Trade Stocks With Twitter? Really?

Trade Stocks With Twitter? Really?

Twitter: it's a way to procrastinate, to check updates from friends, to post jokes and a way to ... make money?

CNN Money reports that investment management firm Cayman Atlantic is launching a hedge fund whose trading strategy is based on Twitter.


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"We are trying to detect events that are breaking out on Twitter before the press, the media, and the world are hearing about it," Cayman Atlantic C.E.O. Paul Hawtin told CNN Money. He says he was inspired to launch the firm by an academic paper co-authored by Professor Johan Bollen of Indiana University demonstrating how general sentiment on Twitter could be used to predict shifts in the stock market.

The technology Cayman Atlantic developed creates algorithms and filters to scan 400 million tweets daily. The firm will then make trades in stocks or commodities based on the five key tweets its technology identifies each day.

The hedge fund aims to generate a 12% return annually. Hawtin says his Twitter strategy has returned 18% over the past 11 months compared with the Dow Jones Industrial Average's 25% gain in the same period. He is still tweaking his Twitter algorithms.

This new hedge fund is Hawtin's second fund focusing on Twitter. The first shut down because of low demand and difficult market conditions. But Hawtin has high hopes for the new fund, which is awaiting approval from the Cayman Islands Monetary Authority, expected later this month. He says the fund comes equipped with better technology than the previous one.

Twitter may be free, but tweet-based investing is not. Hawtin is asking investors to pay $150,000 to open an account with the hedge fund.

RELATED: How to Keep Your Cool When You're Investing


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