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Transcript of Adrian Reid’s Interview On The Market Adventures: The Journey to Financial Freedom podcast

How To Make A Profit Trading Stocks w/ Professional Stock Trader Adrian Reid Pt 1

Alex Cunningham:

Hey, Alex here, and you’re listening to the Market Adventures podcast. We have a great episode for you today. I have Adrian Reid with us today. He’s a full-time private trader. That means he doesn’t trade for any type of firm or hedge fund or anything. He trades for himself at his own house, right? He’s a full-time private trader and a stock trading coach. And he’s based in Australia. He’s the founder of the Enlightened Stock Trading, which is a company which focuses on educating and supporting traders on their journey to profitable systems trading. And he actually gave us some free courses.

Alex Cunningham:

If you go to the link in the description and you can get some free courses and put your name, and I think your email address and those get sent right to you. I’ve even done it myself. So we’re going to jump right into the episode so you can get as much as Adrian has to share with us. This is part one, and you’re going to keep coming back for this series to get as much inform from Adrian as possible. So we’re going to jump right into the show right after we give a shout out to our sponsor, Anchor.

Alex Cunningham:

Do you have something to say, do you have a message you want to get out to the world? Or do you have something that you’re just super passionate about, maybe cooking or traveling? Well, you can start a podcast. I use Anchor by Spotify. It’s the easiest way that I’ve found to make a podcast. It has the tools that allow me to record and edit my podcast, right from my phone or computer. And again, it’s all in one place. And when you’re hosting on Anchor, you can distribute your podcast on listing platforms like Spotify, Apple Podcasts, and many more. So if you have something to say or a story to tell or something you really love to talk about, you want to be on Anchor, right? And it’s totally free, which is the best part of all. So download the Anchor app and go to anchor.fm to get started today.

Alex Cunningham:

Adrian, go ahead and introduce yourself.

Adrian Reid:

Hey there, Alex. Thanks so much for having me. Look, I’m a private trader. I’ve been a private trader now for just about 20 years, which is pretty amazing when I think about it. I started trading, whoa, when I first started in the workforce, really, because as soon as I got my first job, I just knew that I did not want to do that forever. So I started trading and fumbled my way through it. Like everyone else, it took me three years to figure out how to get profitable and consistent. And we’ll talk about how I did that, I think in the rest of the interview. So I won’t go too much into it here. But when I identified the one thing that finally worked for me, my results turned around on a dime. And so here I am, 17 years later, I’ve been trading all that time. Never blown up an account, have consistent sort of long-run returns and sleep very, very well at night.

Adrian Reid:

So, that’s my trading. It’s all systematic again. I think we’ll get into that probably in the conversation. I’m married, got three kids. One of them is grown and moved out. The other two are still in high school. And so a lot of time is just trading and family. And then the rest of my time is training students. And that’s basically me in a nutshell.

Alex Cunningham:

Nice. And you like this work, I presume better than what you were doing before.

Adrian Reid:

Oh yeah. I mean, one of the best things in the world is when you can make your money doing the thing that you love and you enjoy and talking about the thing that you love and enjoy. I left the corporate world in 2012 and I left that year, a very, very stressful job in finance and strategy. I was working 12, 14 hours a day, six, sometimes seven days a week. And it was a real nightmare. It was killing me. I was exhausted. I’ll blame the gray hair on that, but in reality it’s probably just age.

Adrian Reid:

But that year, I made more money trading than I did in my job. And my trading was taking me 20 to 30 minutes a day. And my job was taking me 14 hours a day. And for me, that was a very clear sign that something had to change. And ever since then, I think about trading, I do my own trading. I teach others trading. And obviously trading is the thing I love far more than doing corporate finance and month end and strategy and board papers and ugh, hate that stuff. Trading is definitely my thing.

Alex Cunningham:

Yeah. I mean 30 minutes beats 14 hours every time, right?

