WallStreetBets – How The Retail Day Traders Took On Wall Street
Share trading restrictions by top brokers have been criticised after an army of amateur Reddit investors caused a surge in GameStop shares over the last two weeks in January 2021. As a result, the WallStreetBets trading community has been hit with both excitement and outrage in the space of just a few days. Read on to find out what really happened.
What Is GameStop?
GameStop Corp. is an American high street chain that sells video games, electronics and gaming merchandise, with over 5,500 retail stores throughout the United States.
Until recently, there was nothing particularly notable about the chain, especially as the market for physical gaming products has been in decline since 2016. Furthermore, with many people switching to online shopping due to the Coronavirus pandemic, GameStop became one of many companies to suffer.
Nonetheless, the GameStop Corp. stock, traded as NYSE: GME, was attractive to large hedge funds who were shorting its shares to make millions in profit. In fact, GameStop was described by big investors as one of the most shorted stocks on Wall Street.
Shorting, or short selling, is where investment firms who suspect a company is failing, will make a profit by betting that the company’s share price will drop. For example, a hedge fund might borrow shares in a company and then sell them for $20 each, with a promise to buy them back later when the price drops to $10.
The Short Squeeze
In a bizarre turn of events over the past two weeks, amateur investors on popular internet forum, Reddit, started to play Wall Street at its own game. The ‘wallstreetbets’ forum, with over four million members, exchanged tips and started buying shares in GameStop.
The demand drove the share price up to over 1,700% by the close of trading in New York on Wednesday, rallying to over $480 per share from under $20 previously.
This meant that investors who originally hoped the value would drop had to quickly buy their shares back in a process known as covering. As such, top hedge funds including Melvin Capital and Point72 have had to throw in the towel and close their short positions, losing over $5 billion in the process.
So why did the Reddit army decide to squeeze out Wall Street? Some have suggested that it was simply an internet community-coordinated experiment or perhaps something to pass the time. However, the key motive for many of the millennial ‘Reddit warriors’ was to challenge the rich hedge funds, in what has been seen as a generational fight against ‘boomer’ money.
J.P. Morgan has named several other stocks that may also experience short squeezes, including The Cheesecake Factory, AMC Entertainment, Nokia and BlackBerry. However, the short squeezes have caused concern among regulators around fears of illegal activity.
Picking A Side
After days of trading, top brokers including Robinhood, Trading 212 and Interactive brokers placed restrictions on purchasing online shares on Thursday, causing GameStops shares to dive by 55%.
Traders responded with outrage, accusing brokers of enacting their own market manipulation and protecting Wall Street’s interests. In fact, many of the established platforms and apps put their own needs ahead of customers. Robinhood was particularly criticised, given that it purports to democratise finance for all and aims to make Wall Street more accessible.
After shares closed down around 44% at $193.60 on Thursday, GameStop recovered to over 61% at $311.99 in after-hours trading. Robinhood made a u-turn and announced plans to lift some restrictions on Friday, though volatility in the stock is expected to continue.
Among celebrities including business magnate, Elon Musk, US politicians have also criticised the restrictions on small investors. Democrat representative, Alexandria Ocasio-Cortez, said that Robinhood’s decision to block traders whilst financial institutions are “freely able to trade the stock as they see fit” is unacceptable.
What This Means For Traders
Whilst the phenomenon has mostly occurred in America, popular shorted London-listed stocks such as Cineworld and Pearson also saw similar movements. Whether you’re trading in the US or UK, make sure to keep an eye on the markets, which will be volatile and unpredictable.
With growing scrutiny around how certain brokerages are handling the squeeze, some traders might also now be considering taking their capital elsewhere. If you’re concerned about your broker restricting trading in any of your favourite shares, there are plenty of other top brokers out there.
Brokers
#1 - AvaTrade
Why We Chose AvaTrade
AvaTrade is a leading forex and CFD broker, established in 2006 and regulated across 9 jurisdictions. Over 400,000 users have signed up with the broker which processes over 2 million trades each month. The firm offers multiple trading platforms, including MT4, MT5, and a proprietary WebTrader. 1250+ financial instruments are available for day trading, alongside a comprehensive education center and multilingual customer support.
"AvaTrade offers the full package for short-term traders. There is powerful charting software, reliable execution, transparent fees, and fast account opening with a low minimum deposit."
