I have this theory that small transaction size actually confers a small advantage. You never have to worry about having enough orders on the other side of the transaction, thus you can do any transaction at the lowest price offered. Whereas big bid orders are basically the average price of the N lowest offer prices. I have no facts or experience on this, just a theory.
In other words there may be profitable techniques that are impossible for the big boys to use, simply because they can't be bothered with tiny investments.
Also, I thought you could eliminate transaction costs using a broker like zecco. Such a broker might invalidate my above theory though, if it were true.
The problem is "small" in your definition is at least in the thousands of shares, probably more in the hundreds of thousands of shares in anything liquid. It's true that mutual funds have a hard time moving in and out of the market quickly, but you're competing against traders who will happily do 1000 share trades all day long.
Hmmmm. You are probably right. I still wonder if there might be some advantage in only making small investments, such that the strategy is worthless for investors with money, but not worthless to you.
In other words there may be profitable techniques that are impossible for the big boys to use, simply because they can't be bothered with tiny investments.
Also, I thought you could eliminate transaction costs using a broker like zecco. Such a broker might invalidate my above theory though, if it were true.