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What you need to know about trading, with Adrian Reid
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Transcript of Adrian Reid’s Interview On The Kiss My Money podcast
What you need to know about trading, with Adrian Reid
Speaker 1:
[inaudible]
Speaker 2:
You’re here because you want more out of life, more money, pleasure, flow, freedom, luxury. He, uh, we are all about an unwavering Southwest and a net with you. Love to talk about. My name is Simone Mercer-Huggins. I’m your resident unapologetic wealth queen. So far I’ve built seven figures from the ground up. And these community is now doing the same. The Ms. Wealthy movement is here to help you be more of the bad-ass [00:00:30] queen. You were born to be so tune in for everything, investing money, energetics, millionaire, mindsets, and everything in between. If you want to be a powerful player in the money game, in the right place. Welcome to the kiss, my money podcast.
Speaker 1:
Sure.
Speaker 2:
Welcome back to the kiss, my money podcast. I am your host, Simone Mercer-Huggins, and today’s episode. I have a guest with me [00:01:00] that is long overdue. He is my trading coach and mentor, but he’s also a kind of a life mentor too. He’s the guy that introduced me to Tony Robbins. When I first hadn’t heard of him about seven or eight years ago. And he also was a mentor just in terms of money and wealth accumulation and mindset and business. And so you’re going to really love this app. Now we talk about a lot of things, demystifying and debunking, a lot of the [00:01:30] myths that exist around trading. And also it’s going to be really enlightening for you to see what to look for when it comes to learning to trade or trading programs. Because unfortunately there are a lot of scams and untrustworthy people out there and Adrian breaks down some things to look for.
Speaker 2:
And we also talk about other things that you might not know about, or haven’t heard of before. [00:02:00] Now, I do need to say before I get into this episode, that you do not need to become a trader. If you want to build wealth, it’s not a requirement. I love it obviously. And a lot of people that have joined investing group Kim have gone on to also become a trader, but it’s not necessary. So if you have been thinking of it or if you’re unsure, if it’s for you, this episode is going to be amazing to shed some light on that. And of course, if you have any questions [00:02:30] about it or what is right, then you can always reach out to me and DM me on Instagram. And I’ve also put the notes in the show notes of the links to get access, to find out more about Adrian’s programs. Um, I highly recommend them. They, uh, you know, what has shaped my journey to get to where I am. And I have members in investing boot camp that have gone on to do them as well. And I’ve seen them become traders, literally the space of [00:03:00] just a couple of months. So tune in, enjoy, and I will see you on the other side, Adrian, welcome to the show. How have you not done this sooner? I don’t know, but I’ve been really, really
Speaker 3:
Looking forward to it sometimes. So thanks so much for having me. And, uh, yeah, let’s go look.
Speaker 2:
Well, I’m excited. So most people, if they’ve been, you know, in the Ms welfare movement, if they’ve been listening to the kiss, my money podcast for a bit, they probably have heard me [00:03:30] mention you or talk about you particularly in reference to trading. But I was hoping you could kind of do a little bit of an intro into, obviously you’re the founder and CEO, Overland instruct trading. I started my journey in trading. Um, I was actually coming up to seven years ago. I found like one of the, our first emails. Oh, wow, cool. Yeah, it was really looking at some of the questions I was asking you. It’s like, wow, I didn’t know that [00:04:00] that’s so good. Isn’t it
Speaker 3:
Seeing the progression of questions? Um, as someone grows and evolves, you know, there’s the, um, a great quote by Tony Robbins. He uses it all the time. Um, the quality of your life is determined by the quality of your questions and what I, what I love seeing in teaching finance trading particularly obviously is how people’s questions evolve over the journey from the very beginning, you know, those timid [00:04:30] first couple of questions to, um, you know, they’re really sort of advanced sophisticated stuff. And that kind of blew my mind. It’s like,
Speaker 2:
Wow, you got there already. That’s so awesome.
Speaker 3:
You know, I, I just love seeing that evolution so good.
Speaker 2:
So what I consistently hear, particularly from women who had no, nothing about investing, you know, completely beginner had the same journey as I did. Like, I don’t know what the now Dell Jones is. I don’t know what the NASDAQ is like, what does that even mean to then go [00:05:00] on and become a trader after they’ve, you know, deciding decided that I’ve got an investment portfolio and they want to learn more. And just the thing that they consistently say is like, I didn’t ever think that would be me. I didn’t ever think that I could ever become a trader. Like I didn’t identify or even think that was in the, the world of possibilities. And it’s so amazing to see that progression. It’s just, it’s so rewarding.
Speaker 3:
Yeah, absolutely. And, uh, people self-concept really [00:05:30] does put a lead or a cap on what they can achieve. And I think one of the big things about trading or investing or money in general is, um, when we don’t, you know, we, we don’t have the right psychology around money. We don’t have the vision of ourselves as successful at managing our money. Um, it becomes so fulfilling. And, you know, I know you covered this in a lot, in a lot of depth in your programs and other episodes and so on. So, um, [00:06:00] I, I think it’s really important to have some aspiration to improve your S your, your sort of self concepts of image around money and work on that, but also start having some big dreams about what life could be like with more abundance, because it’s only by having those dreams that will be driven to do the learning, do the work, do the things that required to get there, because without a big dream, you know, we just Bumble along doing what we’re doing. Cause [00:06:30] there’s nothing to drive us and lift us. Right.
Speaker 2:
Yeah. A hundred percent. It’s so funny that you just brought that up. I literally just wrapped up one of the first master classes that are going inside investing bootcamp this year, which is Epic wealth goals masterclass, because you’re right. Most people kind of do live on older pilot and it’s not a judgment. It’s just, it’s genuinely how society is set up and without thinking necessarily about, wow, what do I actually want? And what do I actually want to go off [00:07:00] to?
Speaker 3:
Oh, for sure. For sure. We have this thing in our house, my wife and I, um, we, we wrote, uh, after again, after Tony Robbins seminar, I’m a bit of a fan just in case you haven’t noticed. Um, uh, we, we, we wrote our, um, a dream life statement, which is a very rich, full description of what our amazing life looks like. Not as it currently is, but as we aspire for it to be, um, in all facets of life [00:07:30] and, and having that vision and that clarity about what you want life to be is an amazing, uh, enabler of all of this. Because if I want that life, then I have to be the sort of person that can create that. And if I’m going to be that sort of person, then I need to, you know, I need to learn certain skills and I need to be able to do certain things. And so then I need to go in and do certain courses or certain learning or read certain books. And it [00:08:00] basically creates all of the activity that is required to have that amazing life. Yeah, absolutely.
Speaker 2:
Yeah. I love that. And what kind of mindset, just to your point before, what kind of mindset do I need to have? Like what, what is the mindset of a multimillionaire and what, uh, what, where’s the gap?
Speaker 3:
Oh, for sure. Yeah. Yes, absolutely. Now there’s one other piece, which is really, really interesting. Um, and that’s, when you talk about investing or trading and trading, particularly, um, there’s certain [00:08:30] preconceived ideas that come up in people’s mind that tend to either block or enable them from becoming that. And if I, if I talked to a lot of people who aren’t stock traders or traders in general, um, they might get images of, you know, some of those scenes on movies, like the Wolf of wall street, which are just disgusting, you know, awful people driven by greed, um, ripping people off, doing harm to society, just to make [00:09:00] themselves rich and that sort of thing. And it’s a movie like it’s a fictitious image. I mean maybe yes, there’s probably are some people like that out there, but if you have an image of something that is negative like that, you’re not going to want to go and be that.
Speaker 3:
Yeah. And so I think it’s really important. A lot of people will dismiss trading stocks or trading or even investing because they don’t want to be that person, you know, that [00:09:30] in inverted commas, right. Be that girl, that money hungry, that greedy that’s selfish, that, you know, ostentatious, um, all of those things. Um, but that’s just in the movies, you know, and if we can get past that fake image that they use, that Hollywood uses to, um, to sell movies and figure out or share what it’s really about, which is actually a really fairly sedate, mundane, very calm. [00:10:00] There’s no screaming down the phones at your stockbroker. There’s, you know, there’s no highest, well, there shouldn’t be high stress and freaking out and, you know, exploding relationships and all of those things done, right. It is seriously just a dead, simple process to follow each day that ultimately cranks out wealth.
Speaker 2:
Yeah, absolutely. My God, I have so many topics that I want to go on, tend to zone in that as it’s also, [00:10:30] so on-point because I have very specific notes that you just touched on, but I want to go back to, when did you start in line and start trading and how did that kind of start with you? I mean, I know the journey for you in terms of you were a trader on the side and you worked in corporate and then you were just like, what am I doing? I’m just going to go and become a full-time stock trader, like, um, and by full-time, I don’t mean like literally sitting at your screen all day, [00:11:00] um, you know, as, you know, 30 minutes at the end of the day, but, and I remember when my husband told me about you, and obviously I’d met you a couple of times previously throughout the years with you working with him previous. And he was like, Oh yeah, he left corporate. He just went and just decided to go and trade. And I was like, is that a thing? Yeah. And that’s kind of how, you know, after I’d [00:11:30] become an investor for a bit. And I was like, I want to know more. I want to dive in, you know, how do I explore more of this world? And that’s how our chat started, but how did it start for you in terms of starting in Latin instruct trading? Because you obviously had a really good gig, you can just trade and be perfectly fine and go on sabbaticals and travel around the world. So why did you start the company anyway? Good question. Um,
Speaker 3:
I think it’s really important because, uh, a lot of people assume, Oh, you know, you can support [00:12:00] yourself. You’re free. Um, you just go on holidays, but, um, life needs purpose, you know, and there’s only so many cocktails and stuff. You can drink him before you start putting on weight and getting unhealthy and, and, uh, feeling like what’s the point in all of this? Not that I did much of that mind you, but you know, as human beings we need purpose. Yeah. And what I found was, um, when I had my corporate career, that was very, uh, [00:12:30] all-consuming for me. And it took up a lot of my mental energy and, um, you know, most of my time, um, I worked like a crazy demon. Um, most of my working like corporate work when I, and when I, um, um, got to the point where my trading income exceeded my corporate earnings, I had to look at myself at the end of the year until it w yeah, like you said, what am I, what am I doing?
Speaker 3:
And, um, [00:13:00] so I stepped out to, to trade and spend more time with the family and basically became a stay-at-home dad and, uh, did my trading each day. And, um, you know, continued to support ourselves like that. Um, but what was interesting was being free was amazing. My stress levels dropped, um, got much healthier, got fit. I got time with the kids, got time with the family. Um, but I did find that something was missing. You know, I didn’t have purpose apart [00:13:30] from home and family. Um, I also found that I didn’t have many people to talk to about my trading because, um, a lot of people will sit at home and think, okay, I should do, I should, I should invest. Or I should do something with my money or whatever, but don’t necessarily know what to do. And don’t have anyone to talk to about it.
Speaker 3:
Like, money is a bit of a lonely subject. And I was at home just doing trading. All of my friends were working. None of them traded, I didn’t know any traders. I basically learned [00:14:00] myself from reading hundreds of books and attending a bunch of courses. So it was pretty lonely, um, that combined with feeling purposeless and having a bunch of friends who were working saying, how on earth did you do that? Can you teach me? It’s like, huh, purpose sort of fell in my lap. It’s like, Oh, I’m lonely. I don’t have anyone to talk to about trading. Um, I don’t have a purpose and there’s all these people saying, Hey, can you show me? [00:14:30] And so I started and I started, um, teaching, uh, some friends or colleagues and, um, just basically meeting up with them and saying, okay, here are some steps. And this is how I did it.
