I don't like arbitrary stops like atr I would pick points where you initial view has been proved wrong.
Which way? Penny Stocks education
- Thread starter themickey
- Start date
If a longer term Chart like 4 hour or Daily is satisfactory, with a good trailing Stop of some sort, that would even allow the Nasdaq to be traded by us Aussies, the Nasdaq having so much better potential for Long and Short gains.
I've been looking at that too.
Ahh I know the journal now, but you havent posted in near 6 weeks, all good.
IMHO if you really need to trade something outside of OZ I would definitely go for the DAX. Opens early evening oz time and have nice intraday swings.
Yup, and nicely correlated as well.
How Rage, Boredom and WallStreetBets Created a New Generation of Young American Traders
An excerpt from Nathaniel Popper’s forthcoming The Trolls of Wall Street.
https://www.bloomberg.com/news/features/2024-05-31/how-wallstreetbets-and-reddit-turned-young-americans-into-traders
Illustration: Sammy Harkham for Bloomberg Businessweek
By Nathaniel Popper May 31, 2024
By the end of 2011, Jaime Rogozinski, 29, had fallen into a rut. He spent his days in front of a computer screen in a windowless office at the Inter-American Development Bank in Washington, DC, where he had an unexciting job helping to maintain the endless databases of economic statistics that the executives used. After work, he took the train home to his bland condo in the suburbs that he hadn’t bothered to decorate. When he came in at night, he generally made a beeline for his bedroom, where he spent more hours in front of a different computer screen, scrolling through the dribs and drabs of other people’s lives on social media.
Rogozinski had not always been such a sad sack. Growing up in Mexico City, he’d been the kind of kid who did well in math, got along with the theater nerds and managed to win the title of class clown. He had a muscular jawline and a thick head of black hair that made it easy for him to get girlfriends. But the alcohol that was a social lubricant in college became an addiction in the years afterward. By 2011, six years after graduating, he generally drank alone, avoiding family and friends so no one would comment on the many red flags pointing to his dependence.
To fill some of the empty hours, Rogozinski had opened a brokerage account in 2011 and quickly moved from buying a few stocks to dabbling in options trading. Options are financial products tied to an ordinary stock, like Apple or Ford, but they move in much wilder patterns than the underlying security, because of a whole bunch of complicated factors, like the volatility of the stock price and the amount of time until the options contract expires. All of this was more than enough to discourage most young people from taking up options trading. But Rogozinski still carried the love of puzzles and complicated systems that he’d had as a child, when he’d gleefully taken apart radios and TVs.
To the few people with whom Rogozinski was still close, his antisocial behavior in these months looked like a cry for help. But as unlikely as it seemed, his evenings at the computer screen helped lay the foundation for a major—and, to many financial professionals, completely confounding—cultural movement in American finance. As he was drawn deeper into options trading, he decided to start an offbeat online community that would later become the voice of a new kind of financial trader who was glued to social media and eager to use speculation as a way to bond with like-minded people, while also being deeply cynical about the traditional financial system. The ramifications of this shift are still becoming clear, but the changes it’s wrought seem to be enduring.
WallStreetBets, the bizarre and often offensive message board that Rogozinski started on Reddit, would eventually come to occupy a key position at the center of a movement that turned millions of young Americans into investors and traders. The world got its most recent reminder of this community in May, when some of its members briefly sent the stock price of GameStop soaring almost 500% over two weeks. (It quickly came back down, and as of May 29, it was below its price from a year earlier.) Most meme stockers aren’t rich, or anything close to it, but when they come together on the internet, they have the power to send tens of billions of dollars into the stock market and the real-world companies the markets feed. It’s a new kind of community and social movement, where people hang around after they’re done trading because they’re stuck at home and eager for company. The brash and aggressive attitude that’s come to dominate the forum looked incomprehensible to many outsiders, but it spoke to a deep dissatisfaction and yearning for status and purpose in many of the people who became regulars.
The community is so remarkable, in part, because it grew out of a moment in 2011 when Americans, and particularly young Americans, had seemingly given up on the world of stocks and investing. Rogozinski’s fellow millennials had entered the job market just as the 2008 financial crisis hit, and it became their introduction to capitalism. By 2011, the major stock indexes had bounced back, but because so many people had sold stocks and gotten out of the markets during the crisis, the wealthy were the main people who benefited, exacerbating the inequality in the country. While the share of Americans who trusted banks fell to 32% in 2011, the proportion who trusted the stock market plunged even lower, to 12%.
