Diamond Hands: Meaning And Origin

Stock Market

Close-up of the hand with large size round cut diamond on white background.

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‘Diamond hands’ is a term that’s often used to describe an investor’s stubbornness or resolve and first gained prominence in online investing forums.

What Does ‘Diamond Hands’ Mean?

A diamond hands investor typically refers to a person who does not panic sell if their investment decreases in value, although it is occasionally also used to refer to an investor who holds if their investment increases significantly in value.

It can be used as a compliment to refer to someone who patiently holds onto their investment and waits for it to increase in value or who continues holding an investment that has increased significantly. It can also be used negatively to refer to an investor who stubbornly holds onto an investment that has lost value and is unlikely to increase in value in the future.

Since investors are often said to ‘hold’ onto an investment or security, calling someone ‘diamond hands’ means that the person in question has a hardened resolve to hold onto stocks, similar to a diamond’s hard nature.

Takeaway: Diamonds are created in high temperature and high-pressure environments and someone who has ‘diamond hands’ can withstand extreme market volatility. Indeed, market fluctuations do not deter a diamond hands investor, who might hold their long bet no matter how low the value might go.

Diamond Hands Vs. Paper Hands

Diamond hands and paper hands are opposite types of investors. ‘Diamond hands’ refers to someone who is resolved when it comes to holding onto stock or other investments. Diamond hands are investors who follow the adage ‘buy and hold’ to the extreme. These investors might outperform the market if their investment eventually increases in value, however, they face the possibility of losing a significant amount of their investment if it does not bounce back.

Paper hands investors are investors who are afraid of portfolio losses and will sell a stock even if it has a slight price decrease. Paper hands might avoid losses, but they miss out on opportunities when stocks rebound and pay additional transaction fees because they’re always entering and exiting new positions. Their low-risk tolerance means that they miss out on building long-term value by buying and holding securities.

Where Did ‘Diamond Hands’ Come From?

The term diamond hands is believed to have been coined on Reddit in the r / WallStreetBets subreddit. It is used primarily to talk about those investing in highly volatile investments like meme stocks and cryptocurrencies.

Tip: The subreddit is known for popularizing several slang terms and stock memes including ‘stonks’ to refer to stocks, ‘to the moon’ for their desired profit target, and ‘tendies’ to refer to investments gains – a term that they illustrate with emojis or drumsticks. Its subreddit members tend to invest primarily in high-risk stocks.

While the term ‘diamond hands’ started to be used in 2018, it did not gain prominence until 2021 when the forum helped fuel the GameStop stock surge. The term was then popularized by cryptocurrency traders who also trade in a volatile sector.

The term diamond hands even has its own emoji shorthand. Investors write it using the diamond emoji and the open hands emoji.

Bottom Line

‘Diamond hands’ is a great term to refer to an investor who does not let market swings affect them – but is it a compliment? It depends. Buying and holding is a good strategy for many investors but no one wants to be a ‘bag holder’ (a slang term for someone who takes a heavy loss on a stock).

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