Speaker 3:
And this is the process I went through. But I found that I was, I was giving a lot, right. I spent hours and I prepare, I, you know, do presentations. I do work with them and so on, but I was doing it for free just for my social contact and my social, [00:15:00] my sanity. Um, and, um, I, I pretty soon realized that if, if I do it for free and I just, I was pushing it at these people rather than them having the desire to really learn and dig in and the skin in the game. And so after doing that for, for six or 12 months, I realized that actually, this is, this needs to be a business because it needs to serve people who want to be served, who need [00:15:30] these skills, who want these skills, who have a drive to improve their financial situation in life.
Speaker 3:
And, and it was at that point, it was probably about nine to 12 months after I started informally teaching people that I realized that this was my kind of my calling, like, you know, and it was, it needed to be turned to a business to make it self-sustaining. And, um, and that’s when I started, uh, uh, teaching formally developing, you know, the process and the products, um, the process I took you [00:16:00] through, which then later came to a, um, you know, a series of online programs and so on, which my students, and now I’m doing. Um, so yeah, it was really born out of all of that and, um, wanting a community of, of traders to talk, to engage with and support and have them support each other. Because I, it took me three intense years to learn how to make money in the markets, because I was literally on my own. And I didn’t, [00:16:30] you know, when I was explaining it to people who were wanting to learn after I left the corporate world, I didn’t want them to have to go through that difficulty. I wanted them to have a community and people like an ask and, and support and, um, you know, a crowd of people cheering them on and those sorts of things. So, and that’s basically what I’ve created, you know?
Speaker 2:
Yeah, yeah, exactly. I think it’s so important to also know that because there seems to be, well, certainly what I’ve seen and I’m sure you probably [00:17:00] say it more, cause you’re more in what you’re obviously more in the trading space and I’m more in the investing space, but I see time and time again, this idea, and it’s, it’s not unfounded because it is, there’s definitely some significant truth to it that all of the scams and people that teach trading out, they’re actually just making money off the program or, you know, the commissions and all that sort of stuff. And not [00:17:30] because they’re actually good traders. And so that is probably also one of your biggest pain points to cut through that. A there’s definitely truth to it because there is a lot of that going around and B you are actually authentic. You have done it successfully. You don’t have to have this program and teach people. It’s a choice. It’s not how you actually make money. Do you find that really frustrating, that kind of [00:18:00] mentality, but also truth.
Speaker 3:
Yes. Um, and look, you’re right. There absolutely is a large amount of truth to it, but let me, let me just point this out. Have you ever been to a doctor and walked away thinking? I really don’t think he knew what he was.
Speaker 2:
Oh my gosh. Yes.
Speaker 3:
You know what? I want a second opinion. And after the second opinion, I want a third opinion. [00:18:30] So it’s, it’s not just in trading education, that there are people who are not as good as their marketing appears. It’s in all industries. There are, there are, there’s a spectrum of quality, particularly when it comes to teachers. And if you think back to your high school experience, um, you know, did you have some teachers that were amazing and some that were like, Oh my God, shoot me. Do I have to go to another one of these classes? Yeah. [00:19:00] Yeah. So it’s the same thing. And so, um, the, the difficulty though is it’s tied up with money. And as you know, when something is tied up or intertwined with money, it’s intertwined with emotion and charge and preconceived ideas and stress and fear and all of these things. So there are absolutely trading, uh, educators or investment, um, educators that, uh, are just doing it to make money off the people [00:19:30] rather than to it, to help the people. And I think there’s a couple of tilted Palestines. Oh, sorry. So talk a little about, you know, what these are and what to look out for. Oh my
Speaker 2:
God.
Speaker 3:
Um, yeah, if you, so one of the, one of the most important things is to look at how do these people really make money. Now you may or may not have visibility of their investing fortunes, but the good thing is you don’t really need that. Okay. So if you go [00:20:00] to a trading educator, um, and look at their website and you look at their products and programs, and if they’re pushing you in a certain direction to a certain broker to, um, to buy a whole lot of, um, subscription services to sell you, um, a constant flow of, uh, tips or, or, um, trade calls, like trade advice, like what stock [00:20:30] you should buy, what stock you should sell. If they’re trying to get you onto all of that, what they’re doing is making you dependent on them. Okay? So the, the number one thing you want when it comes to money is to invest in yourself to build the skills.
Speaker 3:
So you don’t need the advisors. Yeah, no, no. I’m not saying you should not have advisors. Having advices is fine, but you don’t want to be completely dependent on them and at their mercy, right. You want to be educated. So the [00:21:00] first thing is you gotta be educated, not buying things that just tell you what to do blindly without giving you a depth of insight. Yeah. And so my, one of my pet hates is a trade advisory services. When you go and you pay, you know, $2,000 a month or something, and every day, they send you a list of stocks to buy and a list of stocks to sell. It’s like, that is the worst form of trading education out there because you’re not actually educating at all. You’re making the people completely dependent. [00:21:30] And I know for a fact that the vast majority of people who buy those services don’t make money because they don’t have the skills and they just fall victim to the same human emotions that cause most people lose money in the markets.
Speaker 3:
They, they pick and choose which ones to buy and sell. They pick and choose how big, how much, how big an investment to make in each one. And they’re completely random and all over the place. You need the education to, uh, understand how to actually invest in the market like a process [00:22:00] so that it’s repeatable and consistent and you have an edge. So you avoid just getting told what to do, you know, by this cell lab, that’s bad, dangerous. The other, the other thing to avoid is the, um, the recommendation to go with my broker. Who’s the best broker in the universe.
Speaker 3:
And those, the people, the, the educators who push really hard, their broker probably also teach very [00:22:30] short term trading strategies. They probably also sell automated trading robots and encourage you to use those. They probably also talk about the benefits of leverage and they probably also talk about how you can make X percent return per week. Now, these things all have one thing in common. They’re all driving you to spend a truckload of money on commissions at the broker and why, [00:23:00] the reason they’re doing that is because they’re recommending their brochure, their broker and their broker gives the educator a commission, a share of all of the brokerage that their clients generate.
Speaker 3:
And this is a, Hey, this can be a huge amount of money at the client’s expense. So if you, um, if you recommend a broker there’s deals out there with the person who does the [00:23:30] recommendation can get 50 or 70% of the brokerage that those clients pay. And then you imagine they teach high-frequency trading trading 15, 20 times a day using an automated robot on huge leverage. Then of a sudden the broker and the educator is making an absolute fortune off the commissions while the investor slowly goes broke. Yeah. So this is why I don’t recommend a broker. Well, actually I do have a broker that I recommend, but I have zero [00:24:00] financial relationship with them. I only recommend them because they’re amazing. And they’re cheap. Yeah. You know, I literally, I don’t get a commission at all. Um, and most of the people that approached me, if you, if you saw how many LinkedIn connection requests I get from dodgy brokers who want to throw commission at me for recommending clients, it is unbelievable.
Speaker 2:
Oh, wow. I didn’t even even think about the [00:24:30] broke. I think I get a lot of, um, for ex spam of like, which just drives me crazy. And unfortunately I do see a lot of people fall victim to it as well, but you just explained so eloquently and I’m sure that it’s not the first time you’ve explained it. The not only the pitfalls, but the things to look out for. But also I think things that people don’t actually realize, particularly around commission and leverage when there isn’t, when things aren’t transparent and there are enough [00:25:00] companies, unfortunately, that are not transparent about how they actually make money. Yeah, absolutely. Um, and I think that that’s, that’s particularly really important. And I mean, it’s, it’s, it’s exactly the same in the investing world too. It still happens. But I think that it happens more so in trading. Yeah.
Speaker 3:
I think you’re right. I think you’re right. A lot of, a lot of the big, the more marketing focused people who don’t actually trade and you don’t know that they don’t trade, right. They,
Speaker 2:
Whatever, whatever,
Speaker 3:
[00:25:30] You can also see. A lot of them have really polished sites, um, huge, um, content, production machines, you know, thousands of articles they get produced and videos every day and all of this, it’s like, well, if you’re doing all of that, you can’t possibly have any time to service
Speaker 2:
Your clients. You can’t
Speaker 3:
Have any time to answer questions. And if you buy something from them and I’ve bought a bunch of these programs, just to see what’s [00:26:00] in there, you get zero contact with the, with the expert.
Speaker 2:
And
Speaker 3:
If anything, when you’re dealing with money, you actually need to talk to the person who knows who’s doing it.
Speaker 2:
Yeah. Because you have questions. Oh my God. Yes. You will.
Speaker 3:
One of the, one of the biggest drivers of success that I’ve noticed in my programs is not how much experience someone has. It’s not where they come from, or, you know, how analytical AR or how much trading experience they’ve got when [00:26:30] they come to me. It’s are they willing to ask questions? Because if they will just ask questions, when they get stuck, then they’ll get unstuck and move and hit the next barrier. And then they can ask a question about that, get that resolved and on to the next one. And the next one. Yeah. This is all the way back to the beginning. We’re talking about the quality of questions evolving. As someone learns, you can tell that someone is growing and they’re going to succeed because the quality of the questions just keeps getting better and better. But when someone freezes and, and refuses to, [00:27:00] um, you know, put their ego to the side and say, Hey, I have a question. I don’t know the answer. I don’t know what to do. You know, when someone refuses to put their hand up like that, um, that is a big driver of a failure.
Speaker 2:
Yeah. You can’t progress. Um, actually good. I’m glad that you brought this up because one of the questions I wanted to talk well, talk about is what do you [00:27:30] think that you need financially, mentally, psychologically, emotionally to become a trader? Because I mean, full transparency, it’s not for everyone. And certainly the people that, you know, I have a bunch of conversations in Instagram, DMS. And what about, depending on where people are at, and some people start at different levels. Some people don’t know that there is a difference between trading and investing and often that’s mixed up. So [00:28:00] that’s usually an indication to me that, okay, well first certainly from my point of view, you need to understand how the investing world works, how the stock market actually works, you know, base fundamental knowledge. You understand, you know, you need to understand certain things like risk and, um, you, what your goals are, and also your purpose, personal lifestyle.
Speaker 2:
Like if you have a full-time job and three kids, and like, how realistic is it that you’re actually gonna have time or prioritize time around trading? And if you’re only starting with $500 and you [00:28:30] are interested in investing in your education and you know, there are certain things that it’s like you need to have also at least some interest kind of like what you were saying before, like some skin in the game of like a deep desire to do it, because there is a learning curve that comes with trading and you have to be at least somewhat interested in the technical side of it. What, from your, from your point of view, [00:29:00] what do you think is like, you need to have this, otherwise it’s just not for you.
Speaker 3:
Yeah. Good question. And I think it is important because it’s not for everyone. And I’ve seen people try and, um, and fail badly because they didn’t have the missing ingredient. And after teaching hundreds and hundreds of people to trade, um, what I’ve found is the most important ingredient [00:29:30] is not what you think it’s, it’s a fascination in the markets and investing and how money works and, um, and how, and how the stock market works and how, how to, um, grow your money fascination in that, if you’re one of these people who is like, Oh yeah, I should probably, you know, learn to trade [00:30:00] and then I can, maybe I can make some money and that’d be cool. It’s like, no, that’s not a good starting point. But if you’re like, Oh my God, I am, I I’m fascinated by the way the stock market works or by the way the market works. And how does, how does some people make money and how some people lose money? And why does it go up and come down again and go on up and come down again? And what does it crash and why is that working?
Speaker 2:
I just like, if it just like, if it just fascinates you. Yeah. That’s it, [00:30:30] that’s what you need. Right.
Speaker 3:
You know, you don’t want to go in and out of some sort of misguided sense of obligation.
