Although the rise of retail trading may seem like an overnight phenomenon, the surge has been a couple of years in the making. Many people credit COVID-19 with the rise of retail traders, also called individual traders, and it certainly did increase participation. However, a big takeaway from today’s trading environment is that regardless of the pandemic, trading is more accessible than ever. This is due to several reasons.
New Tools and Technologies
The data and research tools that were once available only for traditional brokerage firms are now available for anyone to use. This puts more power in the hands of the individual trader than ever before.
In late 2019, a new trend emerged that welcomed many new, individual traders into the trading world: commission-free trading. Commission-free trading quickly became an industry standard, and shifted the way people thought about trading.
With commission-free trading came commission-free trading apps and platforms. Today, there is a huge variety of trading platforms and mobile app offerings to choose from. Great offerings not only allow you to trade from your phone, but they also contain built-in tools that can enable you to trade more efficiently. Some of the most in-demand tools are backtesting, advanced charts, and paper trading, which enable you to test out strategies without putting any money on the line.
More (Free) Resources
Much of the mystery and mystique behind trading is fading due to the availability of free educational resources on the internet. These range from articles and podcasts to YouTube channels dedicated to topics like how to break into trading, the different habits that traders build, and how to utilize certain options strategies and techniques. Free resources are a great tool for people of all ages who want to learn about trading without investing too much time or money trying to make it happen all on their own.
Trading has also been made more accessible with the growth of online communities. These communities span social media platforms like Twitter, Discord, Slack, and Reddit.
According to Insider, Discord has over 4,000 groups dedicated to trading and investing. People in those servers discuss market trends, options and stocks they’re buying, and positions they’re taking.
Twitter and Reddit might be the most popular social media platforms for trading communities. If you’re familiar with the GameStop short squeeze from earlier this year, you’re likely already familiar with the subreddit, r/wallstreetbets. The subreddit is infamous for its memes and dedicated members, as well as their daily discussions where members discuss their next moves and strategies.
Forums like r/wallstreetbets are a testament to the growing shareability of stock market trends and concepts, and they’re not likely to go anywhere soon, especially given the younger generations who are now becoming interested in stocks, bitcoin, and NFTs.
A Perfect Storm
By 2020, the online brokerage industry had already shifted toward greater accessibility for all kinds of traders and investors. The pandemic environment of COVID-19 opened the door even wider: people had more time on their hands at home to try out trading for the first time or fine-tune their portfolios. From February 2020 to February 2021, over 13 million new brokerage accounts entered the market. Spikes in trading volume became commonplace.
According to Bloomberg Intelligence via The Wall Street Journal, individual investors accounted for an estimated 19.5% of U.S. equity trading volume in 2020. This was an increase of 4% compared to 2019 and double the amount in 2010. More and more, individual investors and traders are claiming a stake in the market.
Now that we’re coming out of the pandemic, retail trading habits have settled down a bit. However, trading (and interest in trading) remains more accessible than ever, thanks to the technology and trends that have opened it up to larger audiences.
Explore Your Options
For free options learning and stock market analysis, check out our YouTube channel, OptionsBrewTV. We post educational content every week, with guest appearances by financial experts, entrepreneurs, and experienced traders.
We also partnered with Bubba Trading to create a (free) six-course series all about options trading in 2021. The series covers beginner basics, strategies, and more. Check it out here.