Do you think it's realistic for a community of ordinary people to cause losses to large hedge funds with billions of dollars in capital and also make money from it?

Such cases have happened, and one of the most striking was the manipulation of GameStop shares in 2021. But this time the “game” was not played by market makers, but by ordinary people.

🆘 This article is not about a banal recounting of events of those times, but about a relevant view of the situation today. So, read on 🔫

The GameStop Story: The Power of the Crowd

GameStop's stock rally has been one of the most dramatic examples of market hysteria. In early 2021, the company's shares, which were in financial crisis, began to rise rapidly thanks to the activity of members of the WallStreetBets community on the Reddit platform 👽

Before the “short squeeze,” about 140% of the company’s shares were sold short. This is theoretically impossible, but in practice it was made possible because hedge funds resold the same shares multiple times.

This combination led to an explosive price increase as large funds tried to buy back shares to repay debts. But the higher the price became, the harder it was to find shares at a good price. On the other hand, the crowd actively bought up the shares. As a result, the price rose from $10 to over $100 in a few days 📈

This phenomenon shows that retail can seriously hit large funds. The main strength of the crowd is not in analysis, but in organization and the ability to find the weaknesses of large players.


But is it all that simple?

During the GameStop story, some funds suffered serious losses, for example, Melvin Capital lost 53% of its value, and partners had to invest an additional $2 billion in the fund. However, this also highlights the enormous potential of such structures.

While a retail trader rarely has even $100,000 at his disposal for additional investments.

In addition, there were those who made good money. For example, Senvest Management LLC began buying GameStop shares in September 2020 at a price of about $10 and earned about $700 million on them.

What about the crowd? Yes, there were lucky ones who entered the position in time and made a good profit. But the majority came “to the deal” too late.


Why will you always be in the red?

The GameStop example is not the only one. The same reasons caused the meme cryptocurrency boom. But did everyone profit from it?

If you are a beginner and are wondering: “What to buy?”, “Fix the negative or wait for a reversal?”, continuing to trade randomly, you are repeating the story of “flying on the GameStop highs”. And it doesn’t matter which fund suffered losses if you yourself are in the red 😈

Conclusion

Your main task is to be organized and consistent. Like the crowd that raised GameStop shares, you need to create a strategy, study the market, and act according to the plan.

Retail can win if:

1. Understands the market and the weaknesses of major players.

2. Has clear risk management.

3. Works according to strategy, not under the influence of emotions.

Funds play the long game, have more resources and experience. But the strength of retail is in organization, discipline and learning from one's own mistakes. Success is possible if you approach the market not as a game, but as a systematic work.