Twitter has become an integral part of the world of business, and social media companies such as Facebook and Twitter have dramatically increased the speed at which information travels between individuals. News that has an impact on commodity prices is now shared instantly on Twitter, and often before it reaches the traditional media. But unlike the traditional media Twitter provides raw data from thousands of individuals and the accuracy of information distributed on Twitter is difficult to verify. This verification is made harder by the sheer volume of information provided by an average of 500 million tweets per day.
The type of Big Data provided by Twitter can be analysed to identify trends and movements in the marketplace. Traders turn to Twitter for the real time feed it provides on numerous events that impact the commodity markets such as, the weather, natural disasters, industrial accidents, crop disease, etc.
An example of how Twitter has an effect on commodity prices would be a refinery fire. Images of a recent fire at a Wisconsin Refinery in April were being tweeted well before the fire was picked up by the mainstream media. Twitter’s live feed nature allows traders to get an edge on their competition by providing them with information that impact commodity prices ahead of regular news sources.
Twitter can be an invaluable source of information for traders but, they also need to exercise caution when assessing the validity of the information. Sources are largely unknown entities on Twitter and there have been deliberate attempts to impact the commodity markets by proliferating false news on Twitter. Research has shown that false information is 70% more likely to be retweeted on Twitter than factual information.
There is no doubt that Twitter and other social media platforms will continue to influence commodity markets. However, with increased growth and false information Traders will increasingly require tools to help them get an edge in evaluating the large quantities of data provided on Twitter and other platforms. Constantly striving to provide advanced decision support tools to traders, as part of our next generation Fusion CTRM Software, Fendahl is already exploring the possibilities that social media presents.