The Mysterious World of Stock Forums

Connecting With Other Investors on Stock Forums

One of the multitude of advantages the digital age affords people of all kinds around the world is the ability to connect with others who share the same interests.

One of the most popular social media platforms in the world — Meta/Facebook—began as a means for students at the same university to connect. Another once dominant site – Myspace – began as a site for music lovers. Hobbyists of all kinds have founded forums to share ideas and get help form other hobbyists in the same field. It is little wonder that the forum phenomenon would find its way into the world of share market investing.

What Are Stock Forums?

Australian stock market forums bill themselves as “online communities of like-minded investors, traders, and financial enthusiasts to share ideas, strategies, concerns and virtually anything and everything about how markets have operated in the past, the present, and the future. Some are general in nature while others focus on specific trading strategies or business sectors.

Investors and others come to these forums for a myriad of reasons, with looking for investing opportunities key among them.

Using stock forums as a learning tool bears minimal risk for the cautious. Finding a bold new trading strategy bears no risk unless the reader rushes to his or her trading platform to use the strategy on a big buy without attempting to verify the soundness of the strategy.

Testing personal views of where the market in general or a particular stock is headed against the opinions of a large community of financial enthusiasts with a variety of personal skill and experience can offer invaluable insights. Finding individuals with experience in a trading strategy under consideration can also be useful.

In an ideal world stock forums can be invaluable resources for staying abreast of global and domestic economic trends, sector and individual stock trends, trading strategies, and sharing ideas with other investors and financial enthusiasts.

Unfortunately, it is not an ideal world, and not everyone on a stock forum is there with the intention of sharing honest information.

Stock Forums Best Practices

While stock forums can have valuable information, the critical investor responsibility to do “due diligence” remains paramount. Newcomers who are not sure where to find specific information can get help from well-intentioned members of the forum community.

A strong case could be made that the best practice for benefiting from stock forums is to approach the information you find there with a skeptical eye. Posters make innocent mistakes, citing statistics that are inaccurate. Researching anything you find on a stock forum is a must.

The most critical best practice in making the most of stock forums is by far confirming everything you read there. Many posters are there to share their experiences in an effort to help both new and old investors. Others are there to push agendas they can try extremely hard to keep hidden.

Posters with long positions in stocks can post with the intent to praise the stock to the heavens in an effort to get others to buy the stock, thereby raising the stock price if enough readers of their posts get on board.

Another best practice is to discard posts that appear to be optimistic to a fault. These posters can get into vitriolic exchanges with posters who question their conclusions. The back and forth may be nothing more than a poster with long positions confronting posters with another hidden agenda – short positions in the stock. Posts take on the aura of threats if readers do not buy or short the stock in question. Response to even the slightest of challenges can range from mocking the questioner to outright rage.

One of the most common hidden agendas among questionable posters is the classic “pump and dump” scheme.” Pump and dumpers also go by the name “rampers.” They can be difficult to spot as the pump can be guised in massive disinformation, marked by a barrage of statistics aimed to dazzle even the more sophisticated readers.

Posters who go to stock forums for an honest exchange of ideas about a business sector or a particular stock need to remind themselves constantly they are dealing with anonymous sources, unlike the views from professional analysts found on many financial websites. Behind the cloak of anonymity, rampers, pumpers and undisclosed short sellers can and do say whatever they want without consequence.

Anonymity means the reader has no idea of the background and expertise of a pumping poster. The stock forum phenomenon has found its way into many subgroups on traditional social media platforms with the creation of “meme stocks. A meme stock is one with viral popularity on social media leading to dramatic and rapid increases in share price.

The same caveats apply – pumpers and short sellers can make outlandish claims in the hope they will go unchecked by enough forum members to achieve the poster’s hidden agenda. Anonymity allows the unscrupulous posters to  to make outrageous claims about their spectacular investing track records, with no means for forum participants to verify.

The ”dump” half of the classic stock market fraud most often comes in the world of penny stocks, where the low share price seduces gullible investors. The pump builds up a stock in which the pumpers hold long positions. When enough unwary investors take the bait the stock price surge until the pumpers’ have reached their profit levels at which time they dump their holdings, driving down the stock price.

Pump and dump schemes can happen with established stocks but the time from pump to dump is usually longer. In addition, once the smoke clears on a dumped penny stock the low liquidity of heretofore unknown penny stocks make the task of getting out for remaining investors difficult at best. Established stocks often have the chance to recover over time.

An article on thebull.com.au appearing in 2009 entitled The Mysterious World of Stock Forums made the case for the ASIC (Australian Securities and Investment Commission) to step in and regulate stock forums. As of 2024, Australian stock forums remain unregulated, although most post some form of “rules of etiquette” for members.

The Best Forums for ASX Stocks

Australia has dedicated stock forums along with subgroups on social media platforms. The top stock forum in Australia is Hotcopper.com.au. Hot Copper has forums for different interest groups, from forex to commodities to individual stocks to short-term and day trading as well as a general interest forum. In addition, the site provides daily economic and market news as well as daily gainers and losers, most discussed stocks, and charting and related information on ASX stocks via the search function.

Hot Copper also offers forum members the opportunity to check the posting history, allowing a rudimentary view of the poster’s previous posts.

Aussiestockforums.com is another site covering ASX stocks along with all aspects of trading and investing. The site also has a private forum for registered members. In addition to stock specific forums, the platform has dedicated Aussie forums for beginners, market “nuts and bolts,” derivatives, and commodities. Aussie Stock Forums also allows background checking of previous posts.

Thestockexchange.com.au is a free service that boasts real-time AI (artificial intelligence) moderation of posts for negativity and harassment. The site is limited to most popular stocks, top rated posts, and most discussed threads. Background checking of posters history is available. The search function accesses posts on specific stocks.

Stocktwits is a relative newcomer, launching in 2008, with some “bells and whistles, most notably posts organized into “streams” and the advent of the “cashtag” allowing users to “tag” a stock with a $ in front of the stock code for easy and immediate access to the discussion thread for the stock. The Trending stream is another innovation allowing access to stocks with notable share price movement. Streams include sidebar information and are available for another helpful stream for generating potential investment targets –Suggested.

Stock forums are an outgrowth of digitally available communities where people with similar interests can share information and ideas along with getting help from more experienced posters. However, unlike many hobbyist forums, stock forums attract investors with hidden agendas to attract unwary investors into following their lead. Forum posts can be innocently inaccurate or deliberately misleading, with the onus on the reader to verify anonymous posts.