In future, will you just need to look at social media to invest successfully on the stock market? Absolutely not. Social media may eventually become a useful analysis tool for finance professionals, but they are by no means infallible. The main reason for this is that data on social media are not always reliable and relevant. They contain myriad unfounded rumours and lies. These might momentarily disrupt a share price, but it will stabilise after a few days, or even hours. Moreover, given the speed at which information on them is spread and interpreted, social media clearly should not be used by individuals, even if they are informed, but rather by traders using highly speculative strategies and seeking short- or very short-term returns.
Last, and most importantly, social networks are not permanent entities. Twitter might even cease to exist sooner than people think. The company is currently going through a bad spell, losing money for its shareholders and those who want to sell it. Discussions are under way with many large groups, including Google, Microsoft and Disney. There is no guarantee that these talks will lead to a sale. Equally, there is no guarantee that Twitter will operate in the same way under new ownership.
Even the algorithms themselves, regardless of whether they are used in social media, can have weaknesses. A recent study by the University of Cambridge showed that professional traders were able to outperform the most sophisticated algorithms simply through gut feelings!