Home › Market News › Does Reddit Trading Cause Stock Market Manipulation?
If you can enough “diamond-handed” traders to band together on one side of a market, then it might be reasonable to think that they could make the market move. But is it harmless trading, or can it be considered market manipulation? This week, the Topstep coaches talk about some of the risks involved with trading meme stocks if you don’t have much experience in the markets.
Earlier this year, we saw what happened when all of the so-called “apes” and “degenerates” on the famed WallStreetBets subReddit jumped on board a few meme stocks to force a gamma squeeze on over-exposed investors.
In the case of stocks like GameStop and AMC, a considerable spike in volatility due to smaller retail investors piling into the market did help in creating a short-term boost in price. So the question now becomes, do these traders know how to recognize when it’s time to get out of a trade?
Many investors will tell you that a 100% return on a stock trade is an impressive gain. And, if you are good enough to double your investment on a single trade, maybe it’s time to start thinking about taking some money off the table and put it in your pocket. That’s not really how the meme stock traders are playing the game, though.
The typical WallStreetBets member is between 18 and 30 years old, lacking market knowledge, and looking to hit home runs on every trade they make. Don’t get me wrong, their confidence is exhilarating, and I love to read their comments, but a 10x or 50x return is a stretch for any short-term investment, but that’s what they expect.
It’s always important to have an exit strategy. But, some of the most considerable losses come from simply not knowing when to get out of a trade. Unfortunately, the race to get out is always worse than the race to get in, and when the purge happens, it will happen fast, and the winners will turn into losers in the blink of an eye.
Suppose you have the money to spare and don’t mind holding out for that “mother of all moves,” then more power to you. But the worst thing you can probably do is risk it all in the hopes of a moon shot. So keep your expectations reasonable and always make sure to pay yourself!
Trade Well!
