Traders with less than $1 mn in AUM must have an advantage of scale. Are there any evidences that these traders outperform bigger funds in some asset class?
In theory we can get all in and all out in seconds, and we all can only profit from the pool of money which is lost, the big guys risk billions to secure a few % of this pool, so there never going to be able to make more than 10% area. Where an individual trader could run a 10k account upto 100k, 900% gain, and the gain is so small the market wouldnt really notice it. Ofcourse if loads where to do above, it would badly affect the banks profits, but its rare only 0.01% of us, ever get to that kinda level, if not less.
I really doubt it. Being the last to receive information as it's disseminated, lacking institutional training and the teams they put together supporting you, and being undercapitalized are huge disadvantages vs the bulk of the money in the market which is controlled by institutional traders. There's a reason retail traders have negative expectation while the same can't be said for the market in general. The only real advantages that a retail trader may have are that they may be creative enough to see a different subset of potential opportunities because they haven't been trained in a systematic paradigm of trading like most institutional traders have and that a relatively insignificant amount of money is sufficient to keep the lights on as you alluded to which allows retail traders to pursue--for example--stat arb opportunities in less liquid products to the extent they exist or more volatile strategies that still out perform.
There are just a few parties who consistently win money, and those are generally very sophisticated. Think HFTs, marketmakers and very well connected and experienced hedgefunds who can change the environment they are playing in (Ackman, Buffet, etc.). So beyond these categories, in theory being small is an advantage, in reality often you lack the necessary sophistication.
As covered, it is a lot easier, if your a good trader very very good trader, but very very very very few actually get to that kind of level.
This is a rather stupid question, because it is overly generalized. If we assume that 90% of retail traders are losers as compared to 70% (or whatever) for HF, then the answer is NO. If you ask: Are profitable retail traders achieving better returns than profitable HFs? Then the answer is YES. Simply put: the top 10% of retail traders have a better return than the top 10% of HFs, for obvious reasons...