Rogozinski got a daily reminder of this sentiment on his way to work each day, when he passed the local encampment of Occupy Wall Street, just a few blocks from the White House. Like the protesters, he’d gotten angry at the glaring inequality in society while watching Jon Stewart sound off about the state of affairs on nightly episodes of The Daily Show. In 2008, Rogozinski voted for Barack Obama. But he viewed his interest in trading as something of an unlikely offshoot of the principles motivating Occupy Wall Street. He wanted to understand the opaque financial products and buried risk that had made the economy so prone to crises.
To find people who were investing, he went to Reddit, his preferred social media network, to have some semblance of a social life without anyone seeing his red, watery eyes or hearing his slurred speech. On Reddit, he was not Jaime Rogozinski the alcoholic; he was jartek, the screen name he’d created by mashing his initials with the word “technology.”
Illustration: Sammy Harkham for Bloomberg Businessweek
For months, Rogozinski checked in daily on r/investing, the most popular Reddit forum dedicated to stock trading. But by early 2012, he had a yearning for something more. In part, he was looking for an even wonkier conversation about options. But he knew he also loved the more forbidden, irrational side of the markets—the part where the flashing digits shot adrenaline through his body and made him wake up in the middle of the night wondering what had happened since he’d last checked. This was a kind of drama he didn’t get enough of in his staid life maintaining databases.
Reddit allowed its users to start their own forums, called subreddits, and he decided to take advantage. In late January 2012, as he ran through names associated with the risk he loved so much, he hit on the notion of betting, like in a casino. That and all the talk about Occupy Wall Street coalesced in his mind into a distinctive name: WallStreetBets. That was the kind of bet he wanted to make. Not the risks little kids take, but a real bet, the sort a trader at a Wall Street bank might make.
Rogozinski at his home in Mexico City.Photographer: Marian Carrasquero for Bloomberg Businessweek
In the days after Rogozinski set up his subreddit, a few dozen people trickled in and subscribed, contributing posts about recent buys and sells they’d made. One of Rogozinski’s most successful early posts was a jargon-filled description of a pair of offsetting options contracts, known as a straddle, that he’d purchased to bet on the price of Apple’s stock. After a few weeks of this sort of thing, WallStreetBets wasn’t amounting to anything memorable. It seemed his experiment might be short-lived.
But in one of his trips back to r/investing, Rogozinski spotted a new character, a person who went by the username americanpegasus. This user had lots of previous posts about growing up in poverty and serving in the US Air Force—a very different background from Rogozinski’s. He seemed to share an obsessive curiosity about how things worked, something that had recently led him to discover penny stocks, the cheap, generally volatile shares in small speculative companies. Americanpegasus appeared to have read everything he could find about penny stocks, and he passed along what he was learning in lengthy, detailed posts. His writing sizzled with feeling and excitement. Even if some posts were more than a little naive and overdone, the pulsing heart behind them was obvious.
In one of his first posts on r/investing, americanpegasus had struck back at the people who got angry at him for the risks he was taking. “Most people seem to be so angry about investing, and so hateful of anyone who thinks they know anything they get downright vicious. … Thinking you’re smarter than all the fancy pants investors can be disastrous. … The only thing worse would be to listen to their advice.”
Rogozinski invited americanpegasus to join WallStreetBets, whose audience responded with appreciation to his contagious energy. This gave Rogozinski an idea. He liked options; americanpegasus liked penny stocks. They could have a contest where they each traded on behalf of the other to see who could make more money, with the winner keeping the proceeds. Rogozinski mentioned the idea to americanpegasus, and within days they announced their contest and got it up and running. To limit the risk of what they were doing, they kept what they put into the pot to $500 each.
During the first few days of the competition, americanpegasus pulled ahead, thanks to a bet on a tiny company that provided equipment to the energy industry: AGR Tools. Rogozinski didn’t mind falling behind, because the contest was bringing a whole new crowd to his subreddit. The number of subscribers jumped to a few hundred in a matter of days. Rogozinski attempted to imitate his opponent’s style. After a day with little action, he worked to convey the tension of deciding when to pull the trigger on a trade:
Illustration: Sammy Harkham for Bloomberg Businessweek
“Think of it as the duel scenes in the old clint eastwood movies where they stare each other down with the *waaweee waaweee waaaaa* music. Quite tense.”
It was americanpegasus, though, who won over the crowd with his instinct to put everything in plain, personal terms without taking himself too seriously.
“I am a rookie and an idiot when it comes to trading,” he said in one post. “Only a fool would make any trading decisions based off what I think.”
The audience saw the potential. “This could easily be formed into a book, which then could eventually be turned into a movie, albeit a shitty one,” one follower wrote. “Keep it up boys.”
