What's up everyone? All right? So in this episode, I'm going to answer a question that's been asked of me many times and the question is Ross If day trading is so lucrative, why haven't all the big hedge funds and all the institutional firms everything else? Why haven't they just gobbled up all of those profits for themselves And you know, push day? Traders Maybe like me, right out of the market. So over the years I've thought about this quite a bit. Um, you know, and there's a couple different reasons that that I suspect why this hasn't happened. Uh, and I Suppose the first is that while cumulatively, there is a lot of opportunity for profit day trading of course, Obviously, we'll disclaim that trading is risky.

In for the for an individual fund to be able to make a considerable amount just by themselves. I I Don't think it's really possible and I don't think it's really worth it for them to spend their time trying to day trade stocks that you know are going up to 300 percent, but on only a million shares of volume. Because even if you bought a million shares worth of the stock, I mean you never would be able to if it only had a million shares of volume. But but that on a three dollar stock is only three million dollars you know that you're putting on the table.

Even if it goes up 200 percent, you're only going to make you know five, Six million dollars. And you're We're talking about funds that have billions of dollars to trade with. So the sort of short answer is that they're isn't It's like it's small potatoes. it's just there's not enough money to make it worthwhile for them.

And now of course, they're going to be some funds that do engage in high frequency trading, algorithms and stuff like that. There will be firms that do trade a bit more actively. certainly on large cap stocks I have more liquidity and more volume where you can move 10 or 15 million dollars in or out of a position very quickly. But the area of the market where I've traded for so long the small cap stocks between you know, two dollars and twenty dollars lower price stocks that can and certainly do make 100, 200, 300 intraday moves.

These provide great opportunities for you know, kind of small time Traders like myself, but for really big Money traders out there, it's almost like at least the way I view it. it's not even worth it. So someone asked me a question the other day I was talking a little bit about how you know trading naturally comes with its share of ups and downs and I have been on a little bit of a slump these last this last week or so. I had a red week last week and I was complaining a little bit I was like uh, you know they was like how was your day I was like oh you know, don't even ask.

Well my day wasn't great. Okay I don't want to talk about it and uh I just said you know this is part of trading is that you can come in and trade you know every day for a week and at the end of the week have less money to show for it and it feels a bit. You know you feel defeated, you feel a bit bummed out. but of course these are the ups and downs that come with Trading.

So uh, you know she said well, you know, have you ever thought about, you know, maybe to like sort of smooth out the ups and downs of trading. Have you ever thought about like opening like a restaurant or something and I was like it's a funny question uh because I think that the small town that I live in and I'm in New York City right now. But I think the town that I live in uh, would really benefit from having a nice New York style deli. but I'm not going to be the guy that opens that Deli Why? Because the economics for me don't make sense.

So and of course in this example, I have no experience with Running a Restaurant but let's just talk about the economics. So when I think about a dally I think about maybe someone who takes out a loan to buy some equipment to rent out this space and you know they get it all set up. They maybe hire a couple people and they start making sandwiches and selling sandwiches. But how many sandwiches would I have to sell for me to hit for me my five thousand dollar daily goal trading I'm not gonna make a million dollars a year running.

Uh Deli it's not gonna happen. and so for me, the amount of time that it would take to get this whole thing up and running it just it doesn't make sense. It wouldn't be worth it. Now of course part of that is because I'm not in the restaurant industry.

But let's let's just say for instance that I ran a really successful Steakhouse or something like that and you know I'm in the industry and then someone posts the same question, have you ever thought about opening? you know, a pizza shop or a sandwich? Deli or something like that and I think even for someone at that place, it's like they're successful. Why would they spend the time? Because everything you do takes time. Why would they spend the time focusing on trying to get you know, a deli? Like it's kind of like a mom and pops shop. You know, a deli going when they could spend that same time looking for the next opportunity to open a second.

