Alongside the historic rise of traders entering the market is an equally historic increase of "social" trading. In addition to sites like r/WallStreetBets and Discord, many traders have turned to the financial side of Twitter, colloquially known as "FinTwit," for investment ideas.
Why It Matters: The trio noted to listeners that many of the bigger influencers on Twitter can influence the price of a stock. There is nothing illegal or wrong with simply stating that one likes a stock or sharing research. As Michaud explains, that line is crossed if the influencer is taking money to promote the stock.
“If you’re getting compensated for stocks you should be disclosing it and you shouldn’t be trading them,” Michaud said.
In his very early days of trading, Michaud gained first-hand experience dealing with the SEC regarding compliance issues. While Michaud was in college, he began helping companies improve their websites. From there, he put information about the companies on his stock ideas website as well.
“Where I went wrong was I was trading them as well,” Michaud said.
Many traders, including Michaud, have expressed their disapproval of a large Twitter account tweeting out a stock pick, and then selling that stock as soon as it shoots up — basically a Twitter-fueled pump and dump.
“I think it comes down to intent. So I have mad respect for people that buy and actually hold. ... If you’re tweeting just to exit right into that, I don't think that’s the best thing to do,” Michaud said.
Diamond Hands: Michaud says it is difficult for investors to pass up easy gains. Specifically, Michaud went on to describe how impressed he was that Mr. Zack Morris, held his AMC Entertainment Holdings Inc AMC trade for so long, refusing to take early gains.
“He crushed it, I gave him a lot of credit. It’s very hard to not take gains. In order to get where he got with AMC, he had to not take X, not take 2x, not take 5x… that’s hard to do. Heavy kudos to him,” Michaud said.
Current Market Conditions: Henne, Knight and Michaud also discussed how abnormal the current market climate is for newer investors.
“I don't think that people get how great it is that are just starting out — this is not normal,” Michaud said. “It’s not always like this.”
Michaud went on to compare the current market climate to that of the dot-com bubble of the late 90s.
“Clearly there’s some sort of a bubble. You can either complain about it or do your part to inflate it. I’m doing the second,” Dan said.
Michaud went on to explain that days and days of a stock running up could come crashing down in a much shorter time frame.
“I’m very good at waiting and waiting, and letting it roll over. You could have that two, three week run up and that’s great but that can unravel in one hour. And so that’s why I really like shorting… and it happens to be something I’m very good at.”
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