In sophisticated times and during a peak of complexity in the markets, when a very serious recession is expected and a pandemic strikes, a new wave of experiments takes place in the field of finance. But who really knows how things are? Who deciphers these situations before others? Who's winning? Who benefits? No, there are no quants, there are no fund managers, there are no traders and no other branch of Wall Street. They are amateurs.
In these times when everything seems to revolve around human behavior when it comes to economics, people in finance are still obsessed with analyzing and evaluating preconceptions (bias) and other factors that elucidate their investment success. Based on this set of analyzes, there are two theories that explain how traders and retail investors came to lead the year 2020.
What you don't know, it doesn't hurt!
The first theory is that self-employed investors and traders, unlike those working in the (pro) field, have nothing to fear for their careers. Unbound by this limitation generated by the permanent presence of fear, the vast majority do not understand risk control and classical discipline (schedule, trading hours). This simple fact allowed many to have the freedom to be at the right time (March) and invest right then. Most bought everything that had fallen a lot, believing that a comeback would follow and won. The audacity and high risk taken brought rewards and profits to match.
Luck
The second theory is that they were very lucky. Being a freshman trader and believing that if the price of an asset is 1 USD means that it is cheap, bargain, almost free, because it was also 5 USD and to make practically all the mistakes that amateur investors are capable of, including confusing the name the asset you buy, with the similar name of another asset, you need a lot of luck to win. And so everyone was saved from the Fed's efforts and other details of the situation. The trades and investments of those on their own were the winners.
Of course, if you ask all traders daily or scalping, they will say that they knew what they were doing all this time. If you ask pro traders they will say that in a year when most sessions closed for profit, closing your eyes and buying anything from the market was the best model to profit (strategy). I also talked to a trader who told me that he did research for each asset he invested in (stocks & crypto) and that he documented himself a lot before choosing what he invests his money in or what he does scalping or day. trading.
One-fifth of the volumes traded are retail traders
Are you curious, how many new accounts will be opened on crypto exchanges in 2020? Stock brokers (TD Ameritrade, Robinhood, others) have opened over 8 million new accounts (new clients), because they allow free trading under certain conditions. In this way, volumes increased very, very quickly and retail traders came to represent up to a fifth of the volumes traded in total, immediately after market makers or HF traders, says Larry Tabb, Bloomberg Intelligence’s head of market structure research. I also talked to freshmen and they told me in a very honest way that they learn on the go. At least in the Crypto markets area I met many beginners who started trading on real accounts with their money, unlike the Forex area where the demo account is widely used, from the beginning.
So we have to give credit to newcomers (like myself) and appreciate the interest to learn and the courage to put it into practice!
My successful faucets!
PipeFlare & Hive ZCash - ZEC with tier 4 referral program
FreeCryptos: (DASH), (TRX), (ETH), (Cardano), (BNB), (LINK), (NEO) & (BTC)
fastest way to learn is to have skin in the game!