- DayTrading Review Team
- Instruments: CFDs, Forex, Stocks, Indices, Commodities, ETFs, Bonds, Crypto, Spread Betting
- Regulator: ASIC, CySEC, FSCA, ISA, CBol, FSA, FSRA, BVI, ADGM
- Platforms: WebTrader, AvaTradeGO, AvaOptions, MT4, MT5, AlgoTrader, TradingCentral, DupliTrade
- Minimum Trade: 0.01 Lots
- Leverage: 1:30 (Retail) 1:400 (Pro)
Pros
- WebTrader is well-suited to beginners and features a strong suite of technical analysis tools and market research for day traders
- The broker’s unique risk management tool, AvaProtect, protects against losses up to $1 million and is easy to activate in the platform
- There's a great range of fee-free deposit methods, including bank wire, credit cards and popular e-wallets like Skrill
Cons
- A high $2000 minimum investment is required to use DupliTrade, which will be out of reach for many beginners
- It’s a shame that there are no rebate schemes for serious traders looking for additional perks - CMC Markets would be a better choice here
- There’s an above-average $50 inactivity fee after three months, though this won't impact active day traders
#2 - OANDA US
Why We Chose OANDA US
OANDA is a popular brand offering exceptional execution, low deposit requirements and advanced charting and trading platform features. The top-rated brand has over 25 years of experience and is regulated by trusted agencies, including the NFA/CFTC. Around the clock support is available for short-term traders, alongside flexible contract sizes and automated trade executions.
"OANDA remains an excellent broker for US day traders seeking a user-friendly platform with premium analysis tools and a straightforward joining process. OANDA is also heavily regulated with a very high trust score."
- DayTrading Review Team
- Instruments: Forex, Crypto
- Regulator: NFA, CFTC
- Platforms: OANDA Trade, MT4, TradingView, AutoChartist
- Minimum Deposit: $0
- Minimum Trade: 0.01 Lots
- Leverage: 1:50
Pros
- Seasoned day traders can access industry-leading tools, including an MT4 premium upgrade and advanced charting provided by MotiveWave
- OANDA is a reliable, trustworthy and secure brand with authorization from tier-one regulators including the CFTC
- Beginners can get started easily with $0 minimum initial deposit
Cons
- The range of day trading markets is limited to forex and cryptos only
- It's a shame that customer support is not available on weekends
- There's only a small range of payment methods available, with no e-wallets supported
#3 - Deriv.com
Why We Chose Deriv.com
Deriv.com is a low cost, multi-asset broker with over 2.5 million global clients. With just a $5 minimum deposit, the firm offers CFDs, multipliers and more recently accumulators, alongside proprietary synthetic products which can't be found elsewhere. Deriv provides both its own in-house charting software and the hugely popular MetaTrader 5.
"Deriv.com will suit day traders looking to make fast-paced trades using CFDs and multipliers with high leverage up to 1:1000. The broker is also the industry leader in synthetic indices, which simulate real market movements and are available around the clock. "
- DayTrading Review Team
- Instruments: CFDs, Multipliers, Forex, Stocks, Indices, Commodities
- Regulator: MFSA, LFSA, VFSC, BFSC
- Platforms: Deriv Trader, MT5
- Minimum Deposit: $5
- Minimum Trade: 0.01 Lots
- Leverage: 1:1000
Pros
- Traders can use multipliers between 1 and 30, with take profit, stop loss and deal cancellation parameters
- The low $5 minimum initial deposit suits those on a lower budget
- There's a good range of fast deposit and withdrawal methods with zero payment fees and low minimum deposits
Cons
- There are limited copy trading tools and analysis features compared to alternatives like IQ Cent
- The range of 100+ assets trails some competitors such as Quotex which offers 400+
- There's no loyalty program or rebate scheme for high volume traders
#4 - Pepperstone
Why We Chose Pepperstone
Established in Australia in 2010, Pepperstone is a top-rated forex and CFD broker with over 400,000 clients worldwide. It offers access to 1,300+ instruments on leading platforms MT4, MT5, cTrader and TradingView, maintaining low, transparent fees. Pepperstone is also regulated by trusted authorities like the FCA, ASIC, and CySEC, ensuring a secure environment for day traders at all levels.
"Pepperstone stands out as a top choice for day trading, offering razor-sharp spreads, ultra-fast execution, and advanced charting platforms for experienced traders. New traders are also welcomed with no minimum deposit, extensive educational resources, and exceptional 24/7 support."
- DayTrading Review Team
- Instruments: CFDs, Forex, Currency Indices, Stocks, Indices, Commodities, ETFs, Crypto, Spread Betting
- Regulator: FCA, ASIC, CySEC, DFSA, CMA, BaFin, SCB
- Platforms: MT4, MT5, cTrader, TradingView, AutoChartist, DupliTrade
- Minimum Deposit: $0
- Minimum Trade: 0.01 Lots
- Leverage: 1:30 (Retail), 1:500 (Pro)
Pros
- Pepperstone boasts impressive execution speeds, averaging around 30ms, facilitating fast order processing and execution that’s ideal for day trading.
