It’s getting too easy to buy stocks with gamified brokers. Using a DIY online broker is one of the simplest ways to buy stocks, or invest in general. The problem begins when the market becomes so competitive so these online stock trading brokers are racing to the bottom and buying stocks through them is almost fee-free – even investors who did not consider actively trading are tempted to do so.
It’s not a secret that trading and financial investment have gained a lot of attention in the past few years. And this is due to the fact that many people are looking for “financial freedom”. Also, the problems that have followed the Covid crisis have made a lot of people look for an alternative income.
The increase in people interested in trading leads the brokers to reinvent themselves. This means many brokers are interested in the attraction of new traders or home traders. While luring retail traders is good for the veterans of the market, the impact of massive retail trading on stocks has been tremendous. Just look at GME stock, AMC stock, and others throughout the past 18 months of covid-crazed trading.
All this madness and meme stocks only raise the interest for trading. When it comes to money, people will always be part of it. Before this, trading was known by a few people and using a broker was a bit complex. That’s why many of those brokers have started to implement more easy ways to start trading.
As more easy ways to trade stocks are coming together (Etoro announced that stock trading is coming to USA users!)…. Will the stock market become even more volatile and crazy? Will the regulator ever step in to limit the type of retail traders that can actually trade and get leverage (for example only large accounts or veteran traders). And those are common questions that can invade the mind of veteran traders like us.
Will the stock market become even more volatile and crazy?
Like many veterans traders know, buying stock has a direct impact on the market. Since trading is in fact the act of buying or selling stock in order to profit from the price changes. But why does the price change and vary so much? It’s because of the supply and demand.
If more traders want to buy a particular stock (this is the demand) than sell it (this is the supply), the price will move up. On the other hand, if people want to sell the stock this will make an increment in the supply of the stock, which means that the price will fall.
For example, as I mentioned before, the AMC madness. On June 02, 2021, this stock reaches its ATH (all-time-high price) at the price of 62.55. This means that the amount of demand for the stock incredibly high. This led to many people wanting to enter the market.
The number of people that bought AMC stock without knowing how trading works can freak out easily on any price change. This led to a lot of people selling the stocks. This means that the supply was greater than the demand and the price fall to this day’s price (September 06, 2021 is 44.02).
So, this is living proof that the stock market is getting more volatile and crazy. But the fact that the access to the stock market is a lot easier than 10 years ago does not represent a bad thing. If you have been long enough in the financial market, you must know how to control your risk. Risk management is a well-known and common practice in the stock market. Also, there are a lot of trading styles that can take advantage of volatility, like day trading and scalping.
Day trading and the easy access to the stock market
One of the most popular practices (and profitable) in the stock market is day trading. This practice consists of closing trades before the end of the day. Usually, for day trading, you need to find stocks that are volatile. This is mostly because you’ll be trading the big price changes in a trend. And avoiding flat markets.
As I said before, volatility is needed for day trading. The fact that it’s getting easier to buy stocks and having a direct impact on the price of the stock and its volatility is a good thing for day trading. The more people get to buy stocks, the more volatile the stock will be and the more options to day trade you’ll have.
I really encourage people to have proper knowledge about trading before jumping blindly into the stock market. Many of those strategies have a risk, and you can lose money. This is something you can avoid by learning how to day trade properly. There are many factors behind a successful trading strategy,
Scalping, volatility, and the impact in the market
We can safely say that scalping is a sub-category of day trading. This is a fast-paced type of trading that’s usually done in lower timeframes. 1min and 5min timeframes are the most common for this practice. Scalping consists in buying a stock and selling it at a higher price than the initial retail price in order to make a profit.
Usually, strategies involving scalping are made of fast-paced entries and exits. But how does this affect the market? Supply and Demand. The fact that a scalper is buying and selling in really short periods of time can create high volatility in a stock. If enough people do this practice, it can make the stock price move like crazy.
The crazy price change is something that many veteran traders and retail traders can take huge advantage of. It is a lot “easier” to make a profit in the swing of trade, and those swings are made by volatility. Most traders avoid trading in a sideways market. Instead of trading in a flat market, it is a better idea to wait for the breakout of that consolidation.
Wrapping everything up
Since scalping and day trading are the most popular ways of trading. And they are gaining a lot of attention lately because of more, and more, social exposure. The number of influencers getting involved in any kind of trading publicity has led to an increase in people buying stocks.
Access to the stock market is getting a lot easier every single day. With a global market value of $95 trillion dollars, the stock market is bigger than it ever was. The statistics of the market are amazing, a recent study shows that more than 50% of US adults have money invested in the stock market.
Which leads us to the initial question, “Is it getting too easy to buy stocks for the sake of the stock market?” Indeed, it’s a lot easier to buy stocks, a lot easier than it was 10 years ago. The popularity of this is a lot bigger too and many people are jumping to the stock market, but this’s not necessarily a bad thing.
As I reviewed in the article, most trading styles can make good use of the volatility. You just need to have risk management on point and a good trading strategy to top it all.