Meme trading is alive again. In fact, it was never dead. It had just slowed down in recent months. Now, it is on the rise again amid the ongoing COVID-19 pandemic. It is one of the most watched and mostly young and inexperienced traders are indulging together through the social media platforms, seeking a quick profit. The two stocks which have attracted more attention in the segment are theater chain AMC Entertainment Holdings and video game retailer GameStop Corp.
Prior to the meme trading craze, the GameStop stock traded at around $4.80 while currently it is being traded at around $120. During the phase of meme speculation, the price even jumped all-time high at $348.50.
Similarly, the AMC stocks used to trade at around $5.76 ahead of the meme trading craze. It reached an all-time high of $72.62 and presently the price is averaging at around $18.00.
The two companies were weak financially, as reflected from their earlier prices. Some of the initial meme traders bought the stocks cheap and gradually reaped enormous profits with all the hypes on social media such as Reddit's r/wallstreetbets. The interest of investors is still high on these two stocks.
Meme stocks are defined in various ways and one is to gain a following through social media platforms as well as achieve the status of catch fire. The share prices skyrocket with the involvement of individual investors.
Meme trading practically helps the initial investors to make a quick buck and it is believed such trading types may not get disappear amid the hunt for making money as fast as possible by many traders.
However, it is simultaneously being reported from studies that the influence of social media on such meme stocks has slowed down and not as it was about a year ago. This means the stocks were simply a pump-and-dump scheme by users of social media.
Social media is not highly regulated and speculators find the platforms perfect to influence others in buying the shares of particular stocks as witnessed with GameStop and AMC Entertainment. As said, investment in stocks is always risky and hence just a small part of the portfolio should be put into meme shares to try the luck of making some quick earnings.
Meanwhile, it is always suggested to use risk management tools while opening a position. Some of the trading platforms provide upgraded risk management tools to help reduce the risk of loss due to slippage.