Your biggest advantage is the small size of your account!

Use it!

The biggest advantage as a retail trader is (usually ;-)) the small size of your sub 1-3 Million $ account. Basically, you can be in an out of the market in very little time, big institutions with billions of assets under management have a very hard time doing this. Because when their shares hit the market all at once, there is a big price impact. Also, decisions in big institutions can take a long time, until a decision board turns around.

There is a whole space of good quality small cap stocks big institutions can not trade and also big cap stocks there will be some restrictions for them, because they can not move a one billion position on let’s say Nvidia in a minute.

There are a ton of disadvantages for a retail trader, your do not know the order flow, you have no market makers working for you. You can not pay 100k a month for the best institutional grade research. Your do not get the best execution prices and your fees are higher. The list goes on and on.

But your biggest advantage is, you can be in and out of a position much faster and you can change your opinion without going to a big board convincing them. And you can find strategies that are capacity constraint, e.g., you can only trade them if you have not too much money (differs per strategy) to trade with.

The book Unknown Market Wizards: The Best Traders You've Never Heard of

https://www.amazon.de/Market-Wizards-Traders-Youve-Never/dp/0857198696

This book is full of stories how retail traders make a killing scaling up their portfolios from let’s say 10k into the millions, realizing annual performance up into the 50-100% percent. Do you know an institution with a 500 Billion assets under management that made 50% year after year the last 10 years? No, because its not possible. But its possible to run 50k to 2 Million in a 10 Years.

I am not in this camp (yet). But when I talk to people on a party, they cannot believe my performance north of 25% (after tax) since 2011 either.

The problem is those capacity constrained strategies (where you can reach let’s say over 25-50% a year) are not taught.

First of all, it’s really cool to tell your neighbors your just bought Facebook. They will have a reference and can relate.

If you tell them, you bought $METC a low volume small cap company selling coal you will not only get a bad feedback based on that there are old school (selling coal) but another bad feedback because they can not relate to the stock; they simply do not know the stock!

But the thing is, you goal in markets is not to be cool but to make money and use your competitive advantage in strategies the big guys do not bother to trade.

Second:

They are not (or not widely) taught because there is not much money in it to teach them. The business model of Wall Street is to get as much as money under management (e.g., Size will be huge) and charge a fee. They want your fee (and I do not blame them, they have to feed the kids too) and have an almost risk-free business model, which means they have to manage as much money as possible. They get too big to run capacity constrained strategies.

Do not get me wrong, there are a ton of good services out their teaching retail investors strategies that basically can only be traded by retail investors because of the smaller size of their portfolio.

This is the aim of this sub stack newsletter to help you to identify good market services (they are out there and which I am using) and combining them with capacity constrained strategies that aim for a yearly performance of let’s say over 25%.

Now your homework: Read the above book and see what is possible (I am not affiliated with Jack Schwager, but I think for retail traders this is the best book of him!).