Trading Trump’s Tweets
Even after more than 500 days in office, the unconventional style that President Trump has brought to the White House continues to offer new opportunities for creative traders. The latest example of this is a set of new strategies designed to take advantage of any clues about economic data releases and company-specific news that Trump tweets out.
Trading strategies that track the President’s tweets and place trades in the market accordingly have reportedly been used successfully on a number of occasions. One example was immediately following the announcement of new tariffs on China and the EU, when Trump’s tweeting directly affected both metal prices as well as individual companies.
On GitHub, an online hosting service for computer code, interested traders can even find an open-source trading bot called Trump2Cash that scans Trump’s tweets for any mentions of publicly traded companies, and then uses sentiment analysis to decide on whether the tweet will affect the stock price of the mentioned company positively or negatively. The bot then proceeds to automatically place a trade in accordance with the expected market reaction to the tweet. You can read the full background story of the bot in this blog post.
Another interesting strategy that has been proposed is to pay attention to the self-praise coming from the President’s Twitter account. For example, one could pay attention in the hours and days leading up to the first Friday of every month when the US Department of Labor releases its monthly Jobs Report at 8:30 AM. It’s well-known that senior members of the administration are briefed on the data the evening before it is released to the public, and it appears they sometimes have a hard time keeping quiet about it.
Here is one example from Friday June 1st that was published at 7:21 AM:
As you may have guessed, the numbers that came in exceeded expectations, with the unemployment rate dropping to an 18-year low of 3.8%, better than the forecasted 3.9%.
How to trade tweets
Other than the trading bot mentioned above, the next question now becomes how can we trade on these tweets. To keep things simple, let’s stick with the above tweet as our example case.
- The most obvious way to trade this would probably be to go long the US dollar against other major currencies like the Japanese yen or the euro. For example, anyone who bought USD/JPY right after Trump tweeted, could have made 0.40% by selling again within 2 hours.
- For those who prefer the stock market, going long the S&P500 would also be a natural choice. The problem here is that the numbers are released before the stock market opens in the morning, meaning prices have most likely already rallied by the time you are able to trade. One way around this would be to buy index futures on the S&P500 or a CFD (they are normally traded 24 hours) with the index as the underlying asset. On the day of this tweet, we saw a strong rally in index futures shortly after Trump’s tweet was published.
- Another strategy involving precious metals would be to go short gold, for example by shorting the popular GLD ETF or by shorting CFDs or futures tied to the gold price that are traded around the clock.
Since Trump’s tweets are public and for anyone to see, the trick here is to be prepared when numbers are expected to be released, and then act fast. Trump is a president who undeniably does things in a very different way from what most market participants are used to. As traders, our job is not to judge on how politicians do their job, but rather to take advantage of every single opportunity they hand us to make money from the market.
Featured image from Pixabay.