Inside the weird world of ‘Robinhood’ day traders sending some share prices crazy

Since then, Raytheon shares have fallen about 5pc. While Portnoy’s trade may not go down as one of history’s great investments, it epitomised a corner of the trading world that has gained increasing attention in recent weeks.

Portnoy – who became an internet celebrity after launching the Barstool Sports blog – has become the doyen of a new breed of day traders. Known as “Robinhood investors”, after the commission-free trading platform many use, they have received some blame – fairly and unfairly – for the wild market rally of recent months.

Congregating around online blogs and forums, these traders are marked by spontaneity, aggressive trading, a disdain for investment’s sacred cows and a big serving of self-loathing. They focus on individual stocks, and win – or lose – big.

In a research paper exploring the phenomenon, analysts at German insurer Allianz wrote: “These newly baked investors have little prior experience in trading nor a sound understanding of the capital markets. They ignore the fundamentals and seem to be provoked by the FOMO (Fear of Missing Out) phenomenon as well as gambling incentives promoted on [social networks].”

Messaging board Reddit’s WallStreetBets community, which has around 1.3m members, offers an insight into many of the group’s key predilections: supreme market masochism, bizarre meme-based theories and a unhealthy reverence for its own minor deities: Tesla founder Elon Musk, and US Federal Reserve chair Jerome Powell (variously called J-Pow, JPOW, J Pow Wow and a variety of other names).

It is likely that many of these “new retailers” have done well. Wall Street has soared since March’s nadir – the second quarter, which ended on Tuesday, was the best since 1998, with gains driven by the continued rise of America’s tech giants.

Source Article