Do retail investors have a chance to beat institutions?

Many years ago, I thought about the question: do retail investors have a chance to beat institutions? Perhaps now, you can cite the recent Gamestop incident that caused a sensation in the financial circle, but at that time, no one thought there was an opportunity, but found that the experts were actually in the private sector, even if the number was small, there were still a large number of capable people.

After taking an in-depth look at those who have achieved something on the road of operation, I found an interesting phenomenon. As the saying goes, everyone can change their tricks, and each has its own ingenuity. Most of the people who have excellent performance in operation have their own outstanding ability, which may be the fundamentals or the technical aspects. Maybe they know corporate financial reports and macro data like the back of their hands, or they have a keen sense of industrial changes and policy trends. Everyone has their unique strengths, so they can win. If you have different resources, the winning model will be different, but there will be one thing in common, that is to break information asymmetry.

There is a proverb in the stock market: "the stock price always rises in the subject matter, the market is in revenue, and falls in the surplus." another saying is "buy rumors and sell facts", which is all about the same thing: the importance of being ahead of the operation. For a natural investor (that is, retail investors), with little capital, lack of expertise and backward information, the first two are not easy to overcome and are inherently at a disadvantage, but if you can change the third, there is a chance to reverse the disadvantage and turn defeat into victory. In other words, no matter which market or strategy you do, how to break the disadvantage of information asymmetry is the most crucial condition for retail investors to enter the winning circle. And technical analysis is the best weapon.

From a simple logic point of view, the reason why technical analysis has the reference value of judging long and short is that the superior market information will not reveal what they know, but they will leave a track in the transaction. Through the effective interpretation of the trading information of the market, we can "profile" the long-empty intention of those who are superior in information, and further grasp the multi-empty changes. At that time, it was because of this "profile" that I shelved the financial theory I had learned in my undergraduate course and plunged into the field of technical analysis. Today, I feel that I have gained a lot.

Theoretically, according to the efficient market hypothesis of Nobel laureate Fama, even if it is a weak efficient market, any trading information can not obtain excess profits, let alone semi-strong efficient market and strong efficient market. Therefore, technical analysis does not have operational reference significance. But in practice, we can see that effective technical analysis can achieve good results in operation. Why?

Personal understanding is that the hypothesis has a very demanding premise, including market participants are rational and so on. But in fact, as we all know, the market is often very irrational in the big market. Various conditions separate the hypothesis from reality. Many years later, from the technical analysis books written by foreigners, I saw what they thought were five important functions of technical analysis, among which leadership was clearly mentioned. It has been proved again that technical analysis has its theoretical basis.

Five functions of technical analysis considered by foreigners