Since you brought up the "coin flip" issue, which inevitably leads to the "streak" issue, you should check out the Legg Mason analysis I linked. Here is what they have to say about streaks of market-beating performance amongst fund managers:
"Streaks in the investment business have not been studied in great detail, and most critics write off streaks as the product of chance. A streak is defined as consecutive years of generating returns
after costs in excess of a benchmark. For example, one pundit suggested that there was a roughly 75 percent probability that over the past 40 years some fund would generate a streak of
15 years, the duration of the longest known streak by a mutual fund. One needs a complete disregard for the empirical facts to arrive at such an estimate. The only way to get there is to
assume a large starting sample (in the thousands) and a coin-toss model. There were, in fact, 170 mutual funds in 1965 (the number didnât exceed 1,000 until 1988), and only about 40 percent
of mutual funds have beaten the market annually, on average, with a standard deviation of about 20 percent.
Andrew Mauboussin and Sam Arbesman analyzed mutual fund streaks over the past four decades or so, capturing over 50,000 mutual-fund years. Their null model applied the observed outcomes in each year to the funds in existence, capturing the role of chance. They simulated 10,000 mutual fund worlds and compared the simulated results to the actual record of streaks. Similar to Arbesman and Strogatz, as well as Henderson, Raynor, and Ahmed, they found evidence that some funds generated streaks beyond what chance would dictate. They also observed that the funds that had established the streaks had a much higher âbatting averageââ
the percentage of years that they successfully beat the benchmarkâthan did the average of all funds"
So, I will say again that denying the existence of some level of trading skill is inconsistent with the data.
My best guess for why less than 50% of individual traders are profitable is because individual traders suffer from cognitive biases, especially overconfidence and recency biases, which actually means their trades are not "fair" in the same way a coin toss is "fair". Also, since institutional traders trade in such a size that they can potentially be buying at any given moment from 2 or 100 small traders, it gives 1 institutional trader the chance to make multiple individual traders unprofitable at the same time.