In the second week of the competition, the penny stock that americanpegasus had picked went south. This not only killed any chance he had of winning but also ate up most of the $6,000—his life savings—that he’d put into the stock. After he wrote a post about his losses, followers gave him a comforting pat on the back and said he’d managed to turn the minutiae of trading into genuine entertainment—the first time most users realized that was possible.
“This subreddit has officially become my first stop online,” one commenter wrote.
“10/10 would read again,” another member chimed in.
But americanpegasus had lost his entire savings in a matter of days, providing a reminder of why most people avoided actively trading stocks and why those who did try usually stopped after a first taste. This didn’t seem like a drama that was likely to be repeated. In fact, though, it turned out to be a sign of big things to come.
The community is so remarkable, because it grew out of a moment in 2011 when Americans had seemingly given up on the world of stocks and investing
It was almost a decade between the launch of WallStreetBets and the beginning of the coronavirus pandemic. By then, millions of people had found Rogozinski’s subreddit and the strange culture that had grown out of that early trading contest. This had given a motley crew of teenagers and young adults an unlikely obsession with stocks, monetary policy and financial infrastructure, turning arcane topics into fodder for viral Reddit threads and racy TikTok videos. That would only increase once everyone was locked at home with little to do and, in many cases, with more cash sitting around than usual.
Rogozinski had, by then, kicked the booze and started a family. But he saw the viral promise of what he’d created, and he tried to make it bigger. He wrote a self-published book about his subreddit and began putting together a trading game show, using the WallStreetBets name, just as the pandemic began. Unfortunately for him, a younger generation of self-proclaimed “degenerates” had taken over much of the day-to-day work involved in running WallStreetBets. When Rogozinski showed up with his big ideas, they revolted and got Reddit to remove him from his top position on the forum. He fought, in vain, to win back control of the community he’d founded. But in the meantime, the moderators who took over built upon the culture he’d encouraged early on and attracted millions more members who were drawn in by the strange combination of dark comedy and dangerous trading practices.
The foolhardy trading that was performed on WallStreetBets, which violated all the established rules of investing, was a form of rebellion and a sign of the pervasive distrust of the old ways of doing things that had emerged in the wake of the financial crisis. This behavior was fueled by social media and was particularly strong among young men, who made up most of the members of WallStreetBets. A growing body of evidence indicated that after generations of occupying the top of society’s food chain, young men were falling behind their female peers. In trends that accelerated after the financial crisis, they were now less likely than young women to have friends, earn good grades, graduate from college and secure jobs. Speculative trading promised an easy way to get out of a financial rut, while also feeling like a way to flip off the experts and boomers who’d laid the groundwork for so much of what seemed to be going wrong. These newly converted investors also became entwined with the community and ideas that had sprung up around Bitcoin and other cryptocurrencies.
Many people woke up to this new universe during the GameStop frenzy of 2021, and then assumed, soon after, that it had disappeared just as quickly, like so many other online flashes in the pan. But it’s becoming clear over time that the youthful crowds have maintained their outsize interest in the financial markets. In early 2024, amateur investors and traders were putting roughly the same amount of money into stocks that they had back in the early months of 2021, during the GameStop craze, and a whopping six times as much as had been common before Covid-19. In the first half of 2023, this amounted to $145 billion flowing into stocks from amateur traders, compared with $21 billion in the first half of 2019, according to Vanda Research, a firm that tracks retail investors. The percentage of Americans who own stocks reached an all-time high in 2022, with the youngest generations diving in at the fastest rate, data from the Federal Reserve showed.
The generations that came before WallStreetBets generally opted for staid mutual funds. Only some dabbled in trading individual stocks or more speculative bets. In contrast to that, more than half of all members of Generation Z own digital tokens, according to a revealing report by financial regulators and academics in mid-2023. Individual stocks come in next, far ahead of the boring old mutual funds that used to dominate.
Many outsiders imagine trading as nothing more than gambling, no different from going to a casino or playing the lottery. And it can easily be just that. But unlike casinos, the markets are not zero-sum games. Stocks provide a way to channel savings into the economy, where they can be put to work building things and hiring people. When trading is approached correctly, both sides can come out winners. The novel ways that the young traders from WallStreetBets are investing are changing how companies raise money for their real-world operations. And there are early signs that the broadening ownership of stocks among ordinary Americans has helped boost the household wealth of many who didn’t benefit from rising markets in the past.
Illustration: Sammy Harkham for Bloomberg Businessweek
Even when people lose money on their trades, the experience can offer a kind of education that isn’t available to passive observers who think they understand the world by reading books or perusing the news. There’s nothing like losing a week’s paycheck to make you realize how an overconfident expert got it wrong or to force you to reconsider your most strongly held assumptions and recalibrate your behavior and ideas the next time around. The new world of online money has given rise to a bunch of self-described trolls and degenerates with an unprecedented knowledge of the levers that make the economy work.