Speaker 2:
Yes. Good. I’m glad, I’m glad you brought that up. Yeah. And I, you know, and I really honor and respect, um, people that I talked to an allergist, like, look, I just, I need to have things on autopilot. I know, I know I need to grow my wealth and I know I need to be invested, but you know, trading’s not, for me, I’m like, great, good, like have that clarity and know what works.
Speaker 3:
[00:31:00] Yeah. Now there’s some, there’s a couple of caveats, which I think are really important for people to hear some of the biggest objections or reasons for not doing it as, Oh, I’m too busy. I’ve got three kids, I’ve got a career and I got this and I’ve got that. I’m sick. And those go, you know, and like, okay, great. When I learned to trade, I was working, [00:31:30] uh, in a job that required 12 to 16 hours a day, Monday to Friday, I was managing projects or working in print, managing and working in projects across three different cities simultaneously. I was on two to three airplanes a week. I had a young family and my wife also worked. I did not have the time to learn to trade. I did not have the time to trade, [00:32:00] but I had the desire to change my circumstances. I did not want to be doing what I was doing for the rest of my life.
Speaker 3:
I wanted something better. And that, that desire was enough to help me carve out the time. So I would sacrifice other things. I would, I didn’t watch TV. I didn’t watch the news. I didn’t read [00:32:30] anything other than trading. I didn’t read the newspaper on the bus on the way to work. I would read my trading books and do my analysis on the plane between Sydney and Brisbane and Sydney and Melbourne and Melbourne and Perth and Perth and Sydney and Sydney and Oakland. And back, I would do my trading work. I would wake up half an hour earlier so I could place my orders. And I’m, I made it work because I had the desire. [00:33:00] Everyone is busy. So don’t, don’t, I don’t want anyone to be under the illusion that your busy-ness is busier than anyone else’s business. Everyone in life is busy. Right. If you want it enough, you’ll find a way. Yeah. So it’s not,
Speaker 2:
Yeah, I agree. That’s, that’s actually a really good point. Um, it is a really good point because I think a lot of people can definitely feel trap into the, again, this comes back to psychology, but the get rich quick mindset. [00:33:30] And a lot of the, to me, the scammy educators, you know, try to sell this dream of like, it’s so easy and you can make, like you said, this much percent in a week and whatever, and you can fall into that trap of like, Oh, quick, quick fix. Yeah.
Speaker 3:
It takes some time to learn. It does. Yeah. I took three years to teach myself by reading books and whatever. Um, I can now teach someone the basics and get them started is in three to six weeks because I kind of got the process [00:34:00] down and it’s all, it’s much smoother now, like a lot clearer. Um, so that that’s to get someone started. The second misconception that I think is really important is that trading is again like what you see on the movies. It’s sitting in front of a computer all day, buy, sell, buy, sell, buy, sell, buy, sell, screaming, broke a buy, sell, buy, sell. Oh my God. I’m stressed out of my mind, but I still drink coffee, buy, sell, buy, sell, drink coffee.
Speaker 2:
And then hopefully the American market’s open. I went to sleep four in the morning [00:34:30] and tried, tried to, I try to it’s like, that is not it. Yes. Oh my God. Thank you. The number of people that automatically go also you’re a day trader, because I say I’m a trader. I must’ve heard that about
Speaker 3:
A bazillion times in the last 20
Speaker 2:
Years, just because I said trading, what does it have to do with like, no, I think that’s an indication that people just don’t understand. There are different ways to become [00:35:00] a trader or to Trek trade.
Speaker 3:
Right. So, so let me paint a clearer picture so that, so that your listeners understand what that actually is. Hmm. Okay. Um, trading is a, is a spectrum, right? This very short term high-frequency trade, trade, trade, trade, trade taught people. I’m not that I don’t, I don’t promote that. I don’t actually actively discourage it. And then at the other end of the stream, there is like the Warren buffets of the world who are like buy and I’m going to hold forever because I love this company and I’m going to work on this company and help them. And [00:35:30] what about, so everything in between is some form of trading or investing. And so my style of trading, which is systematic stock trading, uh, is, um, I have rules that if certain things happened, if certain things happen, rather I will buy a stock and I’ll buy a certain amount of that stock.
Speaker 3:
And if certain other things happen, I’ll sell that stock. And all I need to do to make my decisions is, [00:36:00] um, update the data from the previous days activity on the stock market. And I just press a button on the computer and it downloads it. And then I run my rules and I have the rules just built into this, um, my trading software. So it’s just like spreadsheet, formulas. It’s not like complicated analysis or anything. Um, so I run my rules and it tells me what stocks to buy and sell. And I placed the orders with my broker and I go and do something else. And that’s it. And so the process [00:36:30] takes about somewhere between five and 30 minutes a day for me. Um, now you might say, okay. Yeah, I remember you’ve been doing it 20 years. Okay, cool. Um, so it might take you 45 minutes or an hour to start with, and then after a week or two, you figured it out and you’ve got rid of all the lumps and bumps in the process.
Speaker 3:
Now it takes you 30 minutes. Okay. So it’s, it’s, it’s really sedate. And to be honest, it’s not exciting. It’s just following a process and you can follow that process [00:37:00] daily and, uh, traders use a system, a set of rules to, to trade or invest, uh, that you run daily. But I have also, I also have students that don’t want to do it daily because they’re too busy or they just don’t want to do much. And, um, there’s some amazing, um, approaches to trading that you do weekly. And so I’ve got an assistant trading system, which is a trading system is just a set of rules that tells you exactly when to buy how much to buy and exactly when to sell. Um, [00:37:30] I have an amazing trading system, which is once a week and it takes about 10 minutes a week to run. And it makes incredible money, like really good returns.
Speaker 3:
And there were two on effort for running that system is phenomenal, far better than anything else I’ve ever done in my life, because seriously, it’s five to 25 to 10 minutes a week to run it. And so just because someone is busy, doesn’t mean you can’t build wealth in the stock market. [00:38:00] You don’t have to be sitting staring at screen for hours every day. You just need to learn a process that suits your lifestyle. And that’s a big part of what I’m about. It’s understanding your personality, your objectives, your lifestyle, and funding, the, the trading rules and trading approach. That is right. You know, that fits you.
Speaker 2:
I’m glad you brought that up because it’s such a big part of, even as an investor, you have to understand, you know, because as you said, there is one in [00:38:30] spectrum, which is fundamental analysis, which is incredibly time consuming. If you want to be good at it and beat the market, then there’s the technical side. And then there’s the, like you said, everything in between. And I think that people don’t think about how they want it to fit into their lifestyle or how they want to prioritize it and jump straight to. I mean, the number one question I get is what stock do I buy followed by or [00:39:00] equal to what broker do I use? And it’s like, it’s the wrong question.
Speaker 3:
Literally edited and published a video. I think, I think my team is about to hit, publish on asking the right questions, but then they’re the logical questions for someone to ask it is, but they’re not the right questions to really help [00:39:30] them grow and, um, develop I’m independent. Exactly. Right. So you need to ask different sorts of questions. And the first question is, you know, what is my personality objectives, lifestyle so that I can understand me, and then I can go look for a method that will fit
Speaker 2:
Exactly because that is the one that is going to be most successful, particularly when it comes to your mindset and managing emotions because the market does move. [00:40:00] Um, and you definitely don’t want something that isn’t going to fit you because you’re going to stop it. And you’re going to blow it up. You’re going to self sabotage without knowing. Yeah.
Speaker 3:
Yes, no doubt, no doubt. And a lot of people listening might be thinking, Oh yeah. But how do I do that? It’s like, okay, first thing, be aware that you need to do that in my program. Um, in my, in my mid-level program, I actually have a whole module on your trader profile, you know, figuring out who you are as a trader, so you [00:40:30] can find the right set of rules and follow them. So it’s pretty much stress free. Um, so there are guide, you know, guide posts and programs that you can use to understand who you are and what the right approach is. You don’t need to figure all that out on your own. The first thing is just be aware, there’s different ways to do it. And just because the conventionally, you know, discussed ways or the preconceived ideas don’t fit in your life doesn’t mean you can’t build wealth in the stock market. Cause I I’ve seen it, people with all sorts of crazy constraints [00:41:00] and, um, you know, weird and wonderful lifestyles. I’ve had success with this.
Speaker 2:
Yes. Yeah. Um, actually I do want to talk about your two programs, but before we do that, just, you know, I was really fortunate when I learned from you that I didn’t know another way. Oh yes. So I learned systematic technical trading and I was like, well, this is the only way when I first came to it. And now obviously now [00:41:30] I know that there are so many discretionary traders that don’t have a system don’t have a set of roles, kind of, a lot of it is winging it and guessing it, and there’s no process and they think that there may be doing okay, but probably a lot don’t even look at the results. So how would you explain from a top level kind of like there’s discretionary traders and then it’s technical [00:42:00] and kind of fundamental in terms of approaches and then the systematic. Yes. How would you explain them kind of? Well, because to me really, the only way to be successful at it is being a systematic trader.
Speaker 3:
Yeah. Okay. Good question. I like that. Um, okay. So if you think about the way most people make investing decisions, okay. They start off by asking advice from a few different people and then they latch onto a few ideas, do a bit of research, maybe look at [00:42:30] some data, some trends. And from all of this different bits of information, pull together, what they think is a logical course of action and then make a decision that, that, that process is not very repeatable. And it takes a lot of time. Yeah. You’re basically trying to assimilate lots of different sources of information and different considerations to make a sensible decision. There’s a huge amount of pressure on that decision that you’re trying to make that one decision [00:43:00] to be successful now in, um, in investing in trading and stock market, particularly there’s lots of businesses. You could invest in lots of stocks you could buy and you’re not going to buy just one.
Speaker 3:
If you buy just one and it does well great. But chances are, if you buy just one stock, you can have a very Rocky ride. So you need diversification. And so that means you need to hold lots of stocks. [00:43:30] And if you think about the amount of research and time and energy required to find lots of different stocks to hold, to get diversification in your portfolio, it’s an immense amount of time. So discretionary trading is, is, is difficult because you’re looking at them, um, lots of different sources of information about these stocks. You’re looking at the annual reports. You’re looking at the charts, you’re looking at different sort of indicators or mathematical calculations on the price chart. You’re looking at recommendations [00:44:00] from brokers and you’re trying to assemble a sensible decision out of that. And if you multiply that by 10, 15, 20 stocks in your portfolio, all of a sudden you’re drowning and there’s no way you can do that.
Speaker 3:
If you’ve got a busy life, not to mention the fact that it’s inconsistent because you know you, one week you might be really positive because, um, you know, the world seems like a good place. You just got a pay rise. You’re in a good place with your partner, the dumps being nice to you and Bitcoin’s going up. And so you’re like, cool. I’m going to look for things to buy next [00:44:30] week. You know, something might’ve, uh, maybe it’s crashed. Maybe you got fired, maybe a trip over the cat and banged her head on a wall. And you had a fight with your partner. Now you’re in a bad mood. You’re looking for things to sell, right? It’s inconsistent because the emotions get in the way now contrast that with systematic trading and investing, which is investing in trading, using a process that is absolute and objective, if a and B and C a true you buy the, or is true, [00:45:00] you sell a systematic approach to trading and investing is rules-based where your human judgment does not come into the decision.
Speaker 3:
The only human judgment is in creating the rules in the first place. And then after they’re created and tested, you just follow the rules each day. And by following the rules each day, you get a couple of things. You get consistency, repeatability, you get confidence because they’re objective [00:45:30] rules. You can actually test them and make sure that they made money in the past. You’d be surprised how many people are trading using methods that don’t actually make it didn’t actually make money in the past, hoping that they’re going to make money in the future like madness. So, uh, trading and investing systematically, like this gives you a huge advantage over all of the people who aren’t doing it.
