StockTwits May Change How You Trade

A new financial microblogging site lets newbies learn from the pros and eschew bad advice at no charge—at least for now

By Max Zeledon

For a rookie, stock trading can be tough, especially in today's bear market. So when neophyte Carolyn Ferguson got started, she sought all the advice she could get. Known by her online handle, BullishBeauty, Ferguson found input aplenty, but not through what many traders would consider conventional channels, such as brokers, the Bloomberg terminal, or trading chat rooms.

Instead, BullishBeauty was tutored through a new microblogging tool called StockTwits, which lets users exchange trading advice in brief bursts, in real time. "There are plenty of pros there, folks with more money than I will probably ever see in my hands," BullishBeauty says, rattling off a litany of StockTwits users with such names as TraderAlamo, UpsideTrader, and Jsfalvo, whom she says have given her an inside edge. "All have answered every question I have asked. The willingness to help an inexperienced trader like myself is what StockTwits is all about."

For others, the months-old site is about a lot more than that. Launched in October by Internet entrepreneurs Howard Lindzon and Soren Macbeth, StockTwits uses the same technology that runs microblogging pioneer Twitter. "People were already talking about stocks on Twitter," says Lindzon, who also founded WallStrip, an irreverent finance-related video blog purchased by CBS (CBS). So Macbeth came up with a way to tag stock-related Twitter messages known as Tweets and aggregate them, Lindzon explains. "We were creating a filter to separate the chitchat and zero in on finance and trading through a simple platform that was global, lightweight, stable, and in real time."

Mixing with Ex-Hedge Fund Managers

In the intervening months, StockTwits has become a marketplace for ideas that lets amateurs mix it up with former hedge fund managers and such celebrity traders as Eric Bolling and Jon Najarian. Users say it compares favorably with a range of other trading-related social networking sites and portfolio-sharing sites, such as Covestor and Stockpickr, largely because it is so easy to use. Unlike Covestor and Stockpickr, StockTwits doesn't require registration or e-mail verification. And users don't need to create a portfolio of stocks to find potential matches or browse through professional portfolios for trading ideas.

Instead, with just a Twitter username and password, users are immersed in a virtual trading floor. "StockTwits is the modern version of traders shouting in the pits," said Bob Pasker, co-founder of WebLogic, a middleware maker that's now owned by Oracle (ORCL), and also a StockTwits user. And it's more efficient than chat rooms; there's no need to search through a labyrinth of stock forums that end up yielding poor and outdated information.

I, too, use StockTwits, and like many users, I benefit from the conversation with other traders. Thanks to the StockTwits community I was able to time a purchase of shares in the Financial Bull 3X exchange-traded fund to enjoy a 25% single-day gain during the week of Barack Obama's inauguration. The trade helped me end the month of January with a 6% gain, despite the market's losses. Having a constant stream of ideas flowing across a screen might seem distracting to some. In my case it has saved a lot of money because it has held me back from bad trades; it's a useful tool in assessing risk. Traders have this intuitive skepticism—and I prefer that to CNBC's unfounded optimism.