How does an average joe take advantage of this situation?
Generating large returns has been easy for a while now. You have to retain the self-discipline to remind yourself that getting 40% in a day is ridiculous (as with Zoom today), that in normal times that is two or three years of good returns. It's about consciously restricting your own reach for greed. Average investors that get lucky in bubbles also tend to get crushed by them as well.
As an example, back in March I posted my thoughts on buying during the crash and I was buying Square in the $30s at that time. I'm out now. If Square goes on up to $200 or $300 per share, I simply don't care. My returns were easy, ridiculous and good enough, I sleep extremely well having exited with the gains I generated. They're mine now, I captured that return, locked it in, and that's the single most important thing. It's a far better thing to secure already massive gains than to reach for more, being greedy, and risk all of it if the mania turns south (which it will at some point, nobody knows when though and trying to pinpoint that is most often a fool's errand). Always have the discipline to walk away if you hit a homerun. The crazy returns (ie anything far beyond reasonable, very outsized) generated at this time are mostly not skill, they're luck; spotting a position to enter can be skill from years of mental training, however getting 500% on eg Fiverr in five months is mostly dumb luck (to be clear, it's the particularly outsized return that is the dumb luck part of that); cash that luck in, as it will inevitably turn against you.
There are some very straight-forward moves an average investor can make to shield theirself as well, requiring no particular skill. For example if you generate a large return quickly in this market, remove the initial principle, maybe a reasonable chunk of profit as well, and let the rest ride if you have a strong desire to continue to participate. Mentally accept that portion as money that may very well go to zero, to emotionally steel yourself for a bad outcome if the market crashes at some point; that's your speculative money in this gambler's market, having safeguarded the other portion. If you care to, you can even constantly peel your principle back out of these stocks as they climb, rather than aiming for a particular high point to sell in bulk (and trading fees are widely now zero, which can add-up in that context depending on the position size). Losing a big chunk of your principle investment generally stings a lot more than losing a big chunk of some easy outsized gains, always keep that in mind. It is most often easy come / easy go in markets like this one, and the only way to avoid the easy go part of that is to exit the gains at some point.
You might see a lot of people saying the market can't go down because interest rates are so low / zero. Interest rates have been between very low and zero for a decade now, and they'll probably be low for a long time into the future. The market can return to its former multiples from eg 2014-2015 (when rates were also de facto zero), while rates are at zero. Don't let yourself fall for that premise, as though this market's extreme upward trajectory is guaranteed. A crash just back to the multiples we had in 2014-2015 would hammer this market, taking it down by 30-40% (and the more bubbly stocks would particularly get smashed).
That's not to say there are no buys remaining in this market that will yet produce huge returns, rather, I personally wouldn't provide advice on specific stocks on the premise of seeking large returns here (ie which stocks will be the next SQ or SHOP; what's going up 500% in the next six months). Square under $40 was an easy buy, it had a large margin of safety in its valuation; at $166, six months later, I consider it dangerous and wouldn't advise anyone to buy it as a new position (that's what 300%+ in six months will do).
When the parent asked how an average investor should take advantage of the situation, I took that to mean: how should an average investor that is already in this market manage the context (rather than it meaning to enter the market for the first time here and now). I'm looking at this market from a particular angle: I'd say an average investor, already in the market, should take advantage of the situation by looking to exit some or all of their gains (take advantage of the market to exit value; which is what eg Tesla is doing when diluting now, or SV companies are doing rushing to the IPO exits); that's merely my opinion though.
I'll give you an example of what I'm talking about.
Say you bought Square (SQ) between $40 and $80 during/after the March plunge (or even if you caught it in June and are already up 50-60%). Not an abnormal scenario, as many people will be sitting on large gains from the past five or six months.
So one of two scenarios related to what I've said (simplified a bit for brevity):
1) You're sitting on a large gain now, maybe 100%-300% in a mere five to six months. Take your principle off the table only, optionally with a bit of profit as well, and let the rest ride if you want to continue to participate in this market mania to see how far it can go. Or sell it all, if you're fully comfortable with your gains, and bag the full profit here. Either scenario is quite reasonable depending on the person doing the investing. It will heavily depend on your personality type, it's important to understand yourself, your impulses, your weaknesses & strengths, how you react to things. Some people might want to leave more of the profit in the market, some might feel better pulling it all. What I'd suggest at this point for an average investor, given this scenario, is removing the principle at a minimum.
That's not day trading. I'm not suggesting jumping in and out of SQ, trading it constantly trying to profit on small swings. The scenario is that you established a specific position, eg at $40, $80 or $100, and now you're looking at how to either exit or otherwise reduce risk in a reasonable manner. In my view, most of what is left to take advantage of here, is the selling opportunity being presented.
2) You noticed your position was up a lot in a short amount of time, eg it went from $40 to $60, or $60 to $100. Rather than debating when exactly to sell all or a big chunk of it, you sell gradually as it climbs, until either you're entirely out of it or you've extracted your principle (then decide on strategy for the profit remaining). It's of course nothing more than averaging across sales, some people feel more comfortable doing that than selling all at once, especially if they think a stock might keep moving higher yet and they want to try to capture some of that remaining upside.
Then lie outrageously about how profitable they are and sell them to some other sucker with a get rich quick dream and no work ethic to back it up. Rinse, repeat.
The same crappy minimum-effort rent-seeking SEO-spamming techniques that every "get rich quick building affiliate websites" snake oil salesmen use...