Just caught a new post from Zerobeta called, "How to be a market maker in ideas on Stocktwits", that serves as a great follow up to yesterday's post on filtering out noise and finding value in Twitter & Stocktwits.
Here's an excerpt from Zerobeta's post:
"The manner in which the market maker adjusts his/her bid-ask spread as information presents itself is crucial to success. Over the course of the day the market maker will get a ton of order flow and must discern which orders are contain no information (ie “noise trades”) and which trades contain relevant information (ie “informed trades”).
For example, if an informed trader hits the market maker’s offer, he/she knows to raise his bid/ask to adjust his inventory appropriately. In general, the best market makers are the ones who can filter through the noise and obtain the best information (and most informed bid-ask spread) at the lowest cost.
Here's an excerpt from Zerobeta's post:
"The manner in which the market maker adjusts his/her bid-ask spread as information presents itself is crucial to success. Over the course of the day the market maker will get a ton of order flow and must discern which orders are contain no information (ie “noise trades”) and which trades contain relevant information (ie “informed trades”).
For example, if an informed trader hits the market maker’s offer, he/she knows to raise his bid/ask to adjust his inventory appropriately. In general, the best market makers are the ones who can filter through the noise and obtain the best information (and most informed bid-ask spread) at the lowest cost.
On StockTwits we are all market makers in ideas. The key is to separate the informed trades from the noise and get a nice stream of informed idea flow on your screen..."
Have a look at the full post to find out how to get the most value from the pool of ideas in the Stocktwits stream.
You may also want to check out Justin's earlier post, "On smart communities and Stocktwits", for more insight into why Stocktwits has been (thus far) a particularly useful and transparent market for ideas, and why it could become a model for the Twitter communities that will spring up in the future.