- Award-winning customer support is available via telephone, email or live chat with response times of <5 minutes during testing.
- Now offering spread betting through TradingView, Pepperstone provides a seamless, tax-efficient trading experience with advanced analysis tools.
Cons
- Pepperstone’s demo accounts are active for only 30 days, which may not be not long enough to familiarize yourself with the different platforms and test trading strategies.
- There’s no simplified proprietary trading platform, nor are there any social trading features, which could be a disadvantage if you are new to day trading.
- Pepperstone does not support cTrader Copy, a popular copy trading feature built into the excellent cTrader platform and available at alternatives like IC Markets.
#5 - XM
Why We Chose XM
XM is a globally recognized forex and CFD broker with 10+ million clients in 190+ countries. Since 2009, this trusted broker has been known for its low fees on 1000+ instruments. XM is regulated by multiple financial bodies, including the ASIC and CySEC.
"XM is one of the best forex and CFD brokers we have tested. The flexible account types will suit a variety of short-term trading styles while the $5 minimum deposit and smooth sign-up process make it easy to start trading."
- DayTrading Review Team
- Instruments: Forex, Stock CFDs, Turbo Stocks, Indices, Commodities, Precious Metals, Energies, Shares, Crypto, Futures
- Regulator: ASIC, CySEC, DFSA, FSC, FSCA
- Platforms: MT4, MT5
- Minimum Deposit: $5
- Minimum Trade: 0.01 Lots
Pros
- Accessible trading accounts with a $5 minimum deposit and fast account opening
- XM is a hugely respected broker authorized by tier-one regulators
- Powerful MT4 and MT5 platforms are available with 60+ and 80+ technical charting tools
Cons
- There's $5 inactivity fee after only 3 months, though this won't affect active traders
- There is weak regulatory oversight through the global entity
- PayPal deposits are not supported
#6 - IC Markets
Why We Chose IC Markets
IC Markets is a globally recognized forex and CFD broker known for its excellent pricing, comprehensive range of trading instruments, and premium trading technology. Founded in 2007 and headquartered in Australia, the brokerage is regulated by the ASIC, CySEC and FSA, and has attracted more than 180,000 clients from over 200 countries.
"IC Markets offers superior pricing, exceptionally fast execution and seamless deposits. The introduction of advanced charting platforms, notably TradingView, and the Raw Trader Plus account, ensures it remains a top choice for intermediate to advanced day traders."
- DayTrading Review Team
- Instruments: CFDs, Forex, Stocks, Indices, Commodities, Bonds, Futures, Crypto
- Regulator: ASIC, CySEC, FSA
- Platforms: MT4, MT5, cTrader, TradingView, TradingCentral, DupliTrade
- Minimum Deposit: $200
- Minimum Trade: 0.01 Lots
- Leverage: 1:30 (ASIC & CySEC), 1:500 (FSA), 1:1000 (Global)
Pros
- IC Markets offers among the tightest spreads in the industry, with 0.0-pip spreads on major currency pairs, making it especially cost-effective for day traders.
- IC Markets offers fast and dependable 24/5 support based on firsthand experience, particularly when it comes to accounts and funding issues.
- As a tightly regulated and widely respected broker, IC Markets prioritizes client security and transparency, helping to ensure a reliable trading experience globally.
Cons
- Despite four industry-leading third-party platforms, there is no proprietary software or trading app built with new traders in mind.
- The breadth and depth of tutorials, webinars and educational resources still need work, trailing alternatives like CMC Markets and reducing its suitability for beginners.
- Interest isn't paid on unused cash, an increasingly popular feature found at alternatives like Interactive Brokers.
#7 - Eightcap
Why We Chose Eightcap
"Eightcap delivers in every area for day traders with a growing selection of charting platforms and AI-powered tools. Now sporting 250+ crypto CFDs and the Crypto Crusher market scanner, it's also become a stand-out choice for crypto trading, winning our 'Best Crypto Broker' award two years in a row."
- DayTrading Review Team
- Instruments: CFDs, Forex, Stocks, Indices, Commodities
- Regulator: ASIC, FCA, xCySEC, SCB
- Platforms: MT4, MT5, TradingView
- Minimum Deposit: $100
- Minimum Trade: 0.01 Lots
Pros
- With tight spreads from 0 pips, low commission fees, and high leverage up to 1:500 for certain clients, Eightcap provides cost-effective and flexible trading conditions that can accommodate an array of strategies, including day trading and scalping.
- Having excelled across all key areas for day traders, Eightcap outperformed more than 490 competitors to win our 'Best Overall Broker' award for 2024, also securing our 'Best Crypto Broker' title.
