even more rallying of the price until price reaches a level where the institutions are sellers – i.e., retail price or real supply. When this happens, the buying bandwagon swings into full force, sucking in most retail traders who are buying right into institutional supply. Immediately the last novice buyer buys from a market marker or institution at the supply level, price declines, making the account transfer complete. We experienced this for a long time. Actually, we often think that a simple wire transfer would be easier and quicker for newbie retail investors or traders. But then, that may eliminate the need for markets, which won’t be good.
The trading floor is fading away slowly into the non-tech black hole that consumes everything non-electronic. Because of this, you may begin to think that astute traders are losing profitable links to retail traders. Sincerely, that is a herd mentality, and you may need to have a rethink. The supply of newbie investors and retail traders with no idea about the quantification of demand and supply – wholesale and retail price – has exponentially increased, thanks to the introduction of a new market place that’s much larger than the exchange ever was, “The Social Media Revolution.”
Our online trading academy is a big fan of social media. Without gainsaying, social media has to be the financial world’s greatest gift since the availability of Level II data. Level II is yet another trap for retail traders: makes retail traders buy at retail and sell at wholesale, making the account transfer process much easier for financial institutions.
For instance, let us take Twitter: recently, we were asked to speak on a Social Media panel in Dubai. While researching, we got more involved in Facebook, Twitter, and Instagram – it was shocking! On Twitter, some persons said they had just bought stock. This message went out to the initial group, then that group‘s group, then that group‘s group, and so on. As the stock rise, we thought of the legal version of Bernie Madoff. The first buyer is a genius! All the buyers after him on this enormous chain of “followers” were simply paying those in the chain that bought before them. If you do not have a Twitter account, this is how it works. People find and start following you. You receive an email that actually uses the word “follow.” If you know how to buy low and sell high in the market, then you should love followers.
Let’s quickly reflect on why someone interested in investing and trading would choose Social Media as a source for enhancing their financial status.
You can use social media like Facebook, Twitter, Instagram etc., to seek investment and trading information, advice, or education. Those who want information and advice want it fast. However, social media’s financial information leads to herd mentality investing and trading, as we described above. Similarly, those looking for education do not know the difference between quality/real education and misguided or useless education. How can they spot the difference? These people are seeking education because they’re newbies and do not know. Whether you are going to social media for trading education or advice, social media is often a path containing traps that speed the transfer of accounts from those who do not know what they’re doing to the hands of those who do.
More education or faster information does not determine if you will achieve financial success from investing and trading. Instead, it is proper education and information – it separates the have nots from the haves. Technically, social media is excellent for relationships, personal interactions, etc. However, for anything relating to true competition, a competing social media participant is naturally in big trouble.
Why do you think big trading firms PAY retail brokers for retail order flow (payment for order flow)? It’s simple: they want to have access to the orders from novice retail traders. And this is for a reason – find more information on “payment for order flow” on the SEC website.
So, instead of reading all the trading books, learning how to buy and sell in markets when everyone is also buying and selling.
Instead of acting on others’ advice – these people often get paid from giving that advice and not by its implementation or trading.
You can pay attention to the happenings on your trading screens and charts daily, weekly, monthly, and yearly. Pay attention to things that are happening around you; the simple reality of making money from selling and buying anything. This is exactly how astute market players think and act.
You are most likely an astute seller and buyer at the grocery store, when you buy a car, etc. Apply that exact logic in investing and trading markets, and you will quickly have an added advantage that many people can’t come close to having.
Do you think your savings or account is slowly being transferred to another person’s account? Then, now is the time to stop thinking and acting the same way others do; focus on how things actually work.
We hope this was helpful, have a great day!
If you want to learn more about professional trading and investing across multiple asset classes such as forex, futures, and stocks, please sign up HERE for free at our online trading academy www.onlinetradingcampus.com and get access to a free three-hour introductory course.
Author Bio: Bernd Skorupinski teaches the undiluted truth about trading and investing at Online Trading Campus and takes you through what it takes to be a consistently successful trader. His favorite moment as a trading mentor is the way peoples’ eyes light up with excitement and confidence when they understand how Supply and Demand trading strategy works and how it can help win in the trading arena. He believes in building core values and discipline that ensures his students do not succumb to the pressures and temptations of the market. He very much believes in following plans and strategy through. If you want to know more about the author Bernd Skorupinski please read HERE