Speaker 3:
And it also dramatically reduces the amount of time it takes, because I know time is [00:46:00] one of the biggest concerns. We’re also busy, right? And when I started trading, I started trading with discretion, using analysis and reading the reports and looking at the charts and trying to make my decisions. I was spending three or four hours a night at the very beginning, trying to find stocks to buy and sell. But when I went systematic, that time dropped from three or four hours a night to 30 minutes a night. And so all of a sudden I could cover a lot more ground in a lot less time, get a [00:46:30] lot more diversification. And I made a lot more money with a lot less stress.
Speaker 2:
Yes. Great. I think that that is, that’s a really great way of explaining it. And you know, I think there’s so much misconception. You know, people talk about Warren buffet as being whatever the grandfather of investing, but most people don’t realize that he spends 89% of his day reading and doing deep analysis. And he’s also been doing it for about 60 years. [00:47:00] And there’s a lot of work in that. And I think that one thing that isn’t really talked about either is the number of times that he is wrong, but also just like trading that you’re wrong a lot of the time and you have to be okay with being wrong and cutting losses. And just knowing that you can have a system that is 50% of the time. Right. [00:47:30] But it’d be wildly, wildly profitable.
Speaker 3:
Yeah, absolutely. Absolutely. Um, there’s, there’s a lot of social pressure to be. Right. You know, and particularly when it comes to money, if you say you’re trading stocks, I was like, Oh, well, you know what stock to Dubai, or what stock should I buy? Well, I’ll tell you what it’s talking about. And then tomorrow they come back and they say, Oh, how’s that stock doing? It’s like, ah, um, well it went down. I lost money. It’s like, I must be an idiot. [00:48:00] No, there’s a lot of pressure to be, particularly if you’re doing three or four hours of analysis a night, trying to find these stocks to buy it. Right. Systematic trading also helps with that because it takes the pressure off each individual decision because it’s not the individual trades or investments that make you the money. It’s following the process over and over and over again, that extract money from [00:48:30] the market.
Speaker 3:
Each trade when you trade. Well, each trade doesn’t matter if it, if you have a loss it’s so small, it doesn’t matter if you have a win. Okay. That’s great. But that one week doesn’t change your life. Yeah. What you’re doing is you’re following a process that has a positive expectation of making money. And you just risk a certain amount each time, over many, many trade, many, many investments, and it builds your wealth [00:49:00] much less stress, much less pressure on being right. You don’t have to be right. A hundred percent of the time. You don’t even have to be right. 50% of the time you can be right. 30% of the time be wrong, 70% of the time and still make a ton of money. Yeah. Because what happens is when you’re right, you have really big winners and when you’re wrong, you have tiny losses. And so lots of tiny losses, plus lots of real, a couple of really big winners actually makes a lot of money again, [00:49:30] different way of thinking about it that most people don’t.
Speaker 2:
Yeah. And it’s just not the men. You’re right. It’s just not the mentality that is, is taught particularly when yeah. People are like, Oh good. What stock do I buy? But it’s like, no, but I could be out of that position tomorrow. So it’s not, that’s not the point.
Speaker 3:
Absolutely, absolutely. What someone says, Oh, what stocks you’re holding? It’s like, um, well there’s about 60 of them or 80 of them. And they’re all managed by different systems. And I don’t [00:50:00] even know what a lot of the companies do because it doesn’t require me to follow the buy and sell signals that come out of my systems. And it doesn’t take me long each day. And I just take lots of trades over time. And the account grows. Most people will look at me sideways and then go to the bar and, you know, conversation over because trading this way is not something that you talk about wildly at cocktail parties. Oh my God. Like it takes all that emotion. [00:50:30] Yeah,
Speaker 2:
Exactly. And it doesn’t seem as glamorous or as again, a little bit of that kind of get rich quick. Like, am I, you know, have you got a hot stock tip? That’s going to be the next Amazon or whatever.
Speaker 3:
Yeah, absolutely. I mean, that, that just doesn’t, I, it doesn’t exist because it’s just a crystal bowl. That’s a burden. Um, and it’s not the way to make money. That’s a lottery ticket. And what do we know about buying lottery tickets over and over again over time? How much money do you make? [00:51:00] No. Right. It’s an, it’s a negative expectation game. You will lose money and taking hot tips in the markets is also a losing game. There’s always going to be that story of that one person who bought that one stock and, uh, you know, it tripled or 10 folded in, um, in value in a couple of weeks. And then they were tired and blah, blah, blah. But that’s just one story is millions of people out there who are doing exactly the same thing, losing their, [00:51:30] blowing up their accounts, destroying their future wealth because they’re not following a sensible process.
Speaker 2:
Yeah. And they’re not talked about, and they’re not advertised on these day. Trading get rich quick for it.
Speaker 3:
No. And if you go into the Facebook groups or the online forums, uh, with, with traders again, traders and investment comas hangout, the people who are talking today are not the people that [00:52:00] have just blown up their account or have just lost money or just done something stupid. You’ll see the people talking who are crowing about that lucky call that they talk like the lottery ticket, the paid off and trembling is from a psychology perspective. This is really dangerous because you go to those forums and you’ll see people talking about, Oh, I made this much money. I made this much money. I made this much money, but you don’t see them talking about, I lost this much and this much, and this much, and this much, and this much in [00:52:30] this much and this much. And actually I’ve been training for five years and I’m still down 150 grand, but I just made 20 on this awesome call that I, that I’m crying about. Right. You don’t, you don’t hear that cause people don’t,
Speaker 2:
No, they don’t have a test. Yeah. It’s, it’s the, the equivalent of the Instagram highlight reel, But it’s also like, people might, might talk about how they’re up 20 grand or whatever. They’ve done 30% this year, but it’s like, yeah. But [00:53:00] how long have you been trading for how, what is being your return over the last five, six, seven, eight, nine, 10 years. And it’s always a focus on that really short term gain without factoring in. And this really does drive me crazy. Cause I talk about it consistently. I feel like I’m a broken record, but compound interest in wealth accumulation happens with time,
Speaker 3:
Time, time, absolutely timing, consistency.
Speaker 2:
[00:53:30] Yeah. Time and consistently and a proven method.
Speaker 3:
Absolutely. Yeah. So you can’t, um, rely on a hot tip or a, you know, some guru to tell you buy this stock and it’s the next Amazon and you can retire what you need is a process that you follow that grinds out profits over time and build your wealth.
Speaker 2:
Yeah. Yeah. Um, so talking of which you have two programs, one is more [00:54:00] fitting for kind of beginners and entry-level, which is called the system and try to launch pad. Yes. And then you have the trader success system, which is for kind of, you know, intermediate to advanced both, uh, really amazing programs. I know a lot of students that have gone through both, um, quite recently as well. And particularly what I love about the way that you teach is you have proven systems [00:54:30] that have been tested and that will work to kind of shortcut people’s processes that don’t have to build, you know, their rules from scratch. If they do want to take something. Yes. Um, what would you say is best for if someone was coming in and going, okay, I want, I want to learn how to tat a trait. I do. I know how the stock market works. I know how kind of investing works and I want to do this. How would you differentiate between which to start [00:55:00] with? I mean, obviously the ultimate is the trader success system. I’m in it personally myself. It’s an amazing program. Where would you suggest people start and how do they know?
Speaker 3:
Yeah. Good, good questions. Thank you. Um, it depends a little on the level of conviction that you’ve got. If you, if someone is listening to this conversation going, Oh my God, that is what I want. I’ve always been fascinated by the markets on even just show me how this works, teach me. I’m a really, [00:55:30] really want to learn this. I would just go straight into the trader success system because it has the introductory components built into it. And as part of the trader success system, you also get, um, as a bonus access to launchpad. Um, so anyone can start with, with the trader success system, but it’s obviously a big, a more, um, more all encompassing program. So if you’ll, if you’re looking at this thing, you know, that, it sounds pretty interesting. I want to get a taste of it. I want to try it out and learn a bit about the markets [00:56:00] and, um, and just get started then that sort of person that would be, um, you know, to get started with system, tried launch pad, and then you can upgrade and, and, you know, if, if you, if you find it’s for you and you love the, the concepts and the ideas, and you want to learn more, then just continue on.
Speaker 3:
There’s a logical curriculum. Yeah. Um, it’s uh, then there’s also the financial consideration. You know, if someone has a couple of thousand dollars to invest and [00:56:30] they’re just getting started, they’re not going to want to, they may not want to go all in for the bigger program at the beginning. I mean, it’s still going to be hugely valuable, even if it takes up a reasonable chunk of your investing capital, because the knowledge that you get and the, um, the long-term benefits of that knowledge is going to pay back hundreds of many hundreds of times over. But, you know, you know, when you’re just starting out and you’ve, you’ve got a couple of thousand dollars of savings, you don’t want to spend too much of that. So, [00:57:00] um, the introductory program is going to be better for, um, someone who’s just starting out on this in investing journey, someone who’s more established and already got investments. Then again, the trader success system is going to, um, be a logical starting point because you’ll get even more value and more information you’ll be able to accelerate much more quickly.
Speaker 2:
Yeah. Okay. Perfect. I think that’s a, I think that’s a good explanation and yeah, I mean, obviously, you know, I’m all about investing in yourself and your knowledge and it a hundred percent pays [00:57:30] dividends back. I mean, there’s no way I would’ve been able to work out trading myself, um, without the actual proven path. And I talk about investing the same people, trying to work out, you know, work it out themselves and guess, um, and it is such a, such a big part of it is the mindset piece, which comes from having a proven path from a mentor, but also the community it’s, it’s a really an, the support obviously, but the community of other [00:58:00] people of it being in your world and it being normalized.
Speaker 3:
Oh no, that’s such a good word. Something being normalized. Yeah. Normalization of, um, certain actions or certain parts of life can work for either good or evil. Right. You know, psychos hanging out together and that normalize a psycho behavior. Um, it’s not really talking about obviously having people who are positive, growing, learning, interested in their development. [00:58:30] Interesting. In becoming something more interesting, making more of their lives, interested in helping others, having that in your environment is huge. Yeah. And one of the, one of the things that are really pride myself on actually, it’s probably the thing that I love most about what I’ve created enlightened stock trading is how the community interacts with each other. If you go on a lot of, um, a lot of groups around trading and investing, they’re quite toxic, you know, people like bragging and then people blaming other people and people asking questions [00:59:00] and other people abusing them for asking stupid questions. My, my group is the absolute antithesis of that, you know, nothing but helpful people, um, all positive all up this thing, no question is too simple. Um, you know, everyone moving forward together, it makes a huge difference. Yeah. And it’s, it’s, it’s, it’s the group that I wanted around me when I was learning. Yeah.
Speaker 2:
Yeah. It really, it does, it does dictate your success. I mean, you know, you’re the average [00:59:30] of the five people you spend the most time with what you feed your mind and that environment. It really does matter. Absolutely. Thank you so much for coming on and having this chat. I’m so glad that we did it. And I, I also don’t think that this is the last time I think that we need to go into a deeper, um, session around, you know, maybe getting a little bit, a little bit more technical about what it looks like in terms of, you know, even talking [01:00:00] about the entire process. Um, but thank you so much for coming on. It’s I think this has been a great conversation and really helps to demystify and debunk a lot of the stuff that’s out there.