The financial realm has become a part of popular culture, and that isn’t going away.
Academics and experts are only beginning to contend with the influence, both good and bad, that this will have on society and the real economy that the financial markets feed. What’s clear for now is that this often bizarre new universe of money and trading sets this generation of Americans apart from any that came before.
An excerpt from Nathaniel Popper’s forthcoming The Trolls of Wall Street.
https://www.bloomberg.com/news/features/2024-05-31/how-wallstreetbets-and-reddit-turned-young-americans-into-traders
Illustration: Sammy Harkham for Bloomberg Businessweek
By Nathaniel Popper May 31, 2024
By the end of 2011, Jaime Rogozinski, 29, had fallen into a rut. He spent his days in front of a computer screen in a windowless office at the Inter-American Development Bank in Washington, DC, where he had an unexciting job helping to maintain the endless databases of economic statistics that the executives used. After work, he took the train home to his bland condo in the suburbs that he hadn’t bothered to decorate. When he came in at night, he generally made a beeline for his bedroom, where he spent more hours in front of a different computer screen, scrolling through the dribs and drabs of other people’s lives on social media.
Rogozinski had not always been such a sad sack. Growing up in Mexico City, he’d been the kind of kid who did well in math, got along with the theater nerds and managed to win the title of class clown. He had a muscular jawline and a thick head of black hair that made it easy for him to get girlfriends. But the alcohol that was a social lubricant in college became an addiction in the years afterward. By 2011, six years after graduating, he generally drank alone, avoiding family and friends so no one would comment on the many red flags pointing to his dependence.
To fill some of the empty hours, Rogozinski had opened a brokerage account in 2011 and quickly moved from buying a few stocks to dabbling in options trading. Options are financial products tied to an ordinary stock, like Apple or Ford, but they move in much wilder patterns than the underlying security, because of a whole bunch of complicated factors, like the volatility of the stock price and the amount of time until the options contract expires. All of this was more than enough to discourage most young people from taking up options trading. But Rogozinski still carried the love of puzzles and complicated systems that he’d had as a child, when he’d gleefully taken apart radios and TVs.
To the few people with whom Rogozinski was still close, his antisocial behavior in these months looked like a cry for help. But as unlikely as it seemed, his evenings at the computer screen helped lay the foundation for a major—and, to many financial professionals, completely confounding—cultural movement in American finance. As he was drawn deeper into options trading, he decided to start an offbeat online community that would later become the voice of a new kind of financial trader who was glued to social media and eager to use speculation as a way to bond with like-minded people, while also being deeply cynical about the traditional financial system. The ramifications of this shift are still becoming clear, but the changes it’s wrought seem to be enduring.
WallStreetBets, the bizarre and often offensive message board that Rogozinski started on Reddit, would eventually come to occupy a key position at the center of a movement that turned millions of young Americans into investors and traders. The world got its most recent reminder of this community in May, when some of its members briefly sent the stock price of GameStop soaring almost 500% over two weeks. (It quickly came back down, and as of May 29, it was below its price from a year earlier.) Most meme stockers aren’t rich, or anything close to it, but when they come together on the internet, they have the power to send tens of billions of dollars into the stock market and the real-world companies the markets feed. It’s a new kind of community and social movement, where people hang around after they’re done trading because they’re stuck at home and eager for company. The brash and aggressive attitude that’s come to dominate the forum looked incomprehensible to many outsiders, but it spoke to a deep dissatisfaction and yearning for status and purpose in many of the people who became regulars.
The community is so remarkable, in part, because it grew out of a moment in 2011 when Americans, and particularly young Americans, had seemingly given up on the world of stocks and investing. Rogozinski’s fellow millennials had entered the job market just as the 2008 financial crisis hit, and it became their introduction to capitalism. By 2011, the major stock indexes had bounced back, but because so many people had sold stocks and gotten out of the markets during the crisis, the wealthy were the main people who benefited, exacerbating the inequality in the country. While the share of Americans who trusted banks fell to 32% in 2011, the proportion who trusted the stock market plunged even lower, to 12%.
Rogozinski got a daily reminder of this sentiment on his way to work each day, when he passed the local encampment of Occupy Wall Street, just a few blocks from the White House. Like the protesters, he’d gotten angry at the glaring inequality in society while watching Jon Stewart sound off about the state of affairs on nightly episodes of The Daily Show. In 2008, Rogozinski voted for Barack Obama. But he viewed his interest in trading as something of an unlikely offshoot of the principles motivating Occupy Wall Street. He wanted to understand the opaque financial products and buried risk that had made the economy so prone to crises.
