The Twitter Trading Strategy: Backtest and Performance Analysis

The proportion of adult Internet users who use social media platforms is approaching 75%, and this figure is growing. A good number of these social media users participate in the financial markets and use Twitter to disseminate their interest in the market. In this era of social investing/trading, Twitter can be a good place to get a sense of the sentiment in various financial markets. But what are Twitter trading strategies?

The Twitter trading strategy refers to the idea of using market sentiments on Twitter to aid trading decisions. Twitter provides a new meaningful channel for users to share information and their personal feelings, and as such, it can serve as a convenient medium to capture social sentiment in different financial markets at any point in time.

Emotional sentiment about a firm’s stock that spreads rapidly through social media is likely to be incorporated quickly into the stock’s price, whereas sentiment that spreads slowly takes longer to be incorporated into stock prices and may likely influence stock prices in the future.

In this post, we take a look at Twitter trading strategies. At the end of the article we provide you with a few backtested Twitter trading strategies (sentiment strategies).