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The Reformed Broker

Return of the retail trader

After watching a 22-month stock rally, the E*Trade crowd rejoins the market.

By Joshua M. BrownGuest blogger / January 11, 2011

This chart shows the activity of E*Trade Financial ($ETFC) over the past three months. Have the 'retail traders' finally decided they want to rejoin the stock market?

Steve Gomez / Today Trader / The Reformed Broker

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The anecdotes and empirical evidence are sloshing in over the transom. No one should be surprised to see the lunch-break traders and retail commandos coming back after a 22-month, almost uninterrupted stock rally.

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Now, notice the difference between when I talk about retail investors and retail traders. They are closely related and there is definitely some overlap - but they are not quite the same animal.

The retail investors' activities can be tracked more effectively by fund flow data, the filings of public asset managers like T Rowe and Janus, along with sentiment polling.

The retail trader, on the other hand, can be tracked thusly...

This chart of E*Trade Financial ($ETFC) was uploaded to Chart.ly by my San Diego pal Steve Gomez of Today Trader.

Away from the stock price, the single best way to measure E*Trade's core trading commission business is with their monthly DARTs reports. Daily Average Revenue Trades for E*Trade's November report came out on December 15th. They were up a whopping 9% sequentially over October.

Something tells me that December's number will show strength as well, lending support to Today Trader's hunch that the retail trader has, in fact, been making quite a comeback.

BTW, the irony that this is coalescing in the midst of a cooling off for the market over the last week is not lost on me and is probably just absolutely delicious to the pro trader market snobs.

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