To find people who were investing, he went to Reddit, his preferred social media network, to have some semblance of a social life without anyone seeing his red, watery eyes or hearing his slurred speech. On Reddit, he was not Jaime Rogozinski the alcoholic; he was jartek, the screen name he’d created by mashing his initials with the word “technology.”
Illustration: Sammy Harkham for Bloomberg Businessweek
For months, Rogozinski checked in daily on r/investing, the most popular Reddit forum dedicated to stock trading. But by early 2012, he had a yearning for something more. In part, he was looking for an even wonkier conversation about options. But he knew he also loved the more forbidden, irrational side of the markets—the part where the flashing digits shot adrenaline through his body and made him wake up in the middle of the night wondering what had happened since he’d last checked. This was a kind of drama he didn’t get enough of in his staid life maintaining databases.
Reddit allowed its users to start their own forums, called subreddits, and he decided to take advantage. In late January 2012, as he ran through names associated with the risk he loved so much, he hit on the notion of betting, like in a casino. That and all the talk about Occupy Wall Street coalesced in his mind into a distinctive name: WallStreetBets. That was the kind of bet he wanted to make. Not the risks little kids take, but a real bet, the sort a trader at a Wall Street bank might make.
Rogozinski at his home in Mexico City.Photographer: Marian Carrasquero for Bloomberg Businessweek
In the days after Rogozinski set up his subreddit, a few dozen people trickled in and subscribed, contributing posts about recent buys and sells they’d made. One of Rogozinski’s most successful early posts was a jargon-filled description of a pair of offsetting options contracts, known as a straddle, that he’d purchased to bet on the price of Apple’s stock. After a few weeks of this sort of thing, WallStreetBets wasn’t amounting to anything memorable. It seemed his experiment might be short-lived.
But in one of his trips back to r/investing, Rogozinski spotted a new character, a person who went by the username americanpegasus. This user had lots of previous posts about growing up in poverty and serving in the US Air Force—a very different background from Rogozinski’s. He seemed to share an obsessive curiosity about how things worked, something that had recently led him to discover penny stocks, the cheap, generally volatile shares in small speculative companies. Americanpegasus appeared to have read everything he could find about penny stocks, and he passed along what he was learning in lengthy, detailed posts. His writing sizzled with feeling and excitement. Even if some posts were more than a little naive and overdone, the pulsing heart behind them was obvious.
In one of his first posts on r/investing, americanpegasus had struck back at the people who got angry at him for the risks he was taking. “Most people seem to be so angry about investing, and so hateful of anyone who thinks they know anything they get downright vicious. … Thinking you’re smarter than all the fancy pants investors can be disastrous. … The only thing worse would be to listen to their advice.”
Rogozinski invited americanpegasus to join WallStreetBets, whose audience responded with appreciation to his contagious energy. This gave Rogozinski an idea. He liked options; americanpegasus liked penny stocks. They could have a contest where they each traded on behalf of the other to see who could make more money, with the winner keeping the proceeds. Rogozinski mentioned the idea to americanpegasus, and within days they announced their contest and got it up and running. To limit the risk of what they were doing, they kept what they put into the pot to $500 each.
During the first few days of the competition, americanpegasus pulled ahead, thanks to a bet on a tiny company that provided equipment to the energy industry: AGR Tools. Rogozinski didn’t mind falling behind, because the contest was bringing a whole new crowd to his subreddit. The number of subscribers jumped to a few hundred in a matter of days. Rogozinski attempted to imitate his opponent’s style. After a day with little action, he worked to convey the tension of deciding when to pull the trigger on a trade:
Illustration: Sammy Harkham for Bloomberg Businessweek
“Think of it as the duel scenes in the old clint eastwood movies where they stare each other down with the *waaweee waaweee waaaaa* music. Quite tense.”
It was americanpegasus, though, who won over the crowd with his instinct to put everything in plain, personal terms without taking himself too seriously.
“I am a rookie and an idiot when it comes to trading,” he said in one post. “Only a fool would make any trading decisions based off what I think.”
The audience saw the potential. “This could easily be formed into a book, which then could eventually be turned into a movie, albeit a shitty one,” one follower wrote. “Keep it up boys.”
In the second week of the competition, the penny stock that americanpegasus had picked went south. This not only killed any chance he had of winning but also ate up most of the $6,000—his life savings—that he’d put into the stock. After he wrote a post about his losses, followers gave him a comforting pat on the back and said he’d managed to turn the minutiae of trading into genuine entertainment—the first time most users realized that was possible.
“This subreddit has officially become my first stop online,” one commenter wrote.
