Sign - another ET trope: small traders can make more money than large ones. In fact the world is not full of successful retail traders making consistent double digit returns every year. GAT
The 1st sentence is incorrect...small traders should be trying at least to make very significant percentage gains, strategies/tactics/instruments can be used by 'small' money that 'big' money has no interest in. An obvious example is bitcoin and other cryptocurrencies...small traders can particpate and make serious percentage gains, at least some big money is not interested (see Jamie Dimon warning against any of his traders playing with bitcoin) The 2nd statement is true...the world is not full, however there are those small number who do make significant percentage increases on small amounts of capital.
Sorry, I really don't buy the argument that there are limited capacity strategies that only small traders can use. Any given high frequency strategy has limited capacity, but big HFT shops diversify across thousands of instruments, making it economic for them to use that strategy. Yes, small cap stocks have limited capacity, but decent sized small and micro cap funds exist that hold hundreds of stocks. The reason bitcoin isn't attractive to professional investors isn't because they're large investors; it's because they're not stupid. There are a significant number of reasons why trading bitcoin makes almost no sense whatsoever. It's also a poor example since BTC etc has only been around for a few years, but this nonsense that small investors can outperform larger ones has been around much longer. Give me another example. I'm not doubting that there are small number of retail traders who can achieve returns much better than the average institutional trader (and about as good as the best institutions, although not as good as HFT shops), but they are a tiny fraction of the trading population, and nearly all of the people who claim to be in this bracket are (a) lying or (b) have a relatively short track record which isn't statistically meaningful (and are probably trading something with latent blow up risk). The second part of your post illustrates exactly why small investors shouldn't be aiming to make large returns. In doing so they'll probably take on too much leverage or trade too often. Unless they are in the tiny percentage of elite traders (sorry for the pun) who can actually consistently achieve a SR of 1.0 or more they're going to be over betting (significantly higher than full Kelly) and end up blowing up. Even very good retail traders are unlikely to be making 25% a year; since they're probably running at a more conservative risk / return target (because they're not morons). The best guy on fundseeder.com with a track record that is actually meaningful has a Sharpe of just over 2.0 with nearly 5 years of trading on an average 250K account (and looking at their account she's regularly withdrawing her profits rather than leveraging up). But she's running at a mere 15% vol which means her annual returns are 67%, 27%, 15%, 16% and 35%. GAT
My next door neighbour has bought up most of the surrounding farms. From rags to riches being an investment manager. His Fund pay out about 9% a year, which in big fund terms is a good return. Anything above the divi is pocketed.