Why A Rise In Retail Trading May Signal Another Mania

It’s not just Robinhood bringing in new investors. Traditional US brokers like TD Ameritrade, Charles Schwab, and Interactive Brokers added more than 1 million accounts in the first quarter of 2020, a year-over-year increase of +4%. That compares to the first quarter of 2019 which saw a year-over-year increase of +1% in new brokerage accounts.

US RETAIL MONEY FUNDS: APRIL 2010 TO APRIL 2020 (CHART 2)

(Click on image to enlarge)

Why a Rise in Retail Trading May Signal Another Mania

It’s also been a boon for many retail traders. Since the bottom was set in the last week of March 2020, US stock markets have rallied over +60% from their lows. While the past few months may have been exhilarating for retail traders new and old history offers numerous cautionary tale from similar situations. In a follow-up article, we look at the events, emotions, drama that led past traders to seek fortune from similar environments in the past only to leave many struggling with the ruin.

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