“10/10 would read again,” another member chimed in.
But americanpegasus had lost his entire savings in a matter of days, providing a reminder of why most people avoided actively trading stocks and why those who did try usually stopped after a first taste. This didn’t seem like a drama that was likely to be repeated. In fact, though, it turned out to be a sign of big things to come.
The community is so remarkable, because it grew out of a moment in 2011 when Americans had seemingly given up on the world of stocks and investing
It was almost a decade between the launch of WallStreetBets and the beginning of the coronavirus pandemic. By then, millions of people had found Rogozinski’s subreddit and the strange culture that had grown out of that early trading contest. This had given a motley crew of teenagers and young adults an unlikely obsession with stocks, monetary policy and financial infrastructure, turning arcane topics into fodder for viral Reddit threads and racy TikTok videos. That would only increase once everyone was locked at home with little to do and, in many cases, with more cash sitting around than usual.
Rogozinski had, by then, kicked the booze and started a family. But he saw the viral promise of what he’d created, and he tried to make it bigger. He wrote a self-published book about his subreddit and began putting together a trading game show, using the WallStreetBets name, just as the pandemic began. Unfortunately for him, a younger generation of self-proclaimed “degenerates” had taken over much of the day-to-day work involved in running WallStreetBets. When Rogozinski showed up with his big ideas, they revolted and got Reddit to remove him from his top position on the forum. He fought, in vain, to win back control of the community he’d founded. But in the meantime, the moderators who took over built upon the culture he’d encouraged early on and attracted millions more members who were drawn in by the strange combination of dark comedy and dangerous trading practices.
The foolhardy trading that was performed on WallStreetBets, which violated all the established rules of investing, was a form of rebellion and a sign of the pervasive distrust of the old ways of doing things that had emerged in the wake of the financial crisis. This behavior was fueled by social media and was particularly strong among young men, who made up most of the members of WallStreetBets. A growing body of evidence indicated that after generations of occupying the top of society’s food chain, young men were falling behind their female peers. In trends that accelerated after the financial crisis, they were now less likely than young women to have friends, earn good grades, graduate from college and secure jobs. Speculative trading promised an easy way to get out of a financial rut, while also feeling like a way to flip off the experts and boomers who’d laid the groundwork for so much of what seemed to be going wrong. These newly converted investors also became entwined with the community and ideas that had sprung up around Bitcoin and other cryptocurrencies.
Many people woke up to this new universe during the GameStop frenzy of 2021, and then assumed, soon after, that it had disappeared just as quickly, like so many other online flashes in the pan. But it’s becoming clear over time that the youthful crowds have maintained their outsize interest in the financial markets. In early 2024, amateur investors and traders were putting roughly the same amount of money into stocks that they had back in the early months of 2021, during the GameStop craze, and a whopping six times as much as had been common before Covid-19. In the first half of 2023, this amounted to $145 billion flowing into stocks from amateur traders, compared with $21 billion in the first half of 2019, according to Vanda Research, a firm that tracks retail investors. The percentage of Americans who own stocks reached an all-time high in 2022, with the youngest generations diving in at the fastest rate, data from the Federal Reserve showed.
The generations that came before WallStreetBets generally opted for staid mutual funds. Only some dabbled in trading individual stocks or more speculative bets. In contrast to that, more than half of all members of Generation Z own digital tokens, according to a revealing report by financial regulators and academics in mid-2023. Individual stocks come in next, far ahead of the boring old mutual funds that used to dominate.
Many outsiders imagine trading as nothing more than gambling, no different from going to a casino or playing the lottery. And it can easily be just that. But unlike casinos, the markets are not zero-sum games. Stocks provide a way to channel savings into the economy, where they can be put to work building things and hiring people. When trading is approached correctly, both sides can come out winners. The novel ways that the young traders from WallStreetBets are investing are changing how companies raise money for their real-world operations. And there are early signs that the broadening ownership of stocks among ordinary Americans has helped boost the household wealth of many who didn’t benefit from rising markets in the past.
Illustration: Sammy Harkham for Bloomberg Businessweek
Even when people lose money on their trades, the experience can offer a kind of education that isn’t available to passive observers who think they understand the world by reading books or perusing the news. There’s nothing like losing a week’s paycheck to make you realize how an overconfident expert got it wrong or to force you to reconsider your most strongly held assumptions and recalibrate your behavior and ideas the next time around. The new world of online money has given rise to a bunch of self-described trolls and degenerates with an unprecedented knowledge of the levers that make the economy work.
The financial realm has become a part of popular culture, and that isn’t going away.
