Virtually Speaking  |  BON 2006

Using Financial Message-Boards by Clem Chambers

Stocks & Commodities V. 24:13 (46-48): Using Financial Message-Boards by Clem Chambers Extract information and trends from the pools of information available on message boards. Market pricing is all about information flow. One of the tenets of efficient market hypothesis is that all information available is already factored into the price of an instrument, be it a stock, a commodity, or a bond. However, one of the glitches that makes the efficient market hypothesis just that —a hypothesis and not a law — is that all available information is simply not factored into the price. Many facts and much information are not widely known or understood. This is good news for the active investor, because it means he/she can know or understand information ahead of time and can therefore get ahead of a price move and profit from better information. HOW? Most people think of information flow solely in terms of news releases. Breaking news is a big driver of price both for shortterm moves and long-term trends. However, it is just a small part of the information spectrum. There are many other categories ranging from insider information, market knowledge, analysis, rumor, and misinformation. All of these have significant price moving potential, and information flow doesn’t spread out to everyone evenly. Most information is indeed in the price by the time most people receive it, and acting on it late is, at best, pointless. While in the past only the central-most participants would receive any of this information flow, these days a great deal of it is carried on Internet message-boards. What’s more, it often appears there first.

by Clem Chambers