Revenge Of The Reddit Retail Trader? History Says No
It’s impossible to go anywhere now without hearing, or reading about Gamestop, Reddit, and short squeezes. In normal times it would be close to impossible for these 3 names together, to reach the international consciousness.
But these are not normal times.
Put yourself in the shoes of these new traders participating in the rollercoaster markets of Reddit targeted stocks:
The heady rush of euphoria from making a lot of money very quickly. That sense of we’ve-got-each-other’s-backs camaraderie from their fellow Wallstreetbets subredditors.
The sense of moral certitude of having a well known Congresswoman take their side when their brokers impose restrictions on their trading.
The vindication of having the brokers reverse their restrictions in the blink of an eye.
All. That. Adrenaline.
These folk must feel invincible! What can possibly go wrong?
The market does not care about what is right or wrong, moral or immoral, logical or illogical. The market only cares about greed and fear.
The irony is that these same traders, the ones storming the halls of the market’s most shorted stocks are the ones who should know this best. Unfortunately, every time the word “should” is used, it tends to mean that something not very pleasant has happened, or is going to happen.
Why? Because the very purpose of their collective action was to scare shorts into covering, and if you feed a market that is too heavily short with fear, price skyrockets. If they didn’t know this before, they definitely know it by now.
Sadly they will not see it from this perspective, if they ever do, until it is way too late.
They won’t because of the emotions and adrenaline coursing through their brains right now. They won’t because they are inexperienced; and most of all, they won’t because of their greed .
And if you feed a market that is too heavily long with fear… what do you think happens?
Many will say this time is different, or that no one knows with certainty that this unpleasant thing will happen. The former statement has, through the centuries, become very famous last words of many a trader; while they will have a point with the latter statement.
But life doesn’t exist in certainties, it exists in probabilities, and history says the probability is pretty damn high.
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