How to trade WallStreetBets

In today's Exponential Investor…

Silver pumping?
Foul language will offend
How to trade WSB

Warning: offensive language is used in today's Exponential Investor. It's relevant, but it's offensive. Be prepared…

The silver pump is coming. Keep an eye on SLV.

That was the message I sent to a mate of mine back in Australia. He's an economist. He's been involved in the commodities markets for over a decade.

He wasn't convinced.

I sent him that message last Wednesday.

The iShares Silver Trust (SLV) closed at 23.42 on Wednesday. At the close on Thursday it was 24.74. My mate messaged me back.

5.6% not exactly a pump.

I told him to wait. The pump was coming.

This week it came.

The Reddit WallStreetBets phenomenon hit the silver market. The spot price was touching up around $30. SLV popped 10% on Monday.

It's not exactly a few hundred per cent that we've seen in GameStop or AMC. However, the silver market is a different, and much bigger, beast.

Still the ability to move a commodities market is another example of how getting in front of these trades can work in your favour.

The only question is, how?

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Be at one with your inner "retard"

I know the term I use in the sub-headline just now is inappropriate. But its use is necessary to explain what these Reddit threads are like.

It's a term the Reddit users and those taking out these trade positions refer to themselves as. That and "autists".

Apologies if you take offence to that. However, when you go to these threads, you better get used to that language. There's plenty of it, and then some.

To know how to trade these current momentum movements you have to immerse yourself in their world. When I say "their world", I really just mean Reddit and online forums.

I'm used to it because I've been existing in and on internet forums for decades. I'm part of that generation where using the "boards" is no different to sending an email, WhatsApp message or even an old school SMS.

To know what goes down on these threads, to understand what is coming and how to get in front of it, you have to be in it.

That's as simple as it gets. If you're not there, on the coalface of it all, then you'll never be able to trade it properly.

That's how I found out about bitcoin a decade ago. It was through an internet forum and boards on Bitcointalk. That's how I cut my teeth in crypto.

I've also had a couple of Reddit accounts over the years. While I've never been particularly active, I've always been about to keep an ear to the ground.

It's quite easy to find yourself in an echo chamber these days. Social media amplifies that because its algorithms are designed to deliver you content you like. That can lead to a cycle of bias confirmation – an echo chamber.

Breaking out of that is difficult. But that's what platforms and forums like Reddit can help you do. They can break you away to different perspectives from different generations and different parts of society.

The WallStreetBets Reddit thread is no different. And due to the general demographic you find on there, you will find offensive, inappropriate and downright disgusting language. However, within that is a lot of smart, savvy and sophisticated users.

They're looking at and devising strategies to makes moves in stocks like GameStop and AMC. They're also part of why certain crypto have pumped (and subsequently dumped) and why silver is now pumping.

That means if you want to start to figure out what they're doing next, then you need to join them. Just make sure to leave your "PC filter" at the door.

That's how you trade

To join them is simple. Set up a Reddit account, go find the r/wallstreetbets thread and indulge.

You will find a lot of stuff that is absolutely useless. You will find threads that branch off to other groups that are trying to pump their own positions and lead followers down the proverbial garden path.

You will find a whole bunch of users that claim to have massive influence that they do not. You will find a lot of upvotes for posts that might just read,

Diamond hands, GME moon, Doge, XRP, Silversqueeze HOOOOOOOOOLLLLLLDDDD!

That might be the most popular post for a day. It might also be interlaced with those two terms I used earlier.

I know this kind of thing will turn people away. And they will be dismissive of the people in these threads.

That's a mistake Wall Street is making right now too.

These "keyboard warriors" are often perceived as just a bunch of kids in mum and dad's basement playing around with stimulus cheque money. They use foul language and don't know what they're doing.

Make those assumptions at your own peril.

It's far more likely the core users are very sophisticated, experienced and smart investors. Also ones that are well backed with money and assets to take out significant positions and effect the change we're seeing take place.

I've seen positions, profits and loss statements posted where the cost price for a position was six-figures. That means they needed over $100K just to take that position.

That's not stimulus cheque money folks. Some of them have built that up from not much, but not many. I'd suspect the ones really making the moves are already in a position of wealth which means these bets can be taken with little regard to the downside capital risk.

That's how they win big. They bet big. And that's how you have to trade these markets if you even want to attempt to trade like the WSB warriors.

You need a bunch of cash, the utmost disrespect for that cash and be prepared to lose all of it at the flip of a switch. You also need to live in these forums, you need to understand and know the language, and know how to filter the increasing amount of garbage and noise.

You need time, dedication and expertise to keep up.

Frankly, most people aren't capable of that. It's very unlikely you're ready for that. And that's why the best way to trade this, is to not trade it at all if you're not ready for it.

The way to wealth isn't through WallStreetBets. It's fun, it's furious, it's fascinating. But it's fraught with danger which makes it a place to avoid for most.

There are much better, smarter ways to make money, build your wealth. That's what we're going to focus on from here on in. Not how to purportedly get rich quick from the "kids on Reddit".

Regards,

Sam Volkering
Editor, Exponential Investor

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Selasa, 02 Februari 2021