Social networks are changing the world of investments
Trading on the financial markets is becoming more and more available, and in the United States, the number of internet brokers who enable their clients to trade just by using their app is rising. Although regulators do not want to admit it, trading is changing and today we must look for catalysts of price movement also on social networks such as Reddit. Just as a large order can move stocks, thousands of smaller orders can be just as effective.
He takes from the rich and gives to the poor. There is perhaps a no better name for a broker than Robinhood, at least not given the current events and what impact it has on large hedge funds, where there are usually very wealthy clients. It turned out that when several smaller investors come together, they have relatively large strength, as shown by the latest reports on the amount of money that flowed into Robinhood. The brokerage house recorded deposits of over $ 1 billion from investors. The last few days have been generally turbulent for stock markets. The reason was not the fundamentally unsubstantiated growth of some stocks, but concerns about the financial stability of large hedge funds, which speculate largely on a decline in stock prices. There is a risk that they will have to close their loss positions and at the same time sell some profitable ones in order to have enough capital.
Attack on hedge funds
It is on these hedge funds that most small investors try to make money. This is because of the so-called short-squeeze, which occurs when there is a small increase in the price of a share that has a significant proportion of shares issued in short positions. Hedge funds are largely speculating on a fall in price, and if this increase occurs, most investors will have to close their positions and repurchase shares in the market. Market demand is then so high that the share price may skyrocket, which has exactly happened in recent days at Gamestop or AMC shares.
Chart: GameStop stock chart (source: finance.yahoo.com)
Social investment is gaining strength
Some investors simply don't like the fact that you can sell a stock that you don't own. This is the only way to share shorts. This time it was used by speculative investors who agreed on a similar event on the reddit.com website. Although regulators are trying to prevent further similar creation of artificial bubbles in financial markets, it will be very difficult to stop something like this. This is another way to "outsmart" the system, which has not changed so much since its inception. We can also see the relevance for the current events in the markets in the form of complete ignoranceof the results of large companies for the fourth quarter.