Social Media is Your Trading Advantage

Picture having inside information straight from a company, which has not yet been released to the masses. There will always be an advantage in such a scenario.

This is especially true in thinly traded, low market-cap penny stocks, where small bits of information can significantly impact the ...Picture having inside information straight from a company, which has not yet been released to the masses. There will always be an advantage in such a scenario.

This is especially true in thinly traded, low market-cap penny stocks, where small bits of information can significantly impact the share price.

So, what's the real power of social media? Learning about the mundane, semi-humorous details about the lives of hundreds of people you sort-of know? No, the real power is the advantage that social media gives investors.

This article may come across as hypocritical, and it should, considering I've written a blog about the disappearance of Twitter and other social media sites. ( http://www.pennystocks.net/blog.htm?blog=121&title=Satellite-Radio's-Swan-Song )

It'll seem even more hypocritical since I've very recently launched my own Twitter account for penny stock enthusiasts. ( http://twitter.com/peter_leeds )

However, I still stand by my position that Twitter is dead, but I'll rephrase it slightly. Twitter is dead... at least in its current form. It will need to evolve (which it's already started doing) to survive. The Twitter you're using and hearing about now is not the one you'll be seeing in the coming years.

In the investing game, with penny stocks or blue chips alike, trading advantages only exist when some grain of knowledge is known only to the few. If everyone was aware of the same information, there'd be no advantage.

The beauty of Social Media is that, while everyone can be involved in it, not everyone is.

Picture a 65 year old billionaire, who is devoid of computer skills, and spends every day on the golf course. While he's weighing his options between the 7 iron and the 9 iron, you get a Tweet from the company you're both following.

It turns out that early sales of the new product at a weekend trade show were huge. You can act on that information, before the billionaire sees the same thing in a press release that comes out two days later.

Investors who are active in social media are on the front lines, first responders in a game where minutes count. This positions sites like Twitter as valuable tools for more ambitious, "neo-investors" and penny stock traders.

Rather than a retail channel ("we're having a 10% off sale on staplers and paper next week"), Twitter needs to transition into a transparency tool ("the CEO will be speaking at a luncheon in Miami tomorrow, listen to the web cast")

This evolution has already begun, and it's market driven. People are migrating towards those Tweets that give them a real advantage, rather than the millions of distracting and unnecessary messages.

Really, no one cares that you have a headache. No one cares that your cat is going to the veterinarian. They do care, however, about how to get a leg up on all the other investors. For many, social media will fill this need.

Follow me on Twitter: http://twitter.com/peter_leeds

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Link up with me on LinkedIn: http://www.linkedin.com/in/peterleeds