The Retail Trading Revolution

Client Question: "Why is everyone day trading now? My coworker quit his job to do it full-time."

The surge in retail day trading didn't happen by accident. Several forces converged to create an environment where more people than ever are trying to trade for a living—or at least as a side hustle.

The Numbers Tell the Story

The explosion in retail trading is well-documented:

Retail traders went from about 1 in 10 trades to 1 in 4 trades in just over a decade.

Factor #1: Commission-Free Trading

When Robinhood launched in 2013 with zero commissions, it fundamentally changed the economics of frequent trading.

Before zero commissions:

• Each trade cost $5-10 in fees
• Day trading required significant capital just to cover costs
• Small trades were economically irrational

After zero commissions:

• No explicit cost per trade
• Small accounts could trade frequently
• Barriers to entry collapsed

By 2020, every major broker—Schwab, Fidelity, TD Ameritrade—had eliminated commissions to compete. The industry changed overnight.

But remember: "Commission-free" doesn't mean "cost-free." Brokers still earn money through payment for order flow, and traders still pay the bid-ask spread.

Factor #2: Mobile-First Apps

Trading apps transformed investing from a desktop activity requiring research into something you could do from your phone in seconds.

In June 2020, Robinhood users averaged 4.3 million trades per day—more than TD Ameritrade (3.8M), Charles Schwab (1.8M), Interactive Brokers (1.9M), or Fidelity (1.4M) individually.

The gamification of trading—confetti animations, push notifications, easy options trading—made it feel more like entertainment than finance.

Factor #3: The Pandemic Effect

COVID-19 created a perfect storm for retail trading:

As MIT Sloan professor Eric So noted: "Many people who would normally gamble on sports decided to take their money and gamble in stocks and options."

Factor #4: Social Media & Reddit

The WallStreetBets subreddit and financial TikTok ("FinTok") created communities where:

• Gains were celebrated and shared
• Losses were treated as "loss porn" entertainment
• Group coordination emerged (GameStop, AMC)
• Complex strategies were simplified into memes

The GameStop episode (January 2021): On January 27, 2021, GameStop opened 143% above its previous close. It demonstrated that coordinated retail activity could overwhelm institutional safeguards—at least temporarily.

The Options Explosion

Perhaps most concerning is the surge in retail options trading:

• Options volume hit a record 39 million contracts per day in 2021
• That's up 35% from the 2020 record
• Retail investors accounted for over 25% of options activity
• 11% of Robinhood's active users made an options trade in 2021

Options are significantly more complex and risky than stocks, yet they became mainstream retail products.

What Brokers Don't Advertise

While platforms tout zero commissions, they don't emphasize:

• Payment for order flow (PFOF): Brokers earned $3.8 billion from PFOF in 2021
• Robinhood alone made $974 million from PFOF—about half its revenue
• This means retail order flow is valuable to market makers—valuable because they can profit from it

Professional Framing

When clients mention the trading explosion, you can provide context:

"We've seen more people trading than ever before, and it's easier than ever to start. But easier access hasn't changed the underlying math—most day traders still lose money. The difference is now more people have access to an activity that was previously limited by high barriers to entry. Lower barriers to entry didn't create more winners—it created more participants."