You know, um, big steak house, right? And so I think that this is something that's really interesting in the economy in general is that the economics of doing something for one person make no sense at all. but for someone else does make sense. And obviously when you get it up to the really really big scales, that's where you do need these really large institutions. who can you know take hundreds of millions or billions of dollars to take these really big positions and move in and out of different markets.

but it would be kind of the same as like Ross You know if you had a bad day trading, why don't you go around and you know pick up um you know bottles and redeem them for you know, 10 cents or whatever it is and naturally the economics don't make sense to spend time doing that. but there are of course people out there and you see it in the cities who do go around collecting bottles and cans to redeem. uh you know for for the you know, whatever it is the 10 15 cents I have a bottle here I Don't know what it is right now but it's five cents. um or or 10 cents.

um I guess it maybe it depends on what state but in any case um so I think it's one of the things that I kind of like about it is that it creates on sort of every everyone has sort of their place on this ladder and if you call it a ladder or whatever you call it where for me as a day trader I do feel like in the financial markets I'm kind of like at the bottom I'm kind of scraping. you know, like a the bottom of the Barrel in terms of just trading these lower priced stocks and capturing these opportunities which you know are great for a small account but are never going to make me you know 100 million dollars? Well I don't know I guess I'm at 10 million dollars. 12 million dollars now, so maybe over the next. but I've been doing this for more than 10 years, so realistically, I'm probably not going to get to 100 million dollars in my career, but you know I mean who knows I don't want to say for sure, but I'm never going to become a billionaire.

For instance, as a as a day trader, that's just not going to happen, you know? But then there's the people out there who are already billionaires and they're going to focus on their area of the market. And so I I guess the the you know, long and short of it is that there are so many different segments of the market and of course the economy at large. Like with the example of restaurants, but with the market there are places where we can kind of find little pockets of opportunity. and based on smaller account size whether it's penny stocks or it's you know, for me, small cap stocks.

or maybe for some it's mid Caps or maybe for some they try to Apple with large caps, We can find our little place in the market with other traders that are kind of match a similar profile as us. They have similar account sizes. you know they trade in a similar way. One of the things I think is very risky is to try to get into the deep end of the pool where all of the sort of big whales or sharks are swimming.

And that's one of the reasons that I'm very cautious about trying to get into day trading large cap stocks because those the types of stocks that you do have those institutional Traders Moving in and out with really big positions and you know they they don't care if you know their Market order of 50 or 100 000 shares drops the stock. you know, 50 cents or a dollar a share and it gets reabsorbed and comes back up. But if you're leveraging, you know, a day trading account to try to capitalize on a little breakout and then all of a sudden one of those orders comes through. It's going to blow you up.

I mean not necessarily blow up the account, but it's going to blow up your position. You're going to get stopped out. So I guess part of it is, um, knowing sort of your lane of okay if I'm a retail Trader with a relatively small account, what are other Traders Like me, focusing on what are they doing, what seems to be working and sort of sticking with that trying to venture out I Think it's good to try to always be expanding your strategy, but if you try to venture into a different segment of the market that's dominated by these big hedge funds or these high frequency trading algorithms I think that that's where you could start to have some problems. and of course, naturally your metrics would reflect that and then tell you to you know, revert back to what you're good at.

So uh, you know my thought here on that question of you know, why aren't hedge funds Day trading is simply that for any one hedge fund, there's just not enough opportunity in any of these small cap stocks generally speaking to make it worth it. Um, you know you could cumulatively add up all of the small profits that you know hundreds of thousands or maybe millions of day Traders might make, and they could amount to a lot of potential profit for any particular trading day or any particular stock. but to try to consolidate all of that to one firm I Don't think it would be practical or really possible. So I Think the good news there is that for Retail Traders Like myself, we have a sort of segment of the market where we can find some opportunity and we can, um, for at least a time being, probably rest assured that we're not going to have to worry about these big sharks or big whales trying to come in and to steal those opportunities from us because I I don't really think it's worth it for him for them.

But you know as always, leave your two cents and comments below because maybe you have a different opinion than I do. And you know as always, you know what? I'm gonna say, trading is risky. My results aren't typical, so make sure you manage your risk, take it slow and practice in a simulator before you put real money on the line. And I hope you guys tune in for the next episode real soon.

All right! Thanks everyone! See you soon.