Academics and experts are only beginning to contend with the influence, both good and bad, that this will have on society and the real economy that the financial markets feed. What’s clear for now is that this often bizarre new universe of money and trading sets this generation of Americans apart from any that came before.
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Boom in US penny stock trading prompts warnings of frothy markets
Volumes for some sub-$1 shares are above those of Tesla and Apple as retail investors target cheap but volatile names
Stock in a scrap metal merchant, whose website proclaims ‘scrap is the new precious metal’, topped the trading leaderboard for May © Paul Hennessy/SOPA Images/LightRocket via Getty Images
Jennifer Hughes in New York an hour ago
https://www.ft.com/content/c02e4317-e39d-4d0d-a80a-1fd74add72ba
A scrap metal merchant and an electric vehicle maker that has sold just four cars top the list of so-called “penny” stocks that are out-trading the likes of Tesla and Apple, prompting some analysts to warn that markets are becoming overheated.
Seven of the top 10 most traded US equities in May, as measured by the number of shares bought and sold, are penny stocks worth less than $1, according to Cboe Global Markets. None of the companies are profitable.
The huge volumes in so many little-known stocks suggest a renewed appetite among retail investors for cheap names in which they believe they can quickly make a lot of money.
“When markets get frothy, the speculative froth often hits penny stocks as well — this is a classic sign of market peaks,” said James Angel, a finance professor at Georgetown University.
“Penny stocks tend to be extremely volatile, so you can make or lose a ton of money very quickly,” he added. “That appeals to the speculative urge.”
The frenetic trading comes after a strong rally in US blue-chips over the past seven months, with tech stocks reaching a new record high this week, although on Friday the benchmark S&P 500 index recovered from early lows, but still suffered its first weekly decline in more than a month.
Scrap metal merchant Greenwave Technology Solutions, whose website proclaims “scrap is the new precious metal”, topped the leaderboard for May. It has 588mn shares outstanding, and a daily average of 510mn shares were traded during the month, according to Cboe Global Markets data.
Over that time, its market capitalisation swung between $4mn and $159mn and the value of its shares from 4 cents to 16 cents. The company did not respond to a request for comment.
The only large-cap company to make the top 10 most-traded was Tesla, a regular favourite among active traders.
While, in value terms, trading in penny stocks is a tiny fraction of the turnover of mega-caps, investors’ increased interest has coincided with a resurgence in so-called “meme” stocks such as retailer GameStop and cinema chain AMC, which benefited from frenzied retail investor interest in 2021.
AMC was the sixth most-traded US stock in May with volumes more than 7 times their recent average.
“Penny stocks are not the same as the meme stock phenomenon, but let’s say they rhyme. It’s people willing to put fundamentals aside and chase returns,” said Steve Sosnick, chief market strategist at retail broker Interactive Brokers.
Sosnick’s own weekly scan of the most-traded stocks on Interactive Brokers’ platform has recently thrown up several lesser-known microcap companies.
“It’s emblematic of what I consider to have become a very frothy market,” he added.
Stocks that trade under $1 for a certain period are at risk of being delisted by exchanges and, for that reason, institutional investors tend not to touch them.
The rise in volumes has reawakened concerns about the impact of their financing methods on shareholders as well as the rules that allow them to remain listed.
Several of the most traded stocks by volume in May have sold new shares recently. The deals, typically in the form of bonds that convert into stock at a discount to the market price, dilute existing shareholders and swell trading volumes when the new shares are resold, which often happens quickly.
Electric vehicle maker Faraday Future Intelligent Electric was the second-most-traded stock in May. Its 2023 accounts, filed this week after a delay due to staffing issues, showed sales of four cars and leases for a further six since a long-delayed launch last year. They also contained a warning that “it will likely file for bankruptcy protection if it is unable to access additional capital”.
Several posts on social media platform Reddit focused on the wild swings revealed in Faraday’s share count. This has soared from 57mn in November to 1.4bn by February, when it did a so-called “reverse split”, swapping three existing shares for one new one. Its latest filing shows 440mn shares outstanding.
Reverse splits have become a common tool for sub-dollar companies as a way of boosting share prices and warding off the threat of delisting. There are 471 companies currently with shares trading under $1 in the US, according to S&P Global Market Intelligence data, up from 125 a year ago.
More than 70 reverse splits have been announced so far this year, according to data provider Wall Street Horizon. The number of such share swaps roughly doubled in 2023 to 219 compared with the previous year despite a major rally in stock markets after a tough 2022.
Greenwave announced a 1-for-150 reverse split this week, effective from Monday. Faraday Future, which is still behind with its financial filings and whose shares have halved since it published its 2023 accounts, has appealed against a delisting decision by Nasdaq.
