Social media memes are powerful. They have had a massive effect on businesses, commerce, and of course… the stock market.
During the start of the covid pandemic in 2020, the term ‘meme stocks’ was minted, as we saw astronomical moves on certain stocks like $AMC, $GME, and now of late, $BBBY, thanks to viral internet memes and communities.
Sure, there is a ton of money to be made on these stocks given how big they move, but you can also get extremely burnt in the process if you buy at the wrong time.
What Are Meme Stocks and How Did They Start?
The meme stock trend sparked up in Janaury 2021.
Users of retail investing apps like Robinhood read wild, slur-laced stock “tips” on the internet (usually in the form of memes) and then drive up stock prices, trying to make riches for themselves and their communities and ‘stick it to the man’ and hurt the big players in the market.
Meme stocks are stocks that a mass amount of people who have little trading experience and knowledge join together to buy solely due to viral memes, tips, and posts in the hopes of getting rich… fast.
Reddit was the main app where these communities could be found, and most notably where the famous Wall Street Bets community was that orchestrated the infamous $GME short squeeze. And now the latest meme stock everyone is talking about is $BBBY, which has lead to huge wave in momentum in small cap stocks in the past few weeks.
Can You Trade Meme Stocks Profitably?
It is possible. But you have to be careful and precise. Many people will join the bandwagon late on these moves, and get caught bags holding a stock forever, buying at highs right before the big dump. A lot of people got burnt on $DOGE coin as well due to this, as many of the communities said to buy the coin right before Elon Musk went on Saturday Night Live (again, there was no real fundamental reason as to why his appearance on the show would drive price up, besides viral memes and speculation), and the coin immediately dropped 20% from that point, only to give back 85% of its gains in the coming weeks.
Several of our students recently had monster trades using strategies we teach in our Live Trading Boot Camp on meme stocks, and other stocks this week:
+10K for our student Chris on $BBBY
$5K for our student Andie on $GCT on Friday
$5.3K on $NVDA for another member
These numbers look awesome, but they were the result of months of hard work and study under us. It’s NOT an overnight process to learn how to extract these profits out of the markets.
How Do You Trade Them Safely?
If you are looking to trade a meme stock, or even a stock that is all over the news and media, you have to lower your size on the trade. You have to expect that there will be large ranges, a ton of volatility, and sudden moves to the upside or downside. Widen your stop, drop your size, and make sure to have your stops and profit targets determined ahead of time.
Learn more strategies to use on them in this video lesson:
The Typical Pattern of a Meme Stock
Meme stocks typically follow the same patterns over and over again. They all will have a flat zone where promotion on these websites and forums begin, a huge run followed by a blowoff top that catches tons of people holding the bag, and then followed by a dead cat bounce. If you can time your entries with proper technicals at these stages, you will be in a much better shape than those who are blindly following tips.
If you’re going to trade meme stocks, or any stock for that matter, you have to be using proven strategies with an EDGE, no just buying and selling emotionally.
Learn Proven Trading Strategies To Use in Our Live Trading Boot Camp
If you are serious about becoming a full-time or part-time trader this year, apply to see if you qualify for our next boot camp. Limited seating.