Retail traders have an edge institutions don't: they can move fast. When banks buy huge positions, they split orders over days to avoid moving the market, creating predictable price drifts. A small trader pays the same spread as a giant fund, but it costs them pennies instead of millions, so they can ride these slow trends for profit.
I finally figured out why you can be profitable as a trader. For every buyer in every market, there needs to be a seller, and for every seller, there needs to be a buyer. And in every market, there is this book where you have sellers above and buyers below. And if you want to buy, you can either place a buy offer here and wait for a seller to come to you, or you can buy aggressively and accept one of these sell offers. Here you choose your own price. Here you pay a slightly higher price, the spread, so that you can get filled now. But paying $100 or $99 doesn't change much because you're a small trader and your transaction cost would be $1. But if instead of buying one share, you need to buy a billion shares like a bank or a hedge fund, well, this $1 can become millions of dollars because there's literally no space in the book. As a bank, you either put a huge buy offer over here and no one would ever dare to sell to you, or you buy all at once, all of the liquidity available, and you move price extremely fast and pay a lot of money to enter the trade. So instead of of doing this, what banks do is that they split all of their order and gradually pull them in the market in a span of one day or even weeks. That's why you don't see price doing this and then finding immediately fair value. You see a trend, or what we call a drift, because big participants' activity is gradual through time. That's why if a stock has earnings and it surprises positively, you typically see the so-called post-earnings drift— not one candle, but a trend that lasts for a week that you can capitalize on. Or why in the S&P 500, after price breaks the first 30-minute range, you see a drift that lasts the whole day. So the structural inefficiency is that large participants need time to optimize the cost of transaction. You don't because you don't have liquidity problems. So you can join these long trends, profiting from the slow speed of execution of smart money.
