Opinions expressed by Digital Journal contributors are their own.
The growth of retail trading shows no sign of slowing post-pandemic, a trend which is set to change many market fundamentals over the long-term. As Gaurav Kapoor recently stated on Nasdaq, the market is absorbing a new generation of investors who are “digitally-native, connected and younger retail investors that have learned to capitalize on massive behavioural changes in the market.” There is likely no going back on this trend, and while many retail traders will continue to learn the meaning of risk the hard way, markets will likely be better for it in the long-term.
The retail trading boomers are also less naïve than many market veterans would like to think, and in most cases more discerning in the sources of information they consult and investment advice they seek than they are largely given credit for.
Nevertheless, the landscape of available information – from raw market data and financial broadsheet opinion to YouTube tutorials and long-form podcasts – is difficult to navigate. It is vast, populated with opposing opinions, and often replete with false flags and misinformation.
There is no central authority for information or even any obvious hierarchy to appeal to. In the words of Kapoor, ‘‘unlike more traditional or institutional investors, many young retail investors operate solo and don’t have the counsel or experience to assess their risk landscape and make changes to their strategy based on risk.”
Of course, anyone can do their best to monitor the markets and read and listen to financial analysis, but there is little doubt that retail traders will always be at a disadvantage in the marketplace of information compared to professional traders with access to expensive Bloomberg terminals, years of experience and whose full-time role it is to weigh risk against opportunity.
The supply of free tutorials and trading courses has increased to match the demand for legitimate financial information.
Free trading apps such as Robinhood and eToro’s ‘Trading Academy’ purport to teach novices how to trade the world’s top stocks overnight. There has also been a dizzying proliferation of YouTube ‘how to’ videos.
Professional trading platforms have also entered the mix. TraderTV Live, a trading talk show sponsored by professional trading platform Day Trade the World (DTTW), has grown to nearly 300,000 subscribers and has close to 25 million views. The show features live streaming of current market developments, breaking market news, highlights of the best trades of the day and deep dives into trading strategies.
Hosted by professional traders Brendan Wickens, Neal Roberts and Shawn Catena, the show aims to provide market insights and intelligence to amateur traders around the world in a spirit of communal learning, as well as a space where leading financial commentators and journalists covering are interviewed about market developments.
Recent guests have included Peter Schiff discussing inflation and the gold standard, ‘Mr Wonderful’ Kevin O’Leary appraising the pandemic retailing trading boom and most recently Ed Wegel and Ryan Goepel from Global Crossing Airlines weighing risks and opportunities in the low-cost airline industry.
With retail investing more accessible than ever before and with the phenomenon set to continue its rapid growth, the need for insight, intelligence and analysis is also greater than it ever has been. But what effect will the retail trading boomers have on the market in the long-term?
The Retail Renaissance, as it is being called, has more to it than meets the eye, and goes beyond the amusement it has afforded many newcomers on Reddit. It has showed the prowess of the retail community and its effect on the financial markets. Besides disrupting the stock price trajectories of some top companies, the retail community has presented a number of benefits to financial markets as a whole.
For one, retail traders provide much needed liquidity to markets, in some cases helping the assets of investment companies climb by over 15 percent according to data from Hargreaves Lansdown, the UK’s largest investment platform.
Moreover, a younger generation of investors in this space is leading to an increase in financial market knowledge in this demographic, a move welcomed by a host of financial analysts and commentators.
“They are looking to learn and understand what they need to do” said Chris Hill, Chief Executive of Hargreaves Lansdown to the Financial Times last year.
Adding further insight, especially from a younger demographic perhaps more inclined to align their investment portfolios with ethical and sustainable businesses could be a good move during a time when such concerns are taking centre stage for most businesses.
As institutional investors look at times of instability to de-risk their portfolios en-masse, retail investors continue to play a crucial role in providing contrarian liquidity, holding their nerve by actively seeking opportunities born out of political and economic fragility.
With such investors often therefore looking outside of the box with their investment strategies, ensuring that their access to accurate information remains at the centre of such moves is essential in order to mitigate against risk and in turn benefit the market as a whole over the long run.
For more info on the story and Trader TV, please visit https://tradertv.live/