Adrian Reid:

Yeah, no doubt. Yeah. Look, the key is just getting to that point, right? You’ve got to find a way to create the lifestyle you want. I started trading with this systematic style, which takes only 20, 30 minutes a day because I was so busy at work. I didn’t have much time. And most people listening probably don’t have much time. But if you get a strategy and a process, a trading approach that works and is only a very small amount of time each day, then you can fit it in. And then when you grow your account and as you get yourself free, which happens over time as you compound and grow and get more capital and all that, then you can leave the day job. And you’ve got all this spare time. So I had time for my family. I had time for friends and I had time for teaching and showing what I knew with others. And I didn’t feel a need to fill my day with trading and staring at the screen. That would be crazy, because that’s just like another job.

Alex Cunningham:

Absolutely. I mean, I don’t know how familiar you are with TikTok now, but a lot of the social media is that, where it’s got, you got the kid and he’s got 17 screens up. And it’s like, this is his life. And he’s in an office and you, well, what are you really trading an office for an office for? You’re saying 30 minutes, get it in. And this is what you’ve worked your whole life to be able to work and enjoy the rest of your life, right?

Adrian Reid:

Yeah. That’s exactly right. Look, trading is not easy. I’m going to tell you it’s pretty hard, right? It’s probably one of the most competitive environments in the world.

Alex Cunningham:

Absolutely.

Adrian Reid:

It doesn’t mean you can’t win it though, right? But I don’t feel a need and I don’t think anyone listening should feel a need to put themselves into a stressful environment, 12 hours a day or more staring at screens. There’s far easier ways to make money. One of the biggest misconceptions that people have coming into trading is, oh, you’re a day trader or, oh, if you want to trade, you’ve got to be a day trader. That’s how you trade for a living. They’ve got this job mentality, I’ve got to sit there and trade all day.

Adrian Reid:

But the reality of day trading is that most day traders, people who trade intraday, short term, buy, sell, buy, sell during the day, most of them don’t make money. Most of them are highly stressed and most of them quit and leave the game behind and go back and get a job, right? It’s far easier to trade longer time horizons and have a systematic approach, which really eliminates all of that stress, eliminates the need to look at the charts every day and have that job mentality where you’re sitting, staring at 17 screens and worrying about every single tick that goes through the market.

Alex Cunningham:

So I mean, now we know how much you love trading. You can hear it in your voice. I mean, you just, you love the… I think you’re going to be super excited to explain the simple parts of it because it sounds like that’s kind of in the undertones of what you’re saying. But why the stock market? I mean, you’re in Australia, right? I mean there’s real estate out there. You’ve got land, people want to go there. You could start a small business, right? I mean, you were in corporate America. So we X that out, but why not something else? Why stocks?

Adrian Reid:

Good question. Look, I’m not going to tell you stocks is the only way to make money. That would be foolish, right? Clearly that’s not true. You’ve got to have a passion. And if you’re going to spend time and years of your life doing something, you’ve got to love it. I mean, I have real estate. I have multiple houses, but I don’t love real estate. In fact, there are bits about it that I just despise. I hate it. I don’t like having to deal with repairs and maintenance and all of that and all the contracts and the slowness of the transactions. It does my head in, but it’s a necessary part of a whole portfolio for financial freedom. So I have real estate, which is very low maintenance. It doesn’t require me to do much. It’s managed by someone else and so on, right? I’m not going to get in there and be a developer. I don’t like fixing things. I don’t like getting calls in the middle of the night. I don’t like hunting around for houses. So, that was off the table for me.

Adrian Reid:

When I was working, I didn’t have time to do a side hustle job. I mean, I figured out trading and I happened to start in stocks. I could have started a business, but I was earning $200,000, $250,000 a year in my corporate job. The idea of giving up that to go start a small business that has huge volatility, lots of stress and probably longer hours didn’t excite me, right? So I had my job. It was a great career and I was on the career path. My backup plan and my plan for ultimate freedom had to fit in with this. And so trading systematically 20 to 30 minutes a day, following the rules each day, basically cranking the handle and following the process fit in with that corporate job and allowed me to build my account, build my wealth separate from my career. And I didn’t need to go start a business. I could have equally done real estate and I probably should have done more, but I don’t love it as much. So here we are.

