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Are social media platforms reliable trading news sources?

This is a big question considering the reach and influence of social media platforms in the 21st century. Twitter has 400 million users and Facebook a staggering 2.9 billion active users at last count. Business network LinkedIn boasts 756 million users and YouTube has 2.3 billion users. Nearly half of Americans reads news on social media. This speaks volumes about the sheer amount of information available and the need to connect and stay informed.

Most of the established financial news portals are active on social media and it’s not uncommon for traders to hear market-moving news first on Twitter or Facebook. Still, no matter how quickly the information travels on social media through sharing and comments, there are big differences between a qualified news source and an unqualified news source.

Just as important as the news itself is the market’s reaction to the news. Market reactions can play out on social media platforms in real time, offering vital information about the human factor and the emotions set off by sudden changes.

Since social media has become such an integral part of the mass media and some of them, like Meta Platforms, are mega-cap stocks, here are three potential ways to approach financial news on these platforms as a beginner.

1.Consider source quality

It’s vital to consider the quality of the source by asking yourself whether the information comes from an established financial publication or other reliable source. When the news is significant enough for it to go viral, it will be shared on thousands of connected accounts. Check the article to make sure it’s a qualified one because they’re required to cross-check their stories to confirm the facts are accurate.

Once you’ve found the original article, check it for the sources cited to understand how well-grounded they are in the facts. For example, in an article about whether Elon Musk will step down from Twitter, the primary source would be a direct quote from Elon Musk about his decision.

Currently, Elon Musk is CEO of Twitter and has an account followed by over 100 million users, meaning that the tweets are a primary source of information about the business leader. One of the problems is making sure that the account you’re following is the genuine Elon Musk account, since there are many parodies and copycats. This is a common problem across social media platforms and something to doublecheck when reading financial news. After all, this business leader also heads up another blue-chip stock – Tesla Motors, making it important to follow the authentic Twitter feed.

2.Bias – mirror or window?

There are two sides to bias when viewing information. One side is the bias stemming from the opinions of social media users, the other side is the viewer’s bias. Filtering the facts through the sieve of awareness about your own and others’ biases can be helpful in discovering the nuggets of information that are relevant to the market.

For example, an ongoing story about Facebook founder Mark Zuckerberg’s vision of the metaverse has endless opinions from observers, experts in virtual reality and publications dealing with technology. These opinions are likely to be shared on the publications’ social media accounts, some of which might be influential. While the opinions could be valid ones, they can be verified by checking Mark Zuckerberg’s Facebook account for direct information from the source.

Mark Zuckerberg also posts about Meta Platform’s other social media channels – WhatsApp and Instagram. The posts are a window into company strategy and a mirror of his goals as CEO. Some of Mark Zuckerberg’s posts might be significant enough to move the company’s stock price, so it’s worth keeping an eye on his Facebook updates.

3. Geopolitical and public health events

Geopolitical and public health events can move markets, and in the age of social media, news stories often stem from grass roots sources, from the people who live in the affected country. The impact of COVID-19 on different communities was widely shared on social media, for example. Food shortages were highlighted as supply chains were disrupted. Vaccine distribution was shared by big pharma companies, in another example.

The information you see on social media can be cross checked on Google News and confirmed by reading at least one other reliable source. This could include the original press release from a pharma company or an article from an established media firm.

In conclusion, social media platforms are a significant source of trading news provided you cross check with other reliable sources and keep in mind the awareness of bias and the possibility of misleading information from fake accounts.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

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