The Difference Between Traders and Investors

By | August 25, 2014

Traders on Twitter and StockTwits tend to use the symbol $IWM (Russell 2000 ETF) when referencing small cap stocks. While investors and market pundits are more likely to use the symbol $RUT. As a result, your trading or investing style should guide which symbol you follow on Twitter and StockTwits. Take a look at the action of the RUT since the first of the year and then we’ll compare it to the bullish and bearish actions and opinions by traders vs. investors.

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The market dipped in late January, rallied to new highs, dipped again from March till May, rallied back to highs again, then sold off during July. Currently, a new rally is underway. If you look at the chart below of social media strength scores for RUT (which has a larger following from investors) you’ll see that the March/May dip did some damage to the confidence of longer term investors. They are still negative on the prospects for small cap stocks and are likely selling into rallies.

Meanwhile, traders (using IWM as a proxy) got positive after the March/May dip and again as IWM was making a low at the first of this month. The lesson to be learned from this example is that it’s important to follow the symbols that fit your own style. Investors should mostly ignore the IWM stream and focus on RUT instead. While traders should be watching what other traders are doing via  the IWM stream and not place a lot of emphasis on RUT.

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For individual stocks you should be looking carefully at its stream on StockTwits and Twitter to see if it is dominated by investors or traders. This will allow you to take action with others who have a similar style rather than fighting the majority of participants for a stock.

 

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