I forget who it was, but a while back a professional journalist made a funny/true statement that was something to the effect of:
“I follow many traders and financial bloggers, it seems that they are very fond of retweeting each other all day long”.
Hilarious. And totally true.
But there is a fundamentally sound reason for this noticeable tendency of retweeting in our financial and trader vertical. We are market participants and so, unlike bloggers who are discussing sports, music or fashion, we have a deeply rooted yearning (perhaps a need even) to understand which way the wind blows at all times. This means that to effectively participate in our little ghetto corner of social media, we all must do our part and echo the sentiments of those who have spotted something relevant.
We are a herd.
Try to take the negative connotations of the herd concept and put them aside for a moment. Millions of years of natural selection and specialization have led to the instinctual formation of herds by thousands of species over unfathomable stretches of time and on every single continent on earth. This is no accident, sociobiology explains this all very cleanly.
Let me assure you that the most outlying contrarians are also part of the herd, try as they might to deny it. They may be trailing far behind the herd, venturing out far in front of it or wandering off to the left somewhere, but even the contrarian needs to understand the thinking of the group – how else could he seek to subvert that thinking and trade against it?
One cannot be a market contrarian or fight the herd for long stretches of time; loners don’t last and stragglers get eaten. There is a wisdom to spending the majority of one’s investing time safely in the middle of the pack and simply benefiting from the prevailing trend.
Experienced traders and investors know that, for the most part, the crowd will outsmart the remnant. Only when a major opportunity presents itself that is hidden from herd does it make sense to fight the trend and strike out alone off the proverbial “beaten path”. These sojourns can be immensely profitable or completely ruinous, but that’s investing.
And so like any legitimate herd we have an idiosyncratic means of communicating that may seem excessive to outsiders – the constant retweeting is how we alert each other to signs of danger or the promise of sweet pastureland up ahead. It’s how we relay the thoughts and observations of the perspicacious few to the many who may have missed what we believe to be worthwhile
“S&P up 9 out of the last 11 sessions but breadth is weakening,” one of us may say. “Yes but the new highs list is still indicating healthy participation across sectors,” comes the rapid response of another. And both pieces of intel can be retweeted from one end of the valley to the other so that we all have the chance to digest what this may mean for our own strategies and holdings.
In the herd, we are spotting pockets of opportunity, be they in the form of profits or drinking water. We are looking for signs of potential danger, be they from institutional selling or predatory animals. We are retweeting these observations for all to process with the expectation that they too will pass on their own perceptions for our mutual benefit.