Speaker 3:
Yeah, absolutely. I’ve really, really loved it. Thank you so much for having me and, um, look, uh, always very happy to take questions about this. Obviously we’d love to come back and have deeper conversations and explore different aspects of it. Um, so if anyone wants to contact me, I’m sure the details will be around the, this podcast episode somewhere. [01:00:30] I’m very happy to take questions. I have discussions to help people out.
Speaker 2:
Yeah, definitely. I will put the links in the show notes, so they know also where to contact you. Thank you again, and we will be talking to you soon.
Speaker 3:
Fantastic. Thanks so much. [inaudible]
Speaker 2:
If you are not part of the Ms. Wealthy movement yet, make sure you head over to Instagram and hang out with me. There I am at Ms. Wealthy official. And if you need anything else, head to Mswealthy.com and you can get all the info [01:01:00] that you need. Find us on Facebook as well. And I’d also love if you can drop a review on iTunes, it supports us massively, and it means the fricking world
Speaker 3:
[inaudible].
206 – “Systematic Crypto” – Adrian Reid
Andrew Swanscott:
Hello, welcome to BST Live. The show for systematic and algorithmic traders, glad you could join us today, where we’re going to be talking about systematic crypto. Tongue twister. And joining us today is Adrian Reid from Enlightened Stock Trading. Welcome, Adrian. Great to have you here today.
Adrian Reid:
Hey, Andrew. Thanks so much for having me. Super excited to be back on the show.
Andrew Swanscott:
Yeah. Well, you were here, I’ve got this in my notes. You’ve been on the show before. Episode 147, which was in May 2018. So what’s that? Two and a half years ago?
Adrian Reid:
Yeah, absolutely.
Andrew Swanscott:
Wow. So that’s gone pretty quick, because it doesn’t seem like that many years ago. But it’s great to have you back again. If people want to see that show, actually, or listen to it, because it was audio-only back then, that was episode 147, we were talking about building trading strategies with confidence. So that was a good episode, if people want to go back and review that one.
Adrian Reid:
Yeah, absolutely. Definitely worth listening if you’re keen on improving your confidence in your trading systems.
Andrew Swanscott:
Exactly. So today, we’re going to be talking about systematic crypto. My mouth is just warming up. So I’ll be able to say that a bit clearer next time. Before we get started, how about a little bit of background on yourself? Just to give us a bit of context. So, maybe share a little bit about your trading and what you’re trading now, that type of thing.
Adrian Reid:
Sure, absolutely. So I’ve been trading systematically now for, well, it’s pushing 20 years. Not quite 20, probably about 17, I’d say. I’ve been in the market for 20 odd years, but it took me about two to three years to really figure it out and realize that my emotions were just killing my trading results. And so, I discovered systematic trading. And the day I implemented my first trading system, you can see on the equity curve, things turned around. And so, basically, as soon as that happened, I realized I’d found my thing, and I’ve been trading system systematically ever since. I do my best to trade 100% systematically. I have had a few dabbles, usually resulting in losses. And I learned that lesson a few times over and over again, but I’m getting better. And so, basically, for the last 17 odd years, I’ve been trading stocks systematically, developing trading systems to eliminate my emotions, get better diversification, and reduce the time, effort, and stress in my trading.
Adrian Reid:
Crypto came along. And I guess, like a lot of people, I looked at it skeptically, dodgy market, decentralized, no rules, no regulations. And I was a bit, “No, that’s not me. I trade stocks.” But to be honest, that conservatism, maybe in the very early days, was [inaudible 00:03:13] but now, not so much. And I’m really excited to bring the systematic approach, developing systems to trade, portfolio of instruments into the crypto space because it’s just amazing. Such a great opportunity for traders.
Andrew Swanscott:
Okay. Well, that was an excellent summary of all the points I’ve got in my list here to talk to you today. So, thank you very much for that. So how about we get started with, why now? So crypto markets are obviously very hot, and they have been a hot topic for a couple of years now, but I guess relatively new compared to other markets. So why do you think now is a good time to be getting into crypto?
Adrian Reid:
Look, there’s a whole range of reasons. I mean, the first one is the obvious one. There’s a huge profit opportunity for informed traders. And the way you know there’s a huge profit opportunity is if you just look at what the market participants are doing, there’s masses and masses of uninformed, completely new traders who have never traded anything before, who are flooding into the crypto markets. And they’re using social tips there. There’s thousands of people on Facebook trying to ask, “Well, what crypto should I buy? And what’s going to the moon?” And, basically, it’s immature in terms of the masses.
Adrian Reid:
And that’s why there’s an opportunity because if you go way back in stocks, in the early days before there were hedge funds, before there was high frequency, before there was all of this algo trading, it was just dead easy to make money with relatively simple systems. And to be honest, you can still make great money with relatively simple systems, they’ve got to be a bit more elegant nowadays.
Adrian Reid:
But in crypto, because there are so many traders who just don’t really have a structured approach, a systematic approach, which eliminates the emotion inherent in all of that and eliminates the emotion inherent in the volatility of this market, will absolutely crush it.
Andrew Swanscott:
Yeah. Yeah. So I think there’s obviously some opportunity around the way these market participants are acting. Before we get into that, though, can you share a little bit about some of the things that you see traders doing wrong with their approach to the crypto markets?
Adrian Reid:
Yeah, absolutely. I mean, the first and most obvious one is a broad-based adherence to buy and hold. There’s this idea that’s very popular in crypto that if you just buy and hold, you’ll be a billionaire or a bazillionaire, whatever it is. And if you happen to choose the right tokens, that might be true. And if you just held Bitcoin, maybe Ethereum, that might be true. But the reality is this is so new, we don’t really know where it’s going in terms of the market direction. We know that it’s a very strong market. There’s a lot of hype right now. But if you do buy and hold, you’ve got to sit through absolutely gut-wrenching drawdowns. And I don’t know about you, but I’m not a fan of 70%, 80%, 90% drawdowns. It just doesn’t fit my risk tolerance and profile. And so, I think buy and hold is probably the biggest mistake or risk. Because most people will get into that massive drawdown panic, think they’ve made a mistake, and dump it because they just can’t cope. So I think that’s probably the first big one.
Andrew Swanscott:
And they usually dump it at the bottom as well, don’t they?
Adrian Reid:
Well, that’s exactly [crosstalk 00:06:55] creates the bottom is the [crosstalk 00:06:58]
Andrew Swanscott:
Yeah.
Adrian Reid:
The other big thing, I think, is because it’s a new and interesting market, it’s brought in a whole new generation of traders who are yet to learn a lot of the lessons that many of the listeners have probably learned over the last 5, 10, 15, 20 years of trading. Right? And so, there’s a lot of people listening to random people on social media for tips. You go into the crypto Facebook groups, it’s all about, “Well, what should I buy today? What’s going to the moon tonight? How can I get rich next week?” And there’s just no structure in the way a lot of people are trading.
Adrian Reid:
And in reality, we know, if you want to succeed as a trader long-term, you’ve got to have a disciplined approach and you’ve got to have a set of rules that will guide you, that’ll keep you out of trouble and actually be profitable. So listening to those social tips, and pressure, and fads, all of that. And a big part of the crypto market, which makes that dangerous is that there’s a lot of pump-and-dumps in this space. I mean, think penny stocks way back, where one broker might just get hold of a penny stock and really pump it, pump it, push the price up, and then they cash out, and it crashes. It’s exactly what’s happening in a lot of the smaller tokens as well in the crypto space.
Adrian Reid:
So again, if you don’t have a strategy, a set of rules to get in early and profit from the pump, you’re going to end up holding through the dump, and that’s really going to hurt.
Andrew Swanscott:
Yeah. Yep. And so, yeah. So there’s some really good points there that you’ve raised about the things traders are doing that they shouldn’t do and that the wrong approach to the market is obviously hurting them. And you mentioned about systematic trading and having a set of rules. Before we dig into that more, can you just explain a little bit about the ecosystem for systematic traders? Because there’s new tool sets coming out, and data availability, and all these type of factors that, as systematic traders, we need to factor into how we approach it. So can you just give us a bit of an idea of what the space is like now for systematic traders?
Adrian Reid:
Yeah, absolutely. And the first thing to realize is it’s changing very rapidly. Okay? So there’s new tools being developed and released on the market almost weekly or monthly, and so you’ve got to keep on top of what there is. But, fundamentally, there’s the decentralized exchanges and the centralized exchanges. The centralized exchanges are where probably the bulk of the tradable volume and tokens are. And so, I’m trading, for instance, on Binance and FTX, which are two of the biggest. Binance has the highest volume. FTX has the best interface combined with really good depth liquidity of the market.
Adrian Reid:
So the first step is choose the right platform. You’ve got to be really, really careful in this space of the spreads and the cost, because a lot of the exchanges are really just like bucket shops. They charge really wide spreads. They wrap their spread around the spread that they’re getting in. In some other market, they’re offsetting you against or they’re just trading against you. So it’s not just a case of opening up an account with any crypto broker and you get the price of Bitcoin or the price of whatever token you’re looking to trade. I’ve compared quite a few notable exchanges. I don’t want to name names. But I’ve compared quite a few of them and looked at the price, and the bid they ask, and the depth across several exchanges at the same instant. And to be honest, some of them are quite scary. So you really do need to go where the volume is. And that’s why I trade on those two exchanges. So just be mindful that you don’t get reamed by the broker.
Andrew Swanscott:
Yeah, yeah. Yep. So that’s a good point that you’ve made about the choice of exchange, but what other aspects should systematic traders consider? Things like data and stuff like that, what else is there that they need to look at?
Adrian Reid:
Yeah, absolutely. So if you’re going to be a systematic trader, which I think is great for this market because it eliminates all of that emotion. It allows you to cut through and actually have a profitable edge. So I think we’re down with that concept, right? So you need a data source, you need software to design and test your systems, and you need to be able to execute the systems.
Adrian Reid:
To talk about data first, I trade on daily and weekly bars. I don’t trade very short term. And the reason for that largely is lifestyle. I don’t want to spend a whole lot of time doing this. I spend about three minutes. Actually, it took two and a half minutes this morning to do my crypto trading. I ran six systems on daily bars this morning and that’s all it took and I’m done for the day. So you need data. And if you look at each exchange, the problem with the data is that they’ll only publish the data that they have for the tokens that they’ve had while they’ve had them. So it’s hard to get a long time series to design your systems with. And this is the first problem. When I first started looking at crypto, what I found was that you couldn’t really design a system adequately because you couldn’t get a long enough history to get enough bull and bear cycles in your backtest in order to design a system with credibility.
Adrian Reid:
So my first step was to piece together data from a range of different sources to get along the time series, so I could really look at how the systems were performing. But now, thankfully, you can get daily bars for a very broad range of instruments all the way back until inception from an independent data provider. So if you look up Brave New Coin, great source of data, they pull data from a large number of exchanges globally. They clean it, and aggregate it, and publish as a complete database. And you can get the Brave New Coin data from Nasdaq Data, and it’s on daily bars, so it’s not for intraday trading. But really good data set, which we didn’t have just a little while ago. So, that’s the first step. Good data.
Adrian Reid:
Second step is software. And what I’ve noticed in the crypto space, much like Forex, is that there’s a proliferation of trading robots, and algos, and platforms that will allow you to auto-trade and so on, which sounds great in theory, but the big challenge with almost all of them is that they’re pretty simplistic. They’re allowing you to trade one ticker at a time with one system. And what they miss is the ability to trade a portfolio of instruments with the one system.
Adrian Reid:
So in stocks, I don’t trade Amazon, I trade the entire US market and I apply my systematic rules to it. And what’s missing in a lot of the crypto ecosystem now, at least the popularized space, is the ability to trade a portfolio system. And so, what I’ve done is developed systems using this dataset. And I developed using AmiBroker, there’s multiple different trading software you can use, but it’s a portfolio-based backtesting engine. And so, my systems allow me to trade the portfolio of tokens with a particular system. And then, I have a portfolio of those systems to trade. So a portfolio of systems, each trading a portfolio of tokens gives you much better diversification.
