Day trading explodes amid pandemic

ABC News’ chief business correspondent Rebecca Jarvis talks about the new interest that has made some stocks soar and breaks down the risks that come with it.
5:04 | 01/27/21

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Transcript for Day trading explodes amid pandemic
Glad to know how she feels. Thanks very much. The amateur day traders taking certain stocks to new heights during the pandemic but there are lots of risks that go with those rewards and Rebecca Jarvis is here with the details. Good morning, Rebecca. Reporter: Good morning, George. That's right. This is a trend that has exploded because of the a new generation of investors, they are young, they are stuck at home with not a lot to do and they have trading tools where they can do it for free all day long from the palm of their hand on their phones and they have a community on Reddit where they can all band together to try to force stocks higher, at least for now. They're young, internet savvy, stuck at home during a pandemic and looking to beat the odds. No, they aren't your typical wolf of Wall Street guys. The tender age of 2 I headed to the only place that would fit my high-minded ambition. Reporter: Amateur day trader, their impact on stock prices, We have the perfect storm of stimulus money, a cohort of younger investors and we also have these platforms that encourage sort of these weapons of mass trading. It creates, if you will, this explosive upward effect. Reporter: Cameron is a 20-year-old Rutgers student playing the stock market during the pandemic. Every day when I wake up I check first thing I do is go on robin hood and check out the app. Reporter: Using the robin hood app where he trades as much as he wants without paying fees Cameron and others like him have taken the value of stocks and companies that traditional wall Street investors are largely betting will fail like gamestop, blackberry and AMC entertainment to unthinkable heights. How do you get your ideas about which stocks to buy. To be honest it's very impulsive. What people do is basically, you know, gambling on this. Reporter: He also gets ideas about which stocks to gamble on through a community on Reddit called Wall Street bets followed by nearly 2.4 million readers who spend 24/7 talking about stocks of companies like gamestop. The posts include everything from satire to strategies like bankrupting institutional investors for dummies featuring gamestop. The hope is that they can drive up the price of a company and then cash out. Pulling it up, I post bit. More people buying it. Do I think gamestop is worth $220 a share? No. I know personally near where I am of seeing probably four or five gamestops shut their doors within the last year. The stock is only worth as much people think it is. Reporter: Their efforts to game the system sometimes pay off. A year ago gamestop was about $4 a share. Yesterday it closed at nearly $150 after surging almost 100%. You've saved up and you put the savings into -- Yeah. You're smiling. I made money on it. Reporter: While he won't say how much he put in he believes he made thousands on the trade? A lot of my friends do it together. It's kind of almost like a game to me. I love to be up. I get upset when I'm down obviously. Reporter: In the process Cameron and the army of people buying gamestop shares have caused serious losses for some traditional Wall Street speculators. Now a handful of industry leaders are calling for an investigation because of the angry mob that's formed against them. This game perhaps as entertaining as it is risky. I would approach it the same way going into a casino. That is you're not investing. You're gaming and the history of people building economic security through this type of trading activity is pretty rare. Reporter: Even those playing seem to know the odds won't always be in their favor. I've seen people lose their life savings or college fund, not be able to pay their loans off. I never want to put myself in that position. Reporter: Proceed with caution and this is not exactly the first time we've seen this type of euphoria in stocks. I'm reminded of the late '90s, early 2000s in the internet bubble. Back then there was no red. Dit or robin hood app but there were Yahoo! And aoh chat rooms and people would talk about stocks in those rooms, there could be a friend a and, you know the end of that story, it didn't end well for many. Rebecca, your piece helpfully made the most important point. This is gambling. Much more than it is investing. What is the most important thin people need to know about it. Reporter: The difference between saving for retirement and this, they are night and day. If you're saving for retirement that is thinking about it over the long haul. When you invest in an individual stock, it can be very risky. These types of things, it's a good idea if you're getting involved in it at all to make sure that you have a limit on the amount of losses that you're willing to do. Just like if you walked into a casino tomorrow the amount of money you'd be willing to lose and finally the new apps that have been created for trading proceed with caution on those as well. They are meant to gamify and make trading fun. Sometimes that fun can turn costly very quickly, George. Important caution there, Rebecca, thanks very much.

This transcript has been automatically generated and may not be 100% accurate.

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