I was always under the impression that the reason retail investors can succeed lies in the difference in volume. A retail investor finding a niche that earns them, say $100,000 in a year with moderate risk, is great for them. This may not he worth looking at for an institutional investor if that's the cap for the volume and they're trying to invest $100,000,000.

A retail investor may only need a small, fertile, family farm. An institutional investor isn't even looking at something under 100 acres.

I don't really know, not my field.

You're on the money. Strategies don't scale. This is an observation many outsiders (and disenfranchised people with the market) often miss. You can do really dumb things as a retail investor and get away with it because you don't impact order flow. It's arguably harder to generate 1% of 100,000,000 than 1% of $100,000.

The people GP was talking about--keeping super complicated Excel spreadsheets and whatever--are almost certainly not investing. They're day- or swing-trading, playing "technical analysis" games, and engaged in all manner of snake-oil "strategies".

I'm also talking about day-trading here. A retail investor might find worth in being a market maker for a few things which each have a daily volume of $25,000 and 1% margins. An institutional investor may see that $25,000 volume as a rounding error.

> But retail trading: They’ve figured out how to plow a field with a spoon.

Have they, though? Or, perhaps a better question, who is "they" and how do they make a living retail trading?

Aren't most successful retail traders successful by being on the correct (lucky) leg of the random walk?

I have been under the impression that the ratio of successful to busted retail traders is quite close to zero.

Arbitrage of relevant information can be a powerful advantage of amateur retail traders, living as they do outside the Wall Street bubble. Participation in the academic world, frequent international travel, and use of several foreign languages all helped me to make decisions that professionals might have overlooked.

Ironically my best investing decision ever came about due to a drinking session in a KTV in Beijing. My assigned Chinese "companion" was flaunting her new iPhone 4, so, curious, I asked her in my rather limited Chinese: "Are these iPhones popular here". She responded, eyes glowing, "是！我们都有！” ["Yep, we all have them"]. Readers can guess the rest of the story.

It is still survivorship bias though. Phones selling like crack in Beijing means buy APPL and hold for how long? You predicted a new phenomenon but you didn’t know E(X) for that investment for the market in general without a lot of other data.

At that point, while living in various countries in East Asia, I had been following the uneven fate of Apple for a decade. Japan and Taiwan had readily embraced Apple technology across the board, while South Korea remained a resolutely Windows world, that used non-tariff barriers (the dreaded, required WIPI chip) until 2009 to keep out the iPhone.

In China, despite Foxconn assembling Apple products there, the first Apple Store only opened in 2008 and its products rarely seen anywhere before 2009. The commonplace assumption across the financial press was that China was too poor, and its consumers too practical, to pay a needless premium for iPhones. When I heard in early 2011 from the KTV hostess that iPhone 4 sets were universally popular among her colleagues I realized that iPhone mania in China among trend-setting urban women was underway and that the narrative was badly in error. And I believed what was subsequently borne out that this trend would rapidly spread all across China over the next decade.

Of course, much other subsequent real-time "research" went into my investments, during life and travels across Asia, and I developed a variety of ways to hedge my positions. But what set me apart as an outside amateur was that I had deep, real-life knowledge of important foreign markets that the Wall Street financial press and institutions either ignored or got wrong,

For sure. Nearly all retail traders lose. But it’s primarily a result of unrealistic expectations and low barrier to entry.

If there were YouTube ads for weekend boot camps to become a doctor in 3 days and start making 6-figures next week, we’d ask why 99% of doctors fail.

Aside from luck, many appear profitable for a while, maybe 1-2 years, but even most of those have tricked themselves. They use too much leverage and beat the market until an infrequent correction happens and wipes them out, or they follow scammy systems that have high win rates and a very long duration before they hit a drawdown that wiped out all prior profits. Picking up pennies in front of a steam roller.

For instance, you can pick whatever win rate you’d like, but it won’t necessarily be profitable. The scammer selling the course understands how that works, but the newly certified trader doesn’t.

Determining who “they” are is honestly hard, because luck and leverage can pave a long runway. If someone starts a business, and exits 5 years later with 7-figures in the bank, is there a way to know if they’re successful at business or just lucky? It’s hard to answer that question, good business people still exist.

The difference being that in two of the alternatives you list skill has a role to some non-trivial degree, while retail trading (not traditional long-term investing) is dependent almost 100% on pure luck. Even with traditional long-term investing luck plays a much larger role than it does for business, or any skill-based profession.