Alex Cunningham:

And that’s the great equalizer, is that love, right? You could have a huge real estate portfolio. I’m sure by now, if you’re making X amount of dollars in stocks, you could put it all into real estate and just buy up land all over. But like you said, there’s a fine line between money and time, right? How much money do you want? And then how much time are you willing to sacrifice for that money? And real estate does require that other half of the equation that you’re just not willing to give up [crosstalk 00:10:17].

Adrian Reid:

Yeah, that’s exactly right. Also, when I started with stocks, I had 7,500 bucks. It’s not really enough to go out and start establishing a big real estate portfolio. So one of the great things about trading and now with crypto it’s even better is that you can get in with a really small starting capital.

Alex Cunningham:

Low barrier to entry. Yeah.

Adrian Reid:

Low barrier to entry. Now, low barrier in terms of placing a trade, not low barrier in terms of making a profit, right? Two completely different things.

Alex Cunningham:

Absolutely.

Adrian Reid:

The barrier to entry, to place a trade is you need an account. You need a little bit of money. The barrier to entry for making a profit is a bit different. You need a set of rules that work, and you need confidence in those rules. You need a process to run those rules. You need to systemize all of that so that your emotions don’t get in the way. And then you need to diversify. If you do those three things, daily process, systemize, diversify, then you can start making money.

Alex Cunningham:

You sound like a student of Mark Douglas. I don’t know if you know who that is.

Adrian Reid:

Yeah. I’ve read a bunch of his books. Yeah. Yeah. I’ve read a bunch… Yeah, I’ve read that one.

Alex Cunningham:

You probably haven’t met him, but you sound like somebody who at least understands his philosophy as well, even if you have your own, but there’s some underpinnings there I’ve heard.

Adrian Reid:

Yeah. Look, you’ve got to find the way to get in the zone for you, right? And it’s got to be something that’s repeatable and consistent. And the trouble with most people’s lives and trading approach is that it’s a bit… Okay, let me just say it how it is. It’s all over the place, right? It’s okay, where can I get stock tips from and what crypto should I buy next? And which stock’s going to kind of pump, and what are we doing now, and which Facebook group is really hammering and what are they talking about? And they’re looking at all of these different things and it’s noise, right? And it’s impossible to be in the zone, be consistent, be profitable when you’ve got all of this noise.

Adrian Reid:

The way you actually get profitable and get consistent is, eliminate a hundred percent of the noise. Okay. I don’t watch the news. I haven’t read a newspaper for probably 15 years. Probably about 13, 14 years now, I haven’t watched the news and the reason is it doesn’t help my life, right? I’ve eliminated it. And as soon as I did, my trading got better, because I didn’t have all of those external factors making me second guess the signals that my systems were giving me. When you eliminate all that noise, it makes it so much easier to get in the zone, do what needs to be done, not question it and follow through, take the trade, pull the trigger, place the stock, exit out your stock, take the sell signal, all those things that you have to do. And you have to do them rigorously with discipline. But if you’ve got all this noise that you’re feeding into your brain and in your life, it’s pretty hard to do that. Going systematic and eliminating the noise is probably one of the biggest tips for successful trading.

Alex Cunningham:

Hey, thanks for listening to part one of my interview with Adrian Reid. Now you know kind of the philosophy behind how to make a profit trading in stocks. We’re going to talk about more specifics, how to trade international markets and why stocks. We’re going to talk about crypto. We’re going to talk about a lot more in this series to come. So make sure you tune in tomorrow for part two with Adrian Reid.

Should Beginners Trade Overseas Stock Markets w/ Professional Stock Trader Adrian Reid Pt 2

Alex Cunningham:

Right now, I mean, if there ever was noise, I mean, right now this is the apex, right? You’ve got Russia, Ukraine, right? You’ve got COVID cases climbing back up, is what they’re saying now and you’ve got commodity prices. It’s just secondary to the Ukraine crisis, but commodity prices. You’ve got a lot of things and the [inaudible 00:00:26] legislator is rates, right? So, that’s a lot of noise. You block that all out?

Adrian Reid:

Yeah, absolutely. I mean, you have to, right?

Alex Cunningham:

Wow.

