When Saudi-based investors started trading stocks based on popular Internet memes, they had no idea of the dangers ahead. In what can only be described as a bizarre case of social media influencing the stock market, these traders found themselves in hot water when regulators stepped in and banned the trading of meme stocks altogether. Here we look at what happened and explore some potential dangers involved in this type of trading.
The dangers of trading meme stocks
The dangers of trading meme stocks in Saudi Arabia became apparent when the Saudi Stock Exchange (Tadawul) banned the trading of these stocks on February 6, 2020. The ban was in response to a surge in trading activity that saw the value of some meme stocks increase by over 1,000%.
While there’s no official explanation for the ban, it is believed that regulators were concerned about the potential for manipulation and fraud associated with these stocks. In addition, there were concerns that the popularity of meme stocks could lead to a bubble forming in the market.
The ban on meme stock trading came as a shock to many Saudi investors who had been caught up in the craze. Some of these investors had seen their portfolio values increase significantly due to investing in these stocks.
While the ban on meme stock trading may have come as a surprise to some, it is essential to remember that the Saudi Stock Exchange is a regulated market and that there are rules in place to protect investors. These rules exist for a reason, and it is always best to adhere to them to avoid potential problems.
How to trade meme stocks in Saudi Arabia
Despite the ban on meme stock trading, there are some ways investors in Saudi Arabia can get involved. One way is to trade these stocks on foreign exchanges.
While this may seem risky, it is essential to remember that foreign exchange markets are also highly regulated, which means there is less chance of fraud or manipulation. In addition, foreign exchange markets are usually much more liquid than the Saudi Stock Exchange, which means buying and selling shares is easier.
Another way to trade meme stocks in Saudi Arabia is to use online brokerages like Saxo Bank Saudi Arabia. Online brokerages allow investors to trade a variety of different assets, including stocks, without having to go through a traditional stockbroker. It can be a convenient way to trade, but it is essential to remember that online brokerages are not subject to the same regulations as the Saudi Stock Exchange. It means there is a greater chance of fraud or manipulation.
The risks of investing in meme stocks
When trading meme stocks, or any other type of stock for that matter, it is vital to be aware of the risks involved. The first and perhaps most apparent risk is that of losses. Like with any other type of investment, there is always the potential to lose money when investing in meme stocks.
Another risk to consider is that of fraud. While there have been no reported cases of fraud associated with meme stocks in Saudi Arabia, it is vital to be aware that this type of fraud does exist. In some cases, fraudulent companies create fake social media accounts and post false information about their stock to pump up the price. When the stock cost reaches a certain level, the company will then sell their shares and make a profit.
The final risk to consider is that of market manipulation. Market manipulation is when someone tries to manipulate a stock’s price artificially. It can be done by buying or selling large shares to move the price artificially. It can also be done by spreading false information about a stock to influence other investors. Market manipulation is illegal and can lead to severe consequences, so it is vital to be aware before investing in any stock.
What you need to know before trading meme stocks in Saudi Arabia
Before you start trading meme stocks in Saudi Arabia, there are a few things you need to know. First, it is essential to remember that the Saudi Stock Exchange is a regulated market and that there are rules to protect investors. Second, you should know the risks involved in trading meme stocks. Finally, you should consider using an online broker if you want to trade these stocks.