“The company expects its securities to continue to trade on Nasdaq in the normal course during the pendency of the hearing process,” it told the Financial Times.
Volumes for some sub-$1 shares are above those of Tesla and Apple as retail investors target cheap but volatile names
Stock in a scrap metal merchant, whose website proclaims ‘scrap is the new precious metal’, topped the trading leaderboard for May © Paul Hennessy/SOPA Images/LightRocket via Getty Images
Jennifer Hughes in New York an hour ago
https://www.ft.com/content/c02e4317-e39d-4d0d-a80a-1fd74add72ba
A scrap metal merchant and an electric vehicle maker that has sold just four cars top the list of so-called “penny” stocks that are out-trading the likes of Tesla and Apple, prompting some analysts to warn that markets are becoming overheated.
Seven of the top 10 most traded US equities in May, as measured by the number of shares bought and sold, are penny stocks worth less than $1, according to Cboe Global Markets. None of the companies are profitable.
The huge volumes in so many little-known stocks suggest a renewed appetite among retail investors for cheap names in which they believe they can quickly make a lot of money.
“When markets get frothy, the speculative froth often hits penny stocks as well — this is a classic sign of market peaks,” said James Angel, a finance professor at Georgetown University.
“Penny stocks tend to be extremely volatile, so you can make or lose a ton of money very quickly,” he added. “That appeals to the speculative urge.”
The frenetic trading comes after a strong rally in US blue-chips over the past seven months, with tech stocks reaching a new record high this week, although on Friday the benchmark S&P 500 index recovered from early lows, but still suffered its first weekly decline in more than a month.
Scrap metal merchant Greenwave Technology Solutions, whose website proclaims “scrap is the new precious metal”, topped the leaderboard for May. It has 588mn shares outstanding, and a daily average of 510mn shares were traded during the month, according to Cboe Global Markets data.
Over that time, its market capitalisation swung between $4mn and $159mn and the value of its shares from 4 cents to 16 cents. The company did not respond to a request for comment.
The only large-cap company to make the top 10 most-traded was Tesla, a regular favourite among active traders.
While, in value terms, trading in penny stocks is a tiny fraction of the turnover of mega-caps, investors’ increased interest has coincided with a resurgence in so-called “meme” stocks such as retailer GameStop and cinema chain AMC, which benefited from frenzied retail investor interest in 2021.
AMC was the sixth most-traded US stock in May with volumes more than 7 times their recent average.
“Penny stocks are not the same as the meme stock phenomenon, but let’s say they rhyme. It’s people willing to put fundamentals aside and chase returns,” said Steve Sosnick, chief market strategist at retail broker Interactive Brokers.
Sosnick’s own weekly scan of the most-traded stocks on Interactive Brokers’ platform has recently thrown up several lesser-known microcap companies.
“It’s emblematic of what I consider to have become a very frothy market,” he added.
Stocks that trade under $1 for a certain period are at risk of being delisted by exchanges and, for that reason, institutional investors tend not to touch them.
The rise in volumes has reawakened concerns about the impact of their financing methods on shareholders as well as the rules that allow them to remain listed.
Several of the most traded stocks by volume in May have sold new shares recently. The deals, typically in the form of bonds that convert into stock at a discount to the market price, dilute existing shareholders and swell trading volumes when the new shares are resold, which often happens quickly.
Electric vehicle maker Faraday Future Intelligent Electric was the second-most-traded stock in May. Its 2023 accounts, filed this week after a delay due to staffing issues, showed sales of four cars and leases for a further six since a long-delayed launch last year. They also contained a warning that “it will likely file for bankruptcy protection if it is unable to access additional capital”.
Several posts on social media platform Reddit focused on the wild swings revealed in Faraday’s share count. This has soared from 57mn in November to 1.4bn by February, when it did a so-called “reverse split”, swapping three existing shares for one new one. Its latest filing shows 440mn shares outstanding.
Reverse splits have become a common tool for sub-dollar companies as a way of boosting share prices and warding off the threat of delisting. There are 471 companies currently with shares trading under $1 in the US, according to S&P Global Market Intelligence data, up from 125 a year ago.
More than 70 reverse splits have been announced so far this year, according to data provider Wall Street Horizon. The number of such share swaps roughly doubled in 2023 to 219 compared with the previous year despite a major rally in stock markets after a tough 2022.
Greenwave announced a 1-for-150 reverse split this week, effective from Monday. Faraday Future, which is still behind with its financial filings and whose shares have halved since it published its 2023 accounts, has appealed against a delisting decision by Nasdaq.
“The company expects its securities to continue to trade on Nasdaq in the normal course during the pendency of the hearing process,” it told the Financial Times.