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Twitter is a very interesting stock to follow. That's because most people consider the idea that this isn't a good investment. However, because of the overwhelming volatility seen on the stock, this could be a great asset for day trading. If you want to get involved in trading Twitter and taking advantage of the volatility, it's important that you understand the history of the stock, what causes movement, and that you have a great strategy for trading. Today, we'll talk about what we've seen, what causes the movement, and what strategy I have the most success with when trading Twitter.

Twitter Has Had A Tough History In The Market

Throughout Twitter's history, the stock has seen declines. Unfortunately, any time it gains traction, something happens that leads to further downward movement in the value of the stock. On the first close in the market, the stock closed at $41.65 in 2013. Today, 3 years later, it trades at just above $17 per share.

Throughout the past year, we've seen more of the same. For the most part, Twitter has been on a slow, yet steady downward slope. However, over the past three months, we've started to see some gains, leading to investor excitement and strong opinions with regard to where the stock is headed next.

What Causes Movement In The Value Of Twitter

When it comes to Twitter, the movement that we see is generally caused by news. Essentially, the company has struggled with user growth for quite some time. At the end of the day, no news is generally bad news as investors continue to think of the struggles. However, when good news is released that shows that the company is focused on improving user experience we tend to see short run gains.

The most recent example of his is actually the gains that we've seen on Twitter over the past few months. These gains are being caused by the company's announcements surrounding video streaming. Twitter hopes that this will be the piece of the puzzle that they are missing and that it will lead to gains in user growth. While that's yet to be seen, the company has excited investors, and that's really all it takes in order to see gains.

This is an interesting trend, and if history is any indication, we're likely reaching the end of it. Throughout history, when Twitter releases news that excites investors, we'll see gains that last until the next earnings report, or next update with regard to actual user growth. Unfortunately, nothing the company has done in the past has worked, so the trends always seem to end with a big upset on earnings, leading to declines. So, an opportunity is being created here.

The Strategy That I Use When Trading Twitter

The strategy that I like to use when trading Twitter is known as trend trading with the news. Essentially, I've set up news alerts so that I'm notified when any news is released with regard to the stock. This is a signal that it's time to look for trends. Once the news hits, all you need to do is open your chart and see what's going on. Within minutes you will know if the trend is heading upward or downward. By adding in a few technical indicators, you'll get a good view of whether or not the trend is likely to stick around long enough to profit off of, when to enter, and when to exit your trade. For more information on the process of trend trading, click here.

Final Thoughts

While I don't look at Twitter as a great long term investment, I have made quite a bit of money day trading the stock, and you can too. To do so, do what you can to learn about the company and its history, then research more about the trend trading strategy in order to turn the trends into profits!

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the part time swing trader by Ryan Mallory