GOBankingRates

What Does ‘Diamond Hands’ Mean?

Monkey Business Images / Shutterstock.com

“Diamond hands” refers to someone that can hold their positions to the end despite the headwinds. When you have diamond hands, you have high-risk tolerance and don’t quickly exit your positions. The primary goal of someone with diamond hands is to hold a position until they achieve your investment goals.

“Diamond hands” is a phrase flying across Reddit’s r/WallStreetBets, the forum that led to the GameStop frenzy early this year. Apart from diamond hands, there are other new popular investment terms, including bagholders, tendies, mother of all short squeezes and others.

What Are Diamond Hands?

Popularized by WallStreetBets lingo, “diamond hands” is an idiom used in the stock market to discuss shares and options trading. It refers to someone who has high risk tolerance, the ability to stomach high volatility in their assets.

Likened to diamonds with unyielding strength, traders with diamond hands are often determined to hold their position regardless of what’s happening in the market. Simply put, these traders don’t cave under pressure.

The phrase diamond hands was popularized early this year when r/WallStreetBets members teamed up to create a short squeeze in the meme stock, GME 一 they shorted the stock and called on each other to have ‘diamond hands’ and not sell until the stock went ‘to the moon.”

Building Wealth

Diamond Hands vs. Paper Hands

Here are some of the key differences between the two.

What Does Diamond Hands Mean?

As mentioned, diamond hands refer to anyone who doesn’t sell their position even during big market swings. Instead, they hold until they get the profits they want. If you’ve got diamond hands, you won’t mind what price action may bring to the assets you own. Your primary goal is to hold your position until you achieve your investment goal despite the potential risks and losses.

What Does Paper Hands Mean?

A “paper hand” trader, on the other hand, is someone that doesn’t have the patience to hold their positions. They are easily shaken by market volatility and often exit their positions when they see any sign of risk. Their primary objective is to minimize risk in order to prevent losses. If you’ve got paper hands, you’ll sell under pressure to avoid losing money. “Paper hands” is the opposite of “diamond hands.”

The bottom line is that diamond hand traders have patience. The strategy is only suitable for those with high endurance. Paper hand traders don’t have as much patience as those with diamond hands; they’re more likely to engage in intraday trading for quick gains. “Diamond hands” is a trading strategy suited for long-term investors, while paper hands are for swing traders and day traders.

Takeaway

Diamond hand traders focus on holding their positions until the end even if there are headwinds because they’re willing to take risks. Paper hand traders, on the other hand, exit positions when they see any sign of risk.

With more trading forums proliferating, traders and investors will likely come up with more investment terms. As such, you should make an effort to stay up-to-date with the latest investment terms and trends.