Adrian Reid:
So the thing that’s missing and what a lot of crypto traders doing wrong is trying to create a bot, or an algo, or whatever for just one ticker. And there’s not really enough data for that. Yes, it’s possible, but I’d propose that most will have far more success in the long run by having a portfolio-based approach to their crypto trading.
Andrew Swanscott:
Yeah. Yeah. Okay. I want to dig into that a little bit more in a minute. But we’ve got a question about data in the chat, which I think is a very common one here. So it’s from Jeff. Thanks for the question, Jeff. How do you backtest crypto since there is not much history? Are your systems developed off short term back tests? And if so, do you consider them valid?
Adrian Reid:
Good question, Jeff. Andrew, there’s a slide in the pack that we developed. It’s the number six. Can you pull that up?
Andrew Swanscott:
Sure. Here we go, number six.
Adrian Reid:
So what’s interesting about crypto is that the timeframes compared to stocks are really compressed. So the bull/bear cycles are much faster. And so, while we don’t have a lot of data in crypto, we are starting to get a number of bull and bear cycles in the data set that we can test with. And that’s what’s really important because what we need to know is, with our strategy, is it going to blow up and destroy our account when the bull run is over? Because that makes the whole exercise pointless, right? We’ve got to keep our money. We’ve got to keep growing our capital.
Adrian Reid:
So this chart just basically draws a few comparisons. I mean, we’ve got a few years of crypto history now, depending on what data source you get. If you’re use the Brave New Coin data, you can get back to 2017 and start to get a decent breadth of tickers from back then. But during that time, we’ve been through about four cycles, depending on how you measure them. And now, in stocks, if you go back 30 odd years, maybe we’ve got about eight cycles. Again, depending on how you measure them exactly. So, yes, we don’t have as much data, but we’re starting to get there. And so, now, what you can do… Andrew, you can take the slide down if you like.
Andrew Swanscott:
Sure.
Adrian Reid:
Now that we’re starting to get those bull/bear cycles come through, we can develop systems and have confidence in them. But the key is I believe there’s still not enough data to optimize the same way you would in stocks. Because in stocks, you’ve got thousands and thousands of stocks. You’ve got exchanges all over the world you can do out-of-sample testing on. You’ve got 30 odd years of history.
Adrian Reid:
So my approach for crypto systems is a little bit different. What I’m far more interested in is optimizing to ensure the system is broadly stable, pretty much regardless of what parameters we choose. I’m not looking for the best parameters. I’m looking to make sure the system is not going to blow up. So if we take that approach of looking for real stability across the parameter space and only accept and trade systems that are inherently very stable no matter what parameters you choose, then you take those systems and diversify the parameter sets. So you’ve got a bunch of different varieties of those systems. Then, all of a sudden, you’re starting to get a lot more confidence in the way you trade. So long answer.
Adrian Reid:
Short answer to the question is, yes, I think you can develop systems. My systems are on daily bars. The holding period is anywhere from one to two days to four to six weeks, depending on the system. And in those backtests, there’s now many hundreds of trades in the backtest. And if we’re careful on how we optimize and develop those systems and really look for stability, you can actually rely on them.
Andrew Swanscott:
Right. Okay. Because that was my next question. What about sample size? Especially if you’re trading daily bars, then you have a lot less, I guess, data and opportunity for trade. So you look at them across the entire portfolio of instruments that you’re looking to trade? That’s how you assess it?
Adrian Reid:
Yes, absolutely. So, because I’m using daily bars, you do have to look more broadly. So you’ve got to look at the biggest universe you can to get enough trades into the database. And you also need the biggest history it can because you need to make sure you’ve got as many of those bull/bear cycles in your backtest as possible.
Adrian Reid:
So if you have one exchange, let’s say you’re trading on Binance, you could take the Binance data and develop a system and check it works. But this is not enough. You need to look at data from other exchanges as well because Binance will change its universe. And there’s also probably, built-in, some survivorship bias in the universe that ends up on some of these exchanges because they’re filtering for the large-market-cap stocks. So that’s why you want to go more broadly. And I think if you get 400, 500, 600 trades in a backtest, if you design the system to be elegant and simple enough, that can be enough to have a system that’s stable and works real-time.
Andrew Swanscott:
Yeah. And what about the little, I guess, nuances with data? Say, for example, you’re using daily bars. What time does the day end could be different across exchanges, and you test a strategy on one set of data, and then you try it on another. Because it’s decentralized, you get different prices. So what have you found about little things like that? Does that make a big impact in the results?
Adrian Reid:
Yeah. Interestingly, it’s a consideration, but it’s not a showstopper.
Andrew Swanscott:
Right.
Adrian Reid:
And we’ve got a program called the Crypto Success System, which I explained all the nuances. But one of the things that we talked about there was that, the daily cutover, it’s a universally accepted time where the daily bar ticks over. So that’s the same. But even if you use a different timeframe to cut over and you can adjust your data, depending on what data source you’re using, to shift your day, your definition of a daily bar, and then backtest again. So you can actually get slight variations on the data just by saying, “Okay, this is a day. Oh, no. Now, this is a day. Oh, no. Now, this is a day.” And just time shift it a little bit. And that also gives you some extra data to test on. And what we found is, again, if you design the systems, right, simple, elegant, and taking into account the nuance of the way the crypto markets move, and it really doesn’t matter that much.
Andrew Swanscott:
Right. Okay.
Adrian Reid:
Yeah. The key is to understand how your system will work, given the volatility of the market, given the size of the tails or the weeks in the candles. And the way that, sometimes, there’s nice long trends and, sometimes, there’s pump-and-dumps, you need to be able to deal with both of those.
Andrew Swanscott:
Yeah. Right. Yeah. So I guess maybe the next question out of that is what type of systems are you talking about here? You’ve said they need to be simple, and elegant, and they need to take into account the behavior or personality of the crypto market. So what type of things are you talking about here?
Adrian Reid:
Do you want to flick to some of the slides on behavior crypto market? And then, I can talk to what does that mean for the type of systems. Would that work?
Andrew Swanscott:
Sounds good. Yeah. Let me put this on my screen. Here we go. Yep.
Adrian Reid:
So this is a chart of Bitcoin over the last several years. First thing to notice is that the bull markets are very fast and sharp. They don’t last that long, but they are [inaudible 00:21:56] and the market really skyrockets. But after the bull market is finished, there’s typically a very sharp correction and a long period of nothing, which is very painful if you’ve got the wrong style of system. And then, all of a sudden, there’s a new bull market and it rockets up. And then, the same thing again. More pain. So you’re seeing this cycle play out three times on this chart alone.
Adrian Reid:
And so, I think the first thing is my preference is not to be always in the market. If I had, let’s say, the stomach to sit through the 90% drawdowns, then find always in the market might work, but that’s just not me. I’m just not interested. So I want a system that will get me in when the market is moving, but then be very quick to stand aside. So think very carefully about the market regimes that you trade in and when you stand aside. And one of the mistakes that many, many traders make in this space right now, again, because there’s so many new traders coming into the market, is they’re keen to trade all the time. Whereas my approach is patience is what makes you the money. You got to wait for the right conditions. You got to wait for the signal. And so, in my system development, what I’m doing is filtering out a lot of the market phases that I’m just not interested in sitting through. So that’s the first observation. Let’s go to the second slide.
Andrew Swanscott:
Second slide, there we go.
Adrian Reid:
Okay. So the next consideration here is the declines are really sharp and sudden. So from an all-time high, you can go a straight into a 50% decline that happens over the space of just a couple of weeks or less. So the key here is you want your systems to be fairly nimble. Okay? So we’re not going to use ultra-wide trailing stops and trend follow like you might in stocks and get really great returns in stocks, because it just won’t work here. You’ve got to get out more quickly. So, yes, trend following works, momentum works, but you need to have some cleverness in the way you that you exit because the market does turn around pretty sharply. And you’ve got to be careful of the [inaudible 00:24:04] when the market’s in a consolidation range. So a lot of people will [inaudible 00:24:09] bottom. A lot of people will say, “Oh, it’s over. We’re making money again.” But really, it’s just a big rally in a sideways market. So it’s easy to get tripped up by that. Let’s go to the next one.
Adrian Reid:
This is just an illustration of the pump-and-dump style move. And I think everyone knows what the term pump-and-dump means, but in this space, it’s phenomenal how often it happens. And so, out of nowhere, people can start pushing a token and it rallies. You see here on the left, an example of a 500% rally. And on the right, almost similarly big one. And this skyrockets, and then disappears to nothing. Now, if you get on these early enough and you have a profit take in the market, then you can actually make a huge amount of money very, very quickly with this style of move. So you don’t need to be fearful of the pump-and-dump. You just need to be nimble.
Adrian Reid:
And so, I’ll buy on a lot of the systems are entering on breakouts, and I know you love breakouts. But if you have a profit target in the market to get you out and be willing to get out before it really looks like the high is in, then you can make a lot of money from moves like this. So you can either sit through the drawdown and go, “Okay. Well, that was a pump. It wasn’t a trend,” or you can actually set the exit so that you can profit from these and increase your capital as they come along. You’re not going to know the difference in many cases in real time. So you want to combine the concept of momentum breakouts with exiting on strength at times, and also a nimble exit if strength collapses.
Andrew Swanscott:
Yeah.
Adrian Reid:
And then, let’s go to the next one. So one of the interesting things is because of the amount of social chatter [inaudible 00:26:06] and social interactions going on in this market, there are very short-term hype events and short-term fear events as well. And so, what you can see on the charts is really big upper, and also lower weeks on the candles. And so, I don’t use, for instance, in-market stop-losses on this because the lower weeks are very big and, very frequently, they just get hit and it bounces straight back up. So I’ll use a slower exit to cut my losses. I still cut my losses, but I’ll wait for the market close… Well, the tick over of the daily bar and exit then rather than exiting on a stop-loss in the market, because it’s just too often do your stops just get hit.
Adrian Reid:
But the opposite’s actually true of your profit target, because you’ve got these massive upper weeks, assuming you’re trading along, if you’ve got a profit target in the market, then every so often you can blink and you’ve got a 250% profit on a trade and say, “Oh, profit target got hit. Okay. But now, it’s way back down there. Okay.” But it happens. And it happens over and over again. So a system that takes advantage of that move is quite powerful as well.
Adrian Reid:
Probably, the last one, let’s just look at the last slide here. There’s a huge amount of hype, like I’ve said a few times, and new initial coin offerings coming all of the time. There was a big boom in this back in 2017, which I missed. I wasn’t in the crypto market back then. But here’s the danger of the hype and also of buy and hold. If you found the next big thing and you bought it, expecting it to go to the moon, you might get some initial excitement, but most of the projects have really no future. And so, the token would just disappear, [inaudible 00:28:00] away to nothing. And so, if you bought that, at the left-hand side of the chart, expecting to make millions, then on the right-hand side of the chart, several years later, you’re left holding this dud and wondering what happened. So, again, buy and hold is not so great. You want to get out when it’s clear there’s no more momentum in that market.