Adrian Reid:

But it’s not just about closing your eyes and hoping, okay, you’ve got to take another step. You have to have rules that work and your trading rules… Let’s just give some examples, right. Long side trend following is where you buy stocks that are going up and you hold them as long as they still go up. And when they turn around, start going down, then you sell them. And the idea is, you basically ride the bulk of the bull market in that stock. Okay.

Alex Cunningham:

Do you have something to say, do you have a message you want to get out to the world? Or do you have something that you’re just super passionate about, maybe cooking or traveling? Well, you can start a podcast. I use Anchor by Spotify. It’s the easiest way that I found to make a podcast. It has a tools that allow me to record and edit my podcast, right from my phone or computer. And again, it’s all in one place.

Alex Cunningham:

And when you’re hosting on Anchor, you can distribute your podcast on listening platforms like Spotify, Apple Podcasts, and many more. So if you have something to say or a story to tell or something you really love to talk about, you want to be on Anchor, right. And it’s totally free, which is the best part of all. So download the Anchor app and go to anchor.fm to get started today.

Adrian Reid:

Long side trend following over 20, 30 years in the past, has worked amazingly well in most markets. And it will continue to work in most markets over the next 20 years, but it doesn’t work all the time, right? There’s times when the market’s going down, there’s times when it’s sideways and it’s volatile. And there’s times when it’s really overvalued and it’s going to fall, right? Because markets go in cycles.

Adrian Reid:

So you don’t want to just have rules that buy, hoping stocks go up over the next 12, 18, 24 months. You also want to have rules that make money when markets are falling. You also want to have rules that make money when markets are volatile. And by setting up different sets of rules for different types of market behavior, you don’t have to worry about what is happening in the world. Because if you can profit from everything the market can do, then it doesn’t matter what the market does. Right?

Adrian Reid:

If the market goes up and you have rules for profiting when the market goes up over a long-term trend, you’re good. Because your rules that make money when the market’s going down, they shouldn’t be in the market because the market’s not going down, it’s going up. So those rules just sit in the sideline, waiting. And then when the market turns, then those rules for making money when the market’s going down will turn on, because they realize, “Oh, the market’s going down based on the technical rules.” And you’ll get the pattern that you need to get in. You’ll sell short and you’ll make money on the way down. But the rules that we’re making money on the way up, as soon as the market turns, they progressively exit and take you to safety, take you to cash.

Adrian Reid:

So if you’ve got a portfolio like this, which is diversified, different system styles, different timeframes, different directions, different markets, then it doesn’t really matter so much what the market does. I don’t care if Putin… I mean, I care humanely that what Putin’s doing, but I don’t care from a financial standpoint, what he’s doing.

Alex Cunningham:

Absolutely.

Adrian Reid:

I mean, right now, if that blew up into a major European kind of war, multi-countries, multiple fronts, whatever, from a trading point of view, I’d probably make money. From a human point of view, it’s terrible, it’s awful what’s happening, but that shouldn’t affect your finances. Yeah?

Alex Cunningham:

No. Yeah, no, I like that.

Adrian Reid:

And similarly, if he pulls out tomorrow and the Fed backs off and decides not to raise interest rates, that shouldn’t affect your finances either. I mean, that also, I think would be a bad thing fundamentally for the economy. Because inflation is rising, things are overheating, blah, blah, blah. But again, I don’t have to care about any of that stuff. Because if the stock market turns around and goes straight back up, I’ll get in. I’ll load up. I’ll ride the trend.

Adrian Reid:

If it collapses from here, I’m already partly short, I’ll ride the trend down, I’ll make money. If it goes sideways and it bounces around volatile, I’ll make money. Now I don’t make money every day. That’s not what I’m saying, but in the general sense, over months, if you’ve got the right systems, you can make money no matter what the market does. And that’s the key. That’s why I don’t have to worry.

Alex Cunningham:

Yeah. And so your systems, your multiple systems, as I’m gathering, act as a shield against everything else, right? It’s your shield and your sword, which is really, really cool. You’re aware of what’s going on in the US markets, but you’re in Australia.

Adrian Reid:

Yeah.

Alex Cunningham:

How do you even get into trading multiple markets? Like how did you get interested or even learn how to do that?

