RiskPicksWhat are Diamond Hands and Paper Hands?
These are slang terms that became popular during the 2021 meme stock era, primarily on Reddit's WallStreetBets community.
Diamond Hands
Holding your position through large drawdowns and extreme volatility without selling. The idea is that you have conviction in your thesis and will not be shaken out by short-term price drops. Often represented with the diamond and hands emoji.
Paper Hands
Selling your position at the first sign of a loss or pullback. The implication is weakness or lack of conviction. In meme stock communities, selling is often viewed negatively regardless of the reason.
The reality check
While these terms are used as badges of honor in retail communities, experienced traders see them differently:
- "Diamond hands" can mean ignoring your stop loss. Holding a losing position because an online community tells you to is not conviction, it is peer pressure
- "Paper hands" can mean good risk management. Selling a losing trade at your predetermined stop is exactly what a disciplined trader should do
- Context matters: diamond-handing a long-term investment in a quality company through a market dip is reasonable. Diamond-handing a meme stock down 70% because strangers on the internet told you to hold is not
A profitable trader does not have diamond hands or paper hands. They have a plan. They hold when the plan says hold and sell when the plan says sell, regardless of what anyone on the internet thinks.