- After bolstering its roster in 2021, Eightcap offers one of the most extensive selections of cryptocurrency CFDs in the market, with crypto/fiat pairs, crypto/crypto pairs, plus crypto indices for broader exposure to the market.
Cons
- Eightcap needs to continue bolstering its suite of instruments to match category leaders like Blackbull Markets with its 26,000+ assets, featuring a particularly weak selection of commodities.
- In spite of an increasing variety of tools, Eightcap doesn't offer industry favorites like Autochartist or Trading Central, which offer cutting-edge charting analytics, live news, and market insights for short-term traders.
- The demo account expires after 30 days and can only be extended upon request - a notable inconvenience compared to the likes of XM with its unlimited demo mode.
#8 - LiteForex Europe
Why We Chose LiteForex Europe
LiteForex Europe is a CFD broker established in 2008 and authorized by the CySEC. The brokerage offers forex, commodities and indices via the MT4 and MT5 platforms. Spreads are ultra tight on ECN accounts and leverage is available up to 1:30 in line with EU regulations. LiteForex also offers a rich education centre for new day traders and social trading capabilities.
"LiteForex is a good option for active day traders with variable spreads from 0.0 pips, daily analysis and high-quality training guides. The forex copy system also lets you duplicate the positions of experienced traders."
- DayTrading Review Team
- Instruments: CFDs, Forex, Indices, Commodities
- Regulator: CySEC
- Platforms: MT4, MT5
- Minimum Deposit: $50
- Minimum Trade: 0.01 Lots
- Leverage: 1:30
Pros
- LiteForex offers a range of proprietary mobile app tools which are ideal for traders who want to analyze the markets on the go
- There's a comprehensive analytics portal by Claws&Horns, which offers video reviews, expert insights and short-term trading signals
- Low $50 minimum deposit makes LiteForex accessible for beginners
Cons
- The range of day trading markets is limited compared to alternatives, with no share CFDs offered
- There are limited funding methods compared to other brands
- Cryptocurrency trading is not offered
#9 - CityIndex
Why We Chose CityIndex
City Index is an established and award-winning forex, CFD and spread betting broker with top-tier global regulation, including in the UK (FCA) and Australia (ASIC). With 30+ years in the industry, 13,500+ instruments and 24/5 customer support, City Index is a solid pick for aspiring traders.
"City Index is best for new and intermediate traders looking for a wide selection of assets on user-friendly platforms."
- DayTrading Review Team
- Instruments: CFDs, Forex, Stocks, Cryptos, Options, Commodities, Bonds
- Regulator: ASIC, FCA, MAS
- Platforms: MT4, TradingView, TradingCentral
- Minimum Deposit: $0
- Minimum Trade: 0.01 Lots
- Leverage: 1:30 (Retail), 1:50 (Accredited Investor), 1:200 (Sophisticated Investor), 1:300 (Wholesale Investor), 1:400 (Professional Trader). Varies with jurisdiction.
Pros
- A free demo account with unrestricted access to all markets and trading tools
- Industry-leading platforms including MT4, plus access to cutting-edge third-party tools like TradingView
- Excellent reputation with over 1 million account holders and tier-one regulatory oversight
Cons
- US traders not accepted
- $15 monthly inactivity fee
- No Islamic account for Muslim traders
#10 - DNA Markets
Why We Chose DNA Markets
DNA Markets is a forex and CFD broker established in 2020. The broker operates two entities in Australia and the offshore jurisdiction, St Vincent and the Grenadines. Traders can access 250+ markets, with a Standard account for beginners and a Raw account for experienced traders. The reliable MetaTrader 4 and MetaTrader 5 platforms are available, alongside Signal Start.
"DNA Markets is an excellent choice for short-term traders familiar with the MetaTrader platforms. The smooth sign-up process also makes it easy to get started while the $100 minimum deposit is accessible. That said, DNA Markets trails the top brokers in education, research and mobile trading. "
- DayTrading Review Team
- Instruments: CFDs, Forex, Indices, Commodities, Stocks, Crypto
- Regulator: ASIC
- Platforms: MT4, MT5
- Minimum Deposit: $100
- Minimum Trade: 0.01 Lots
Pros
- Top-rate platforms and charting tools for day traders with access to MT4 and MT5
- Low trading fees with spreads from 0.0 pips in the Raw account and zero non-trading fees
- 24/5 customer support with response times of <2 minutes during testing
Cons
- The investment offering trails alternatives, especially in terms of stocks, cryptos and commodities
- Despite access to MT4 and MT5, there is no proprietary trading app
- Although it continues to strengthen its client base and reputation DNA Markets lacks the track record of top brokers like Vantage