How traders can avoid getting burned in the Reddit-GameStop mania, according to the pros

A Fedex deliveryman prepares a package for a GameStop store amid the coronavirus disease (COVID-19) pandemic in the Manhattan borough of New York City, New York, U.S., January 27, 2021.
Carlo Allegri | Reuters

Wall Street has been rocked over the past week by amateur traders pumping money into unfavored stocks in an attack on short positions held by large hedge funds.

Bricks-and-mortar video game retailer GameStop and cinema chain AMC are now up more than 1,744% and 838% year-to-date, respectively, after retail investors organized via Reddit thread WallStreetBets piled into the stocks in a bid to drive their prices higher and squeeze institutional short-sellers. Short selling is when investors borrow shares at a certain price, expecting the market value to fall below that level when it's time to pay for the shares.

Hedge funds have already lost serious money and been forced to close out some short positions, as online activists continue to seek new targets, despite warnings that the David versus Goliath trend could end in tears for some retail investors. On Thursday, Redditors were leading a charge into shares of Nokia and others.

Now, analysts have told CNBC their strategies for investors to stay safe as the battle between retail investors and institutional money hots up.