Andrew Swanscott:
Yeah. So let me just switch the slide off. So most of your strategies are really momentum-based. Is that what you’re saying? Is that-
Adrian Reid:
Look, momentum works really, really well. So, yes, I have momentum strategies. But I’ve also got rotation strategies, rotational momentum that works, not always in the market, mind you. So rotational with a regime filter, and I’ve also got mean revision systems that work. So, basically, what I’ve found is that, because it’s such a new market, because it’s still so emotionally-driven, a lot of the concepts that have always worked in stocks and maybe might be eroding a little bit now because there’s so much smart money, and high frequency, and so on, a lot of those strategies can be adapted for crypto really, really well. And that’s basically what I’ve done in the program I put together with a partner. I worked with a partner, [Adam Feldman 00:29:16], on the Crypto Success System. And we built some systems specifically to take into account all of those nuances of the crypto market. And what that allowed us to do is have a really big, broad, diversified portfolio. And we’re on the verge of fully automating the portfolio-based approach as well, which is pretty exciting.
Andrew Swanscott:
Yeah. Yeah. So it sounds like, from your examples there, that it’s very important to consider the top-of-market environment or the regime. And there’s a question here, actually, in the chat, I might just put this one up here, from Simba. Here we go. Simba would like to know, “Hey Adrian. Have you had much luck with developing a regime indicator? Do you just tend to use Bitcoin as a bellweather for the market?”
Adrian Reid:
Yeah. Look, I do use Bitcoin as the regime filter. There are other ways you could do it. There’s other indices. But to be honest, Bitcoin dominates so much of the market cap of the entire market right now. Not all of it, but a lot of it. That really has been a great… as a regime filter so far. Now, for exactly what indicators to use as the regime filter, that’s something you’re going to have to test. What I’m going to suggest is we don’t have a lot of data. I think we said four bull and bear cycles that we’ve got meaningfully in our data right now, something like that, depending on how you define bull and bear.
Adrian Reid:
And so, you’ve got to be really careful with your regime filter, not to curve-fit the regime filter, which is a big trap, right? Because let’s say you have a regime filter that turns your system on and off four times. And it works amazing. And you optimize that regime filter and you get this really great-looking equity curve, and you think, “Oh, I’m cool because I’ve got 500 trades in my database, and this regime filter really makes it amazing.” Actually, no, you’re in real trouble here. Because you’ve optimized something [inaudible 00:31:20] basically for data points for on-offs, which is a real big mistake.
Adrian Reid:
So for the regime filter, the important thing is to make sure that the regime filter works very broadly, no matter what the settings. And this is what I was talking about earlier, the stability of the system. We’ve got to make sure that we are not curve-fitting. And maybe you have one system with a regime filter of X, and you have another system with a regime filter setting of Y, intentionally. Not because X or Y is better, but because you want to build in that diversification, because we don’t really have enough bull/bear cycles yet to properly tune a regime filter.
Andrew Swanscott:
Yep. Yeah. That’s an excellent point. We’ve got a question here from AW, which is two questions in one. First of all, is your crypto approach even applicable to the future’s market considering it’s a one-or-none contract? And I guess maybe the second part is about holding overnight or over the weekend. So what do you say about that? Does it apply to the futures markets?
Adrian Reid:
Yes. I mean, first of all, I don’t trade futures. I trade stocks and crypto. So I’m not sure that my comments are going to be that relevant. But I would say anywhere where you’re trading a single instrument and struggling for diversification, the portfolio approach can really help. The challenge in the futures markets is a lot of the contracts are really big. And so, unless you’ve got a decent-sized portfolio, it’s hard to trade a portfolio system. I mean, to meaningfully trend following futures with a broadly diversified portfolio, that’s tough. I mean, getting easier with the micro contracts and so on.
Adrian Reid:
So I would say it’s more applicable to crypto. And the reason is the minimum trade size is basically there is no minimum. And so, even if you’ve got a small portfolio, a couple hundred, a couple of thousand bucks, you can still get a really good diversified portfolio using a portfolio system in crypto that you just can’t do in other markets. And so, this is why when someone says to me now, “I’ve got $500, I’ve got $1,000, I’ve got $2,000. What market should I start in?” Well, the answer is crypto. Because the opportunity is the best. The systems have the most amazing edges and the diversification potential for a small account is phenomenal. And so, that’s why it’s so exciting for a new trader, if you are systematic.
Andrew Swanscott:
Yeah. You’re touching a little bit on risk there, which is one of the hot topics for traders when they talk about cryptos, the risk and the volatility. And so, I mean, you just spoke a little bit about having the opportunity to take very small position sizes, but how do you think traders should look at risk and volatility in the crypto space?
Adrian Reid:
Good question. Thank you. There’s a couple of parts to it. There’s catastrophic risk, and there’s system risk, and then there’s position risk. So we’ll need to cover each of those individually, if that’s okay.
Andrew Swanscott:
Yep.
Adrian Reid:
So, catastrophic risk. You can’t deny that the regulation in this space is evolving rapidly, if I can get my words right. And so, what you can trade in one country from one week, to one month, to the next can change. And also, the future of particular tokens or parts of the market can change over time. So you want to be really cognizant that you might need to be nimble with your strategy, your portfolio, and get out if the market turns down. It’s an immature market, so there’s a lot of market shock potential. We’ve seen some very sudden declines. And so, you want to think pretty carefully about your risk profile and your catastrophic risk tolerance. For me, if I think about my whole portfolio, no matter what happens, any conceivable event that I can dream up, I want to be able to trade the next day and still support my family. That’s my threshold of what catastrophic risk I’m willing to tolerate.
Adrian Reid:
Now, what that means is when I think about something like crypto, I’m not putting all of my assets in that, however tempting it is. However amazing the returns are in the systems I’m developing, they’re just a part of the portfolio. And I think that’s important because people see the dollar signs and just go all in. And particularly, a new trader with very little experience, that’s really dangerous. And then, you combine that with a 10, 50 times leverage that the exchanges seem to want to give you, and, instantly, people are just blowing up. So catastrophic risk is huge.
Adrian Reid:
You also want to think about the exchange risk. So I wouldn’t put all my money on one exchange. I am trading actively. So I can’t use cold storage because I’m in and out of the positions fairly quickly, and that’s a bit cumbersome. But in order to protect myself a little bit there, what I’m doing is I’m using multiple exchanges. On the exchanges that offer leverage, I’m putting some of my assets on there and using leverage and keeping some of the cash separate out of the market. So that’s to make catastrophic risk protection.
Adrian Reid:
The second part of the risk management is the systematic risk. The risk of your systems failing. And this is important because the market’s evolving rapidly. And we’re seeing new participants entering. There’s ETFs coming, and there’s broader and broader acceptance. And so, the nature of this market may change over time. Well, it will change. How quickly, [inaudible 00:37:10] yet to be seen. But you want to know that you have a broad portfolio of systems, so that if one of them fails, you can close it and keep trading with the others and monitor those pretty closely. So backtesting weekly and evaluating, “Okay, are the stats doing what they’re supposed to be doing? Is this behaving as I think it should, given the market conditions?” So I’m not trading one system. This morning, I ran six and I’m developing new systems all the time. And so, my goal is to keep building that portfolio of trading strategies so that when one fails, because the market dynamic shifted a little bit, it doesn’t actually matter that much. So, that’s system.
Adrian Reid:
And then, the last one is the individual position risk. You just can’t afford in this market to get married or fall in love with one position. People talk about, “Oh, this is going to change the world,” and, “This token is going to revolutionize everything.” And maybe it will. But trying to call it now is like going back to when the automobile was first invented and saying that it was going to be Ford and General Motors that survived. I mean, who knew? No one knew, but there was hundreds and hundreds of car companies. And the same, again, with aircraft, when the aerospace industry took off. Same thing. Massive proliferation of people trying to crack it and change the world. And then, same again with the dot-com. And most of those aren’t here now either.
Adrian Reid:
So the same, and probably more so in the crypto space, is we just don’t know which ones are going to succeed. And so, if you buy one and heavily concentrate your portfolio with a couple of tokens, and they happen to be the ones that change the world, congratulations, you’re probably going to be a billionaire. But you’ve got to think, what if I don’t? What if I don’t pick the right ones? What if the five that I pick are the duds and I end up with nothing?
Adrian Reid:
My approach to trading is I want maximum probability of a certain outcome, not maximum profit potential with a small probability. Yeah. I’m much more interested in a degree of certainty about what results I get. So therefore, a portfolio of systems trading a portfolio of instruments with a very low reliance on any you one ticker is what gets you there.
Andrew Swanscott:
Right. Yeah. And I guess as well that you’re talking about which cryptos to trade, I don’t know the exact number for today. It’s changing all the time. Right? Cryptos are coming and going.
Adrian Reid:
[inaudible 00:39:52] thousands and thousands that you could.
Andrew Swanscott:
Yeah. So do you have some filter to say which ones you would even consider? How do you manage that?
Adrian Reid:
A lot of that is built into the design of the strategy, the system that you’re trading. Right? And so, you need to look at the charts and the exchanges, and look at the spreads and the volatility of the tokens, and create rules to get rid of the garbage. Because, I mean, it’s the typical trap. Let’s say you backtest a system with no commissions and no liquidity filter, and you can design an amazing system. Looks fantastic. And you think you’re going to be rich next week. But the reality is the spread, and the slippage, and the commissions are going to kill you. So instead, design a system with strict criteria for how liquid the tokens are and just ignore everything else. Yeah, there’s going to be a bit of FOMO, “Oh, I didn’t get into that [inaudible 00:40:57] for the cent token that went to [inaudible 00:41:02] for the cent,” and got rich. You’re going to miss that. But it’s okay because you’ve got a higher level of certainty that the outcome will be good long term.
Andrew Swanscott:
Yeah. Yep. Speaking of liquidity, I guess one of the unique features of the crypto market is that it’s 24/7. So do you find that you need to consider liquidity on the weekends or out of popular times of the day, that type of thing? Is that a factor?
Adrian Reid:
Look, it definitely will be the bigger and bigger the account gets. I mean, I’m not trading tens of millions of dollars in crypto because it’s a small part of my portfolio. So I’m finding that with a decent-sized portfolio, you can get in and out any day of the week, without too much trouble, provided you’ve got the right liquidity requirement on the tokens you’re trading. Right? And that’s all built into the system. So, for me, it has to trade many millions of dollars a day worth in order to make the cut. And so, you can usually get in and out, and because I’m so diversified and the positions are so small, it’s pretty straightforward. If you were trying to move a whole portfolio in and out, then, yeah, that’s going to be a problem. There’s some interesting price behavior that’s a little different on the weekend, which I haven’t yet developed systems around. But not something that, really, you need to worry about as a showstopper getting into the market.
Andrew Swanscott:
Yep. Okay. A little bit more on risk here before we move on. There’s a question in the chat from a Asindu about handling risk. Do you follow it a market-neutral approach or stop-loss?
Adrian Reid:
Look, I’m definitely not market-neutral. I’m [inaudible 00:42:48] So if the market [inaudible 00:42:51] my portfolio is going down, but I do have stops in all of my systems. But I also have price behavior-based exits or indicator exits as well. So depending on what the market behavior looks like, I’ll definitely get out to protect myself. But in every single system that I’ve developed in this space, there’s a stop-loss that it will basically get you out in the case of a disaster, if all else fails. And I think that’s the key. You don’t want to be left holding the bag. You don’t want to turn things into a long-term hold in this space.
Adrian Reid:
In stocks, again, you see it over and over again. People go, “Oh, I missed my exit,” or “I didn’t execute my stock.” Oh, don’t worry. I’ll just put this into my long-term portfolio. And in 10 years time, it’ll be okay. Maybe it’ll come back and I’ll get out break-even. In this space, so many of the tickers are going to go to zero that you just can’t afford to do that. So you need a fail-safe exit to get you out.
