How to find trending stocks on Reddit
Here’s how you can find trending stocks on Reddit:
- Go to investing subreddits. Some examples are r/WallStreetBets, r/Stocks, r/Investing and r/PennyStocks. If you’re looking for specific categories, like dividend stocks, you can search for other subreddits.
- Sort the posts. You can do this with the “hot”, “new” and “top” buttons above the posts and choose a time period to sort by.
- Read the discussions. You can find out what people are talking about and read their research to find out why the stock is trending.
- Do your own research. Before you dive in and invest, look into the stock yourself and weigh up the risks involved.
New to Reddit?
Not quite sure what Reddit is and how it works? Here’s a great place to start. Reddit is a social media site where users come together to share news, rate content and host discussions. Users can submit content for discussion, which you can “upvote” if you like it or “downvote” if you dislike it.
Reddit is best known for the massive communities it hosts. People from all over the world gather on various subreddits to discuss niche hobbies, passions and interests. A subreddit is a specific community in Reddit where you can discuss issues. For example, r/dogs is a subreddit where you can chat about dogs! If you want to take part in a certain subreddit, you just need to click “join” or “subscribe” – and you’ll be all set.
Why does Reddit have an impact on the stock market?
At the start of 2021, Reddit cemented itself as a key trading indicator for many seasoned and institutional investors around the world. This was because GameStop, a US-based video game retailer, spiked over 700% during a frenzied few days at the end of January.
GameStop skyrocketed around 8,000% over six months. The stock became a piece in a rather complicated financial power struggle between a major hedge fund, Melvin Capital, and a group of internet investors who congregated on Reddit. GameStop became the subject of what’s known as ‘short selling’, a process in which professional investors borrow shares of stock to sell them and then buy them back at a later date, allowing them to make a profit if the stock price goes down. In simple terms, short-selling is a bet that the company will fail, with infinite loss potential.
Long story short, Reddit investors found an opportunity to make some money by aggressively buying GameStop shares, which resulted in an internet pile-on, with everyone from Elon Musk to Wolf of Wall Street’s Jason Belfort wading into the debate and hype. A boom of coverage of the now-infamous subreddit r/WallStreetBets made sure the frenzy continued through January.
Does Reddit matter to ordinary investors in Ireland?
The GameStop scenario tells us that, yes, it does. For example during the frenzy, some brokerages suspended trading of certain stocks, and the frenzy even caused outages of entire apps. This was due to the intense strain put on the infrastructure of brokerages and trading apps, many of which received unprecedented volumes of trades and new sign-ups.
The GameStop affair has also caused a lasting shift in the analysis conducted by institutions. The internet has empowered retail investors, the combined force of which now matches institutions when it comes to buying power and volume. This changed the dynamics of investing somewhat – you’d think in favour of the little guy – though it remains to be seen if retail investor success has eaten into the profits of the big guns on Wall Street.
Is Reddit a reliable place to research stocks?
The internet has been used for talking about stocks and investments since its inception. Reddit is just the latest evolution of that. There are some advantages to researching stocks on Reddit, as well as some things you should watch out for.
- Anonymised forums can provide protection and create an unbiased environment that allows fruitful discussions to thrive. For example, it’s not unheard of for genuine employees at companies to participate and share genuine insight which can help readers achieve higher gains.
- Reddit’s used globally. You can get access to insight no matter what time it is, whether you’re an early bird, up at the brink of dawn, or a night owl that prefers late night stock searching.
- The voting system helps you filter discussions. This is great for filtering out some of the nonsense and getting straight to the good stuff.
Things to watch out for:
- It can be difficult to verify the authority of posters. This means that you don’t really ever know the credibility of anyone in these forums, and should use insight from several sources when researching.
- There’s a tendency for groupthink. This means that you don’t get a balanced discussion.
- Some of these stocks can be risky. Sometimes pink sheet stocks are mentioned, which are not listed on major exchanges and carry added risk. Stocks can become riskier once they’ve taken off a bit, as they can become very volatile.
Like any form of research, Reddit offers some things you can’t get elsewhere, but should probably just form a part of your overall research process – as opposed to being the start and end of your digging.
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Disclaimer: The value of any investment can go up or down depending on news, trends and market conditions. We are not investment advisers, so do your own due diligence to understand the risks before you invest.