I could observe that there has been a lot of...

I could observe that there has been a lot of gambling/speculation in ASX and noted here in this thread and this story has just confirmed it.

Staying isolated may well have contributed to online gambling.

People cherish volatility hoping to win trying to second guess where the market will head on a day to day basis. And riding on momentum. Yes, people make money on some days , may get greedy and lose it all back in a quick short period. Or they make short term trades make a thousand or so and lose it back more in the next trade. And so on. But my guess is people who have won will not quit the game soon enough before the next crash materialise. And thats how the game works.

Remember it is when it ends that counts and what you have to show for. The people who made $1m on BIG knew it the hard way.
How COVID-19 created a nation of ASX punters

An enlightening report from ASIC into retail trading during the COVID-19 crisis suggests mums, dads and day traders were determined to catch falling knives.
May 6, 2020 – 11.47am AFR


Should we blame Warren Buffett?

There’s a piece of folksy wisdom from the Oracle of Omaha for just about every situation, but many of them have at their heart a simple piece of advice: swim against the tide.

You know them all. Buy straws in winter. The market transfers wealth from the impatient to the patient. Or the ultimate motto of the contrarian investor: “Be fearful when others are greedy and be greedy only when others are fearful.”

Retail investors charged into the ASX with abandon during the peak of the COVID-19 turmoil.  

Australia’s mum and dad investors have clearly heeded Buffett’s advice, according to a new report by the corporate watchdog, which examines trends in trading by retail investors during the early phase of the pandemic crisis, when markets were in free fall.

According to the Australian Securities and Investment Commission paper released on Wednesday, Australian retail investors traded more money, more frequently, as they tried to take profit from the market turmoil.

But there was one problem – these mini Gordon Gekkos just weren’t very good at trading. And that’s got the watchdog worried.
The ASIC study looked at the period February 24 to April 3, during which the ASX 200 tumbled from 7139 points to a low of 4546 points on March 23 before recovering to close at 5068.

It then compared the action from retail investors to a six-month benchmark period before that, running from August 22, 2019, to February 21.

The differences between the two periods are staggering. In the benchmark period, average daily share trading by retail brokers was $1.6 billion. In the focus period of the market turmoil, that rose to $3.3 billion.
ASIC argues the average retail investor was pretty crummy at reading the market volatility.
This was, of course, a hugely busy period across the entire market, with average daily turnover rising from $15 billion to $28 billion; the jump even forced the ASX to put a cap on trading activity. Still, retail trading as a proportion of all trading rose from 10.6 per cent to 11.9 per cent during the period in focus.

A good proportion of this trade wasn’t from experienced retail investors – a staggering 4675 new investor identifiers appeared on ASIC’s radar per day on average during the 40 days of the focus period, with 140,241 new identifiers in total. New accounts made up 21.4 per cent of all active accounts.

To put that in context, the previous six months has seen 1,369 new identifiers per day and an average of 34,502 over a comparable 40 day period.

On top of this, punters who’d been out of the market picked this moment to come back in. ASIC saw 142,022 accounts that didn’t trade in the benchmark period suddenly come back to life during the turmoil; these accounted for 21.6 per cent of all active accounts.

ASIC argues that the average retail investor was pretty crummy at reading the market volatility, with its report showing that on more than two-thirds of the days on which retail investors were net buyers, the share prices of the stocks they invested in declined the next day.

And on the other side of the coin, on more than half of the days on which retail investors were net sellers, they watched the stock prices of investments rise the following day.
Tinkering with alarming frequency

I’d argue that this assessment is actually pretty unhelpful – no investor worth their salt would give two hoots where a share price heads over the course of a day, or even a week.

It’s also worth noting that even if some stocks did have a short-term reaction that was contrary to the investor’s hopes, the market has bounced back pretty impressively from that low on March 23, with the ASX 200 now up 18 per cent. Buying and holding would have been a pretty reasonable strategy.

Unfortunately, that’s not what retail investors did during the focus period. They appeared to have tinkered with both the portfolios and their individual holdings with alarming frequency.

During the benchmark period before the crisis, the average time between trades by the same investor in a particular stock was 4.5 days. During the focus period covering the crisis that number fell to one day.

Similarly, the average time between trades by the same investor decreased from 2.5 days to 0.9 days.

The ASIC report makes several excellent points about the added dangers of more exotic instruments, including geared exchange-traded products, oil-linked securities, listed investment companies that have seen their discounts to net tangible assets blow out, and, of course, CFDs.

The leverage involved in CFDs obviously magnifies the risks during periods of crisis. But this doesn’t appear to have been much of a deterrent, with activity in this market seen doubling from the start of the year to the middle weeks of March, when the market was falling fastest.

In the week between March 16 and March 22, based on a sample of 12 Australian licensed CFD providers with a total market share of 84 per cent, retail clients lost just over $428 million on a gross basis, and $234 million on a net basis.
ASIC's timely warning too late for some

ASIC needs to be commended for two aspects of this report.

First, the speed with which it has been pulled together suggests a welcome sense of urgency at the corporate cop.


Second, ASIC has opened a valuable little window into the world of these retail investors that many wouldn’t have been aware of.
The numbers around the size and frequency of trading during the crisis period are of course surprising, but so too is the data on the frequency of trading during a “normal” period, which underscores just how often the average retail investor is playing around with their portfolio.

The corporate regulator is right to emphasise how difficult it is to time the market, and especially during times of extreme volatility. Yes, bargains can be found, but patience is required.

It’s funny how investors remember some “Buffettisms” but forget others. Perhaps ASIC should have included this one on the front page of your report: “Risk comes from not knowing what you're doing.”