Adrian Reid:

Yeah. Good question. And this is something that I want to encourage everyone who’s listening to really hear. Because trading other markets is nowhere near as scary as you probably think it is. Right? When I started trading, I was in Australia. I’m still in Australia, but I’ve traveled around the world since then. But I’ve come back, right? I’m home at the moment.

Adrian Reid:

And when I started trading, I was trading Australian stocks. And I learned to trade, you know, like trial and error on Australian stocks and I found rules and systems that worked on Australian stocks. And I traded Australian stocks for probably seven years before I did anything else. And I’m going to tell you, that was a huge mistake. Because when you diversify more broadly, you can make money from more different types of movements, more economies, more conditions. So I now trade Australia, Hong Kong and the US stocks, and I trade crypto. And crypto is 24/7.

Adrian Reid:

And when I diversified out of Australia, the reason I struggled for so long is because I had learned what worked on Australian stocks and that doesn’t work brilliantly well on the US stocks. It’s profitable, but not like amazing. And it also doesn’t work on Hong Kong stocks. And the reason is, the markets have a slightly different personality so you need slightly different rules. But all it is, is slightly different technical rules and the knowledge on how to test and evaluate those rules, right?

Adrian Reid:

So I have students now, when students start with me, they’ll start generally in their home market most of the time. And that’s often Australia, Canada, US, or some of the Asian markets. But very quickly, I encourage them to diversify because I’ve got systems for all those different markets and the students get access to that. And all it is to trade a different market is just, you need the data for the stocks in that market and you need the rules to apply to the data. And then you just get a buy signal and you take it and you get a sell signal and you take it.

Adrian Reid:

So if you’re trading systematically, like I don’t have to know and research Apple or Facebook or whatever stock is hot in the US right now. I just know that I’ve got a set of rules that I’ve tested on 30 years of US stock market history. And if I keep following those rules, I will make money. So therefore, I follow the rules each day and if I get a signal, I’ll buy or short sell, and I’ll close that trade when I get a sell signal.

Adrian Reid:

So diversifying internationally is something you should do sooner than you think. All you need is the data and a set of rules that work. And you could get help, like I show people how to do that. You can design them yourself if you’re into that. But really, if I could go back and talk to myself 20 years ago, I would say, diversify much more broadly much earlier. Because that then smooths your results, gives you more consistent growth and makes your personal finances less subject to the economy that you’re living in.

Alex Cunningham:

I’ve never heard that advice before. That’s really interesting. You’re the first person to say that. So you have these rules for these different markets of stocks. Crypto, like you mentioned briefly, is 24/7, but it’s also a different… It’s a different entire, it’s a different ecosystem. Do those rules work with crypto too? Or do you have to complete with something completely different?

Adrian Reid:

Look, the style… I mean, if you’ve traded in crypto or held some crypto, you know, it’s volatile, right? [crosstalk 00:09:13] The bull markets are huge, really fast.

Alex Cunningham:

Yeah.

Adrian Reid:

And then they turn around on a dime and you’ve got a 60% drop. And you’ll have some penny stocks or tiny tokens, tiny coins that pump two, three, four, 500% in a day and then smash back down. So it’s like the stock market on speed. So the timeframes are compressed, the amplitude of the moves is increased.

Adrian Reid:

So the great thing about that is, there’s thousands and thousands of retail, crypto traders, who have no clue what they’re doing. It’s hugely emotionally driven. And if you apply a set of rules in that environment, it’s like the Wild West. All you need is a set of rules that work and you make a ton of money. So, systematic trading in crypto works brilliantly. The rules are slightly different to stocks because the nature of the price movements. The timeframe is compressed. The amplitude is much bigger. So you need slightly different rules, but once you know the rules, it’s very easy to follow them.

Is Stock Trading Natural? Why Is It So Hard? Pt. 3 w/ Adrian Reid

Alex Cunningham:

Hey, welcome to another episode of the Market Adventures podcast. As promised. We’re going to continue to learn more from Adrian about what it takes to be a successful stock trader. Let’s tune into part three, right after we get a shout out from our number one sponsor, Anchor.

