A new army of social media day traders is helping push stocks to records and convert companies into market sensations.
As trade by individual investors boomed during the coronavirus pandemic, so did the popularity of online communities where they gathered. Platforms such as TikTok, Twitter, YouTube, Reddit, Instagram, Facebook, and messaging platform Discord have become Wall Street’s new trading desks. Individual investors come together to talk about popular stocks like Tesla Inc., show off profits and feel sorry for losses.
However, these investors do more than just talk. They piggyback on each other’s ideas and transactions, helping to fuel the momentum that drove some companies to triple-digit or greater profits in 2020.
“People fall in love [some stocks] and they come into these echo chambers, where they all shout, “We’re going to buy Tesla forever!” Said Blake Bassett, a 31-year-old delivery driver who started trading a few years ago. “People post all day as if it were a football game.”
And while online investor discussions are not necessarily new – in the late 1990s, internet chatrooms devoted to stocks sustained the technology equity bubble – social media is more widespread than ever before. That, meanwhile, coincided with an industry-wide shift to commission-free trading, while most brokers have made it easier to dabble in risky instruments such as options.