Okay, but your examples are now all the same as your “2.” (which I don’t disagree with). Size isn’t the advantage here, it’s being able to be involved in weird things. (I was disagreeing with your point “3.”)
Fair enough. I suppose I’m having trouble coming up with examples of opportunities that are both not weird, and also not systematizable. (Though I do think evaluation of individual penny stocks counts.)
I’m keeping that as separate from 2 though because I think that if you do find something like that, the retail trader is potentially advantaged. And in general, I think it’s true on a spectrum — the more capacity a strategy has, the more you shouldn’t expect to beat the market with it.
I think of the market as like an ecosystem. If you look at a cubic meter of rainforest, there’s a ton of activity going on at different levels, from bacterium up to tree. Different organisms are taking advantage of different metabolic opportunities of different sizes and types (and their activity provides opportunities to each other). Each creature has its niche.
I think of the market as like that. You’ve got big long-term macro funds taking positions that last for months. And you’ve got little nimble HFT shops making money off of the big slow macro fund’s predictable-on-short-timescales trading behavior.
And I claim the retail trader can potentially find a niche here too. And part of what they should look for are opportunities that are not worth the time of bigger firms. (Though note that this might just mean that this retail trader is currently being undervalued, if they can find opportunities that are worth their while, but wouldn’t be worth the while of an employee at a firm.)
Okay, but your examples are now all the same as your “2.” (which I don’t disagree with). Size isn’t the advantage here, it’s being able to be involved in weird things. (I was disagreeing with your point “3.”)
Fair enough. I suppose I’m having trouble coming up with examples of opportunities that are both not weird, and also not systematizable. (Though I do think evaluation of individual penny stocks counts.)
I’m keeping that as separate from 2 though because I think that if you do find something like that, the retail trader is potentially advantaged. And in general, I think it’s true on a spectrum — the more capacity a strategy has, the more you shouldn’t expect to beat the market with it.
I think of the market as like an ecosystem. If you look at a cubic meter of rainforest, there’s a ton of activity going on at different levels, from bacterium up to tree. Different organisms are taking advantage of different metabolic opportunities of different sizes and types (and their activity provides opportunities to each other). Each creature has its niche.
I think of the market as like that. You’ve got big long-term macro funds taking positions that last for months. And you’ve got little nimble HFT shops making money off of the big slow macro fund’s predictable-on-short-timescales trading behavior.
And I claim the retail trader can potentially find a niche here too. And part of what they should look for are opportunities that are not worth the time of bigger firms. (Though note that this might just mean that this retail trader is currently being undervalued, if they can find opportunities that are worth their while, but wouldn’t be worth the while of an employee at a firm.)