There are a lot of thinly traded stocks, so that is one area where big funds will not trade. Because of low liquidity, the big funds are unable to take advantage of them. They need to make money on a $10 million portfolio, and yet the stock may have a daily trading volume, in terms of dollars, maybe only $100,000. So there is no way this would interest the major institutional investor. But thinly traded stocks are something the independent trader can take advantage of.
Another area is low-priced stocks. I worked in numerous places where there is a strict prohibition against buying stocks less than $2, for example. There is no particular reason that rule was imposed except for possibly transaction costs. If you trade in a size suitable for an independent trader, however, there is no reason why you should not be able to buy these kinds of low-priced stocks.
There are also strategies that trade once a year, once a quarter, or once a month. These are strategies that do not interest a lot of hedge funds because they need to make a profit practically every month, if not every week. So if you have a strategy proven to be profitable once a year, you can be assured it is not something the institutions want to engage in. As an independent trader you have no such concern, so you can go right ahead with these strategies... (continue reading)
Reference Post: Why trade illiquid stocks...
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