Why do institutional traders have an advantage if any advantage is whittled away by using it?

[TDMA]

I think the colloquial thought is that institutions have advantages against retail traders, but wouldn't any exploitable pattern be quickly arbitrated away by their own actions?

I suppose there could be a significant advantage in discovering the patterns before anybody else does. But competing institutions would quickly negate any shared advantage.

They have patience, they have capital, they have an infrastructure, all the things retail don't have. The patience is there as the number of viable trades is much lower than retail understand, the capital is there to leverage when a viable trade comes online, the infrastructure is there to make sure that all the rules are adhered to. You can bypass all this HFT trading, but you need the architecture which no one outside of an institution has, so absolutely, the successful individual traders have just taken institutional and downscaled it to a nano level.

There is one beyond stupidly simple metric, revenue per employee, Goldman is $1mn, Blackrock $10mn, Renaissance is $100mn, what is yours, $50k, and there is your answer. If you look at service providers, just find their revenue per employee. One of the software providers on this site with 'professional' grade tools, looking at their figures appears to be around $200,000 revenue per employee, always wondered why their software never matched their marketing. The institutions will be immensely more efficient and experienced than you will ever be, aspects such as intelligence and risk taking are not determining factors.

 

[ElectricSavant]

kinda' like a speedboat jetting in and out the path of a giant steamship

es

Hi CyJackX,

I guess it matters your definition of institutional, what they trade and their needs. If the trading has a high fixed cost, a small account can't handle that. E.G. Fixed costs of $25,000/month would kill any small account and be a small number to an institution with $500mm. A small account trading a strategy without a large fixed cost, can be more nimble, require less liquidity and have an advantage over a larger account.

No easy answer.

Bob

 

[CSEtrader]

the advantages of institutions relative to the general public lie not in their IQ, information or media but only in their position in the market

since public will never be able to attain the same position this advantage is permanent

Everything is in movement and for the best. Never will remain permanent among this which disadvantage people - look at capital goods which were a privilege only for elite and today's startups from a garage? Look on jews banned in Russia of Zars and how it changed? Look on black people segregated in ghettos and today? No, it will never last forever, everything is getting in balance, just give it time and trust. The successful traders are willing to become self-directed, they need no directions, hours, orders. So the army of us, individual and successful traders is growing, even if still be new, rising out of ignorance and lies about us. The time will come and we will be more and will heavily outperform in the measure of our profits, in our quality of trade we are already better. And then the capital will follow us. In long hedge funds will extinct, bot exists at all. As castles and towers have instinct, and more barons live in apartments and are happy with, and castles serve as museums, hotels for conferences and weddings.

 

[CSEtrader]

Everything is in movement and for the best. Never will remain permanent among this which disadvantage people - look at capital goods which were a privilege only for elite and today's startups from a garage? Look on jews banned in Russia of Zars and how it changed? Look on black people segregated in ghettos and today? No, it will never last forever, everything is getting in balance, just give it time and trust. The successful traders are willing to become self-directed, they need no directions, hours, orders. So the army of us, individual and successful traders is growing, even if still be new, rising out of ignorance and lies about us. The time will come and we will be more and will heavily outperform in the measure of our profits, in our quality of trade we are already better. And then the capital will follow us. In long hedge funds will extinct, bot exists at all. As castles and towers have instinct, and more barons live in apartments and are happy with, and castles serve as museums, hotels for conferences and weddings.

Corrections - hedge funds will exist as self-directed traders will open it and some people will never learn or will to learn to trade, but gross institutional privilege owned mostly because of large volumes, this will extinct.

 

[murray t turtle]

I think the colloquial thought is that institutions have advantages against retail traders, but wouldn't any exploitable pattern be quickly arbitrated away by their own actions?

I suppose there could be a significant advantage in discovering the patterns before anybody else does. But competing institutions would quickly negate any shared advantage.

%%

Its like volume, CyJack,which does matter. Why??When i bought real estate i seldom ever got in a bidding war, with another buyer. Selling property, more buyers the better, for me selling property. But in an uptrending bull , stock market, for example ,more buyers, the better Even though markets change, measurements are still the same. Per month, per quarter.......With a low volume market, you may have to sell @ buyers price-that is another reason why buyers [volume]matter-in any market.