GameStop (GME) is sucking up a lot of market oxygen today, as it tests its closing high around $347 and then suddenly collapsed to under $180. It has been halted several times in quick succession and is now back in positive territory, as I write. The stock has had a trading range so far of a low of $172 and a high of $348.50.
The trading in GME is fascinating, and quite a few traders are intently focused on it, but what is most interesting is how it impacts the broader market. There are many extremely volatile stocks, but none have captured the attention of the market to the degree that GameStop has. The entire market dipped when the GME stock dipped, because it has such a major impact on the speculative mood.
The attention focused on GME can be annoying, because it does create some sudden and illogical volatility, but it can be a good opportunity to jump into stocks that are sold off in sympathy. I just used the dip to add to positions in Vuzix (VUZI) and Currencyworks (CWRK) .
The trading has calmed down, but the reaction to the GME shows how speculative sentiment can shift extremely fast. This market has many more small, individual traders than it has had in the past, so emotional reactions tend to often more frequently.
If you are trading GameStop, the best advice I can offer is that the focus should be on managing the trade rather than trying to predict what the stock might do. No one knows what GME might do, so if the trade is based on prediction, then the likelihood of being wrong is quite high. What we do know is that the stock will make big moves, so we can design a system to take profits at some point and to prevent losses before they become too big. You still have to guess, but by focusing on managing your reaction to the volatility, you have a better chance of walking away with some good gains or small losses.
Quite a few traders have embraced what is known as "YOLO trading" which is a "you only live once" approach to trading. They take huge positions and then hope they get lucky. It can work, but the way to get rich from trading is to stay in the game for a very long time, and you don't do that when you YOLO trade. If you want to trade as a form of gambling, that is fine but make sure you keep plenty of capital safe for a more serious approach to the art of trading.
The indexes are churning and will be focused on a bond auction this afternoon.
