On February 24, 2021, something strange happened. GME, the stock of a declining chain of video game stores deeply hurt by the pandemic, doubled in value in just ninety minutes. It was the end of a month of wild swings in the company’s stock, which jumped from the mid-$20s to over $300, before tumbling back down to below $100 (Yahoo 2021). When the dust settled, it was clear that the people who fueled this volatility were day traders – non-professional traders who trade large volumes of stock from day to day, hoping to profit off of short-term price changes instead of long-term, thought-out investments. The popularity of day trading has exploded in recent months. In just the first two months of 2021, six million new users joined Robinhood, a trading platform popular with day traders (Bevan 2021). Only 1 in every 25 day-traders ever makes a profit (VantagePoint 2020), so what can be spurring millions of people to try? It seems that the answer, at least for this year, can be summed up in one word: boredom.
For one CPS student, day trading was a way to escape from the monotonous reality of online learning. “Day trading gave me something to do, a rush of adrenaline whenever I checked my balance, and a feeling of accomplishment whenever one of my bets paid off,” recounts Charlie H., a high-school junior. Erin Westgate, an assistant professor of psychology at the University of Florida, described a survey that found 53% of Americans were more bored during the pandemic than before, and he went on to detail how this can increase our appetite for rewards and risk-seeking, causing new accounts at free-fee brokerages like Robinhood to boom (Ember 2021). Just like anything, however, this new behavior comes with its risks. As mentioned above, 96% of day traders will end in the red, and with a hobby that’s closer to gambling than prudent investing, there’s always the danger that one big bet might fail, leaving you in a big hole that would be hard to climb out of (VantagePoint 2020). But for those wishing to escape the boredom and tedium of pandemic living, a mix of moderation and common sense can keep the adrenaline high but the losses low.
If you are interested in responsibly investing in the stock market, below are some tips:
Do your own research; don’t just follow trends
Build emergency savings first
Focus on the long-term
Work with a trusted adult (this will most likely be required until you are 18)
Only use “fun money” that you’d use on other entertainment otherwise. Only invest as much as you’d be willing to lose
The "Day-Trading Boom" was selected as a winning submission in On the Money Magazine's Inaugural 2021 Spring Writing Competition. This article was written by Zachary Troher, a senior at Whitney Young High School. He lives in Chicago's Edgebrook neighborhood and is involved in Model UN, Academic Decathlon, and National Honors Society. In the future, he hopes to pursue a career combining math and economics.
Zachary Troher
Whitney Young '22
Comments