The type of alpha trading available to retail investors tend to be slow-converging, noisy inefficiencies. Things like statistical arbitrage (pairs trading/baskets), or style-factor trades (illiquidity, momentum, carry, etc.), which persist for economically plausible reasons. You have to be willing to very systematically grind out small edges over a long time, because often about half of the trades are losers. You also need applied data science to find these and notice when they dry up. “Gut feels” are all but useless in the face of this much noise.
Big investors, on the other hand, prefer to exploit fast-converging supply-and-demand imbalances. High-frequency trading, direct arbitrage between exchanges, dispersion trades, etc. You need a lot of capital and staff, but the trades are much more reliable, in the sense that if the edge disappears it’s easy to notice that quickly. Why would they bother with the slow trades when they’re busy exploiting the fast ones?
The type of alpha trading available to retail investors tend to be slow-converging, noisy inefficiencies. Things like statistical arbitrage (pairs trading/baskets), or style-factor trades (illiquidity, momentum, carry, etc.), which persist for economically plausible reasons. You have to be willing to very systematically grind out small edges over a long time, because often about half of the trades are losers. You also need applied data science to find these and notice when they dry up. “Gut feels” are all but useless in the face of this much noise.
Big investors, on the other hand, prefer to exploit fast-converging supply-and-demand imbalances. High-frequency trading, direct arbitrage between exchanges, dispersion trades, etc. You need a lot of capital and staff, but the trades are much more reliable, in the sense that if the edge disappears it’s easy to notice that quickly. Why would they bother with the slow trades when they’re busy exploiting the fast ones?