Andrew Swanscott:
Yep. Okay. Thanks, Adrian. Another question in the chat here from AW. What are you using to trade such a wide basket of exotic cryptos or exotic [inaudible 00:44:04]?
Adrian Reid:
Look, I don’t want to give the impression I’m trading this massive, massive universe. I’m trading on Binance and FTX, right? So they’ve both got a pretty broad range in the vicinity of several hundreds, but not thousands, right? The trouble with the more decentralized markets where you’re going to get all the really exotic things is that the depth is low, the commissions or the spreads are going to be high, and it’s going to be pretty hard to make good money repeatably in that space. I’m not adverse to developing systems in that area, just like I’m not adverse to trading penny stocks. But think about it, the same thing. I’m not going to put all my stock money into penny stocks. I’m not going to put all of my crypto money into really exotic off-exchange tokens. But right now, what I’m doing is I’m trading fairly high-volume tokens on Binance and FTX, which gives you more than enough diversification, because between them, there’s many hundreds of tokens you can trade.
Andrew Swanscott:
Yeah. Okay. Thank you. Oh, we’ve got a comment here from [Tab John 00:45:12] from Poland. It’s 2:00 AM when you posted that. So, thanks for the commitment, [Tab John 00:45:17]. Well done. If there was a prize, you’d win it. But, okay. Here’s a question about intraday. I know you mentioned that you only trade daily and weekly. Have you actually looked at intraday?
Adrian Reid:
I have not. So, look. Strong hypothesis is that, yeah, absolutely, a systematic approach would work intraday. The trouble is the platform. The ecosystem, I don’t think is really up to trading a portfolio approach intraday just yet. I mean, probably, with a little bit a work and a stretch, I could use the current platform that we’re on, AmiBroker-based systems, with a live data feed running intraday. Possible. But when your systems backtest in the triple-digit annual return space with drawdown of 20%, 30%, 40%, I don’t really feel the need to trade more frequently, to be honest. I mean, maybe you could make more money. But it’s not really my thing. I’ve never been an ultra short-term trader.
Andrew Swanscott:
Okay.
Adrian Reid:
But don’t dismiss it. If you’re into it, definitely look into a portfolio-based approach to trading systems intraday. I think it could work.
Andrew Swanscott:
Yep. All right. We’ve got a question here from Jeff, and then we’ll start wrapping up soon. Let me just put this one up on the screen. Turtle system’s worked for many years for markets that trended and in markets without much history. What are your thoughts on using turtle system on crypto?
Adrian Reid:
Yeah, good question. Look. Whenever I had a student who asked me a question like, “Oh, what do you think of this rule or this system?” My answer is always the same. It’s backtest it and see. And, look, I’ve backtested breakout systems like the turtle, not the turtle system per se, but breakout systems like that, and there’s definitely some potential. But because of the nuance of the way crypto moves, you can achieve a lot more by taking into account those nuances and tailoring the entry and exit rules around that. So, yes, start there, but also look at all of the systems that you’ve got in other markets and apply them to the crypto market and see how they do. Actually, it’s probably a good time for one last slide, Andrew, if we’ve got time. Just this morning, I was mucking around in preparation for this session. And I took one of my existing stock systems. That’s slide seven there, if you’ve got it, Andrew.
Andrew Swanscott:
Yeah.
Adrian Reid:
I took one of my existing stock systems, unmodified, and I just took out a couple of components of the system that were not relevant to crypto, and I applied it to my data set and backtested it. It’s like, “Oh, I didn’t reoptimize it. I didn’t change the rules. I didn’t change the structure. And to be honest, it’s amazing.” And this takes into account slippage and commissions, and it takes into account liquidity requirements. So it’s got a several-million-dollar-a-day turnover filter. So actually quite tradable. Is it the best system that we’ve got? Absolutely not. I’ve got way better systems than this that I trade myself in, that are in the program. But the point is if you’ve got systems in other markets, take them and apply it and test it, and see what’s working and what’s not, and then work with that. You don’t need to reinvent the wheel here, which is the great thing.
Andrew Swanscott:
Yeah. Well, we’ve actually got a good question here from Simon to dig a bit deeper into that comment you just made. What are the most significant things you have had to change in your approach to system building as you adapted from stocks to crypto?
Adrian Reid:
Yeah. Good question, Simon. Nicely done. Look. The first one is that the markets turn around very quickly, particularly at tops. So I’m much more nimble in my crypto systems than I am in my stock systems. In the stock systems, I’m typically a long-term trend follower, and I give them a lot of room to move. But in crypto, you want to be much more nimble and exit much more quickly.
Adrian Reid:
Second thing is the timeframes are massively compressed compared to most other markets. So the bull/bear cycles happen more quickly. So your system settings will typically be shorter-term than they would be in stocks or in other markets. I mean, take, for example, a breakout system in the stock market, you could very easily trade profitably with a 200-day breakout. But in crypto, 200 days is a very long time. So maybe looking at 20 or 40 days, or 50 days, maybe at the outside. So shorten them up.
Adrian Reid:
And then, take into account the price behavior of the weeks and the pump-and-dump nature of the markets. If you take all of those things into account with your rules, you can do a lot better. So that’s why I said earlier, I don’t use in-market stops because they just get hit too often. And profit targets in the market can be very, very profitable if you know where to set them. And long-term systems that bank on big trends going forever are probably not as good as nimble systems in this market.
Andrew Swanscott:
Okay. Thanks, Adrian. We’ve got a question here from Christopher on statistical edges. Is it a bad idea to use historical data before mid 2016, since futures and perpetual swaps changed the nature of the market around that time?
Adrian Reid:
Yeah. Look, it’s a good question. And I think you’re right. That’s risky. And what’s interesting, the bulk of the data that’s available is post that period anyway. And the futures and perpetual swaps are in a small part of the market. It’s not like you have those contracts on every token. So I think you want to take it into account. I would be very suspicious of a system that performed astronomically well in, say, 2016, 2017, that has since died or has since been lackluster. Don’t trade a system like that expecting to have another cycle like you did back then, because the market has moved on. Pardon me. But there’s still huge opportunity. And I’ve backtested systems where it did work very well in those bull markets back then, but it still works well in the last couple of cycles, showing that it’s not a showstopper. The market dynamic or structure hasn’t changed that much. So it still works.
Andrew Swanscott:
Yep. Okay. Thanks for that one, Adrian. Let’s take [inaudible 00:51:52] question from Mike. And before we start finishing up for today, so it’s from Mike. Are your systems robust or simple with few parameters?
Adrian Reid:
Yeah, absolutely. They have to be because we don’t have a lot of data. Instead of simple, I’m going to use the word elegant. Okay? Because you’ve got to be careful here between a simple system, which is simplistic, moving average crossovers, simple system channel breakouts, that sort of thing. Simplistic. And elegant, where there’s a bit of nuance to take into account the way the market moves.
Adrian Reid:
So, yes, they’re simple, but they’re elegant in that they’ll adapt to the way that the crypto market moves and profit from that. Few parameters, and the critical thing is when you’re developing the systems, you’re not optimizing to get the optimum result. You run your optimization to check that the system performs well, pretty much no matter what value you choose. Because we don’t have a lot of data, you’ve got to make sure the system is really, really robust to the parameter settings. So if I have a system that works with a setting of 50, but it doesn’t work with 60 or 40, then it’s going in the bin. But if it works with a setting of anywhere from 20, 30, 40, 50, 60, 70, 80, then maybe it gets a look at. That’s really, really important just because of the data problem.
Andrew Swanscott:
Yep. Okay. We’ve got a question here from Tim. I think we’ll finish up on this one. This is a good question. “Adrian, can you outline your system development environment and execution workflow? How do you code and do you manually auto-trade these systems?”
Adrian Reid:
Okay. Yeah. Look, there’s a lot in that. Okay? So the environment, I’m using data from Brave New Coin. I’m using AmiBroker to backtest the portfolio systems. The whole development process, we don’t have time to go into here. But, basically, it starts with a hypothesis concept based on observation of the market. So I’m looking at market behavior saying, “Okay, I’m seeing this type of behavior over and over again. What type of system would capture that?” And then, I’m developing the system based on that hypothesis to see if I can build something profitable out of it.
Adrian Reid:
So execution-wise, what I’m doing is when the daily bar ticks over, I’m updating the data and I’m running the system immediately, and I’m placing the orders. Right now, I’m doing that full order. But that’s only new this week, right? So up until last week, I was trading these manually. So you update the data, it takes a couple of minutes to pull down the entire data set, import that into AmiBroker, run the backtest to generate the buy and sell signals, and then go to the exchange straightaway and place those orders. So that whole process takes just a couple of minutes. The rate-limiting step is the data download, which, now, we’ve got down to just a minute and a bit. So that’s quite good. The market doesn’t move that much in that time. So we’re getting really close to the opening price, which is what the backtest assumes.
Adrian Reid:
Now, I’m trading now on full-auto. There’s still a few bugs we are working through. But from start to finish, on full-auto, it’s taking about two minutes to run six systems and across trend following, momentum rotation, mean reversion, across a portfolio, the entire universe, that Binance trades. So it’s really quite quick and pretty exciting that you can do all of that on automatic.
Andrew Swanscott:
Yep. Okay. Thanks for sharing that. So there’s a few more questions in the chat, but we’re just about out of time. So how can people get in touch with you if they have more questions?
Adrian Reid:
Yeah. Great. So there’s a couple of things. First one is I’ve put together a little package for people to benefit from what I’ve learned in the crypto market. The first one is I’ve put together a crypto acceleration bundle, which is the 20 killer crypto trading mistakes, a couple of articles, and a course to get your mind right about how to approach trading. So you can get that at go.enlightenedstocktrading.com/crypto. You can also just go to my website, enlightenedstocktrading.com, or email, [email protected]. Love to hear from any of the listeners.
Andrew Swanscott:
Yeah. Okay. Well, thank you very much for preparing that for the listeners today. It’s much appreciated. So is there anything else that you wanted to mention before we wrap up? Because I know you’ve shared a lot of stuff. Is there a way you can summarize that in 30 seconds to a minute?
Adrian Reid:
Yeah. Look, the big thing is just because the market is new, you don’t have to throw your long, hard-earned discipline out the window. Okay? A systematic approach works and it eliminates the emotion. Now, the challenge is, in crypto, the volatility of the market is bigger than pretty much anything else. You can blink and something has moved 40%, 50%, 60%, 100%. And so, with that, comes emotional fluctuation, which is why you need a systematic approach, which is why I think this is so important, because most people will blow up due to their emotions. Adopt a set of portfolio systems like this, reduce your risk, trade many small positions, and you’ll be right.
Andrew Swanscott:
Yep. Okay. Well said. That’s an excellent way to finish up today. So thank you very much, Adrian, sharing with us all your knowledge and insights on crypto. It was great chatting to you. And thank you, everyone, who participated today. Thanks for joining us. We had a lot of great questions in the chat. So thank you very much. And don’t forget to hit the thumbs up on this video, and hit subscribe and the bell icon so that you’re notified every time we share some new information. So thanks again, everyone, for joining us today. We’ve got a couple of thanks in the chat as well. So, excellent work. Cheers, Adrian.
Adrian Reid:
Thanks so much, Andrew. And, everyone, please do like and share the video, and also the Better System Trader podcast. Andrew puts in such a lot of work to bring this to you guys. So please support it and make sure you tell your friends about it.
Andrew Swanscott:
Excellent. Thank you very much for that little plug too, Adrian. I appreciate it.
Adrian Reid:
Thanks, Andrew.
Andrew Swanscott:
All right. Take care. Thank you very much. Cheers.
Adrian Reid:
Bye.
Andrew Swanscott:
Bye.