Sponsor:

Do you have something to say? Do you have a message you want to get out to the world? Or do you have something that you’re just super passionate about, maybe cooking or traveling? Well, you can start a podcast. I use Anchor by Spotify. It’s the easiest way that I’ve found to make a podcast. It has the tools that allow me to record and edit my podcast right from my phone or computer and again, it’s all in one place. And when you’re hosting on Anchor, you can distribute your podcast on listing platforms like Spotify, Apple Podcasts, and many more.

Sponsor:

So if you have something to say or a story to tell or something you really love to talk about, you want to be on Anchor, right? And it’s totally free which is the best part of all. So download the Anchor app and go to anchor.fm to get started today.

Alex Cunningham:

Beginning by [inaudible 00:01:12] and for everybody, even someone like yourself or people who already made it, I guess, they had to go through a period of, like you said, trial and error right? Blowing up accounts, losing money, starting over from zero like everyone’s going through it, but why? Why do we go through that small period of just pain? Be it months or years?

Adrian Reid:

Yeah. Yeah. I just want to, I just want to clarify something. It’s often not a small period of pain. It’s often a big period of pain, right? Because for most people who come into the market without training, without the right education and or without reading about a hundred or 200 books on trading, like I did to figure this out, they quit as a loser, like as a loser. I’m not saying they’re a loser as a person, it’s just they lose money right? So why does that happen? Why is it so hard, is kind of the crux of everything. The markets are designed to shake you out of your position. They’re noisy, they’re uncertain. It’s about price discovery so, and they’re also very different to everything else we encounter in life.

Adrian Reid:

Completely different success in the markets is completely different to success in school. It’s completely different to success in your job. It’s completely different to success in your relationship. In trading to be successful, you’ve got to ignore almost every emotional impulse you have, like almost all of them guaranteed are wrong and just take a simple example. When you go to the store, or you take your partner to the store or whatever, and you see the pair of shoes you want to buy and they’ve just increased the price by 200%. Yesterday it was $200 now, it’s oh, listen, take even a smaller example, yesterday was a hundred dollars, today is $150. Are you more inclined to buy those shoes or less? Because you saw them yesterday for a hundred, now you’re seeing them for 150. It’s like, “Oh, that’s expensive. I don’t buy that.” Right?

Alex Cunningham:

Yeah.

Adrian Reid:

So, but if you went to the store and you saw yesterday, there were a hundred dollars, today they’re 75 because they’re on sale, you go, “Hey, cool, good deal.” Get out the credit card. Like it almost… Like that’s how we conditioned. I got a bargain. But in trading, there’s a thing called momentum, right? If a stock is going in one direction, it doesn’t necessarily just turn around and go in the other direction for no reason. So if a stock is going down, which way is it likely to keep going? Down.

Alex Cunningham:

Down.

Adrian Reid:

If a stock is going up, which way is it likely to keep going? Up. And the way I expect this to my kids, when I started teaching them trading way back was if you get a tennis ball and you throw it across the room, when it hits the floor the first time, does it turn around and bounce straight back? No, of course not because there’s nothing in its way, it just hits the floor and it keeps going and it bounces back and then it hits something, a wall, and it bounces back, right?

Adrian Reid:

In the markets, it’s the same thing. The stock keeps going, keeps going on its trend until it hits something, something changes. The management mucks something up, they have a big competitor. The interest rates goes, like something big and fundamental changes and then the price turns around. Now we don’t have to know what that big fundamental change is as a systematic trader, we have to observe that the price actually turned around right? But what we also have to do is avoid the impulse to say, “Oh, the price is going up. It’s expensive now I shouldn’t buy it.”

Adrian Reid:

Actually the price is going up because it’s trending up. If you don’t buy it, you’re going to miss that trend. Ooh. Right? But that’s completely opposite thinking to the bargain hunter in the store. And then at school we are trained to be right. What grade did you get on the math test? Did you get 90% or did you get 20%? And if you got 20%, oh, you better work on your maths, your little Johnny, that’s not a good grade, you can’t pass, you can’t go up to the next level, right? Sorry to anyone who didn’t like math at school but you know, this is how we’re all made to feel, right? We’ve got to get it right.

Adrian Reid:

And in trading, what happens when you come in with the mentality of wanting to get it right, is you place a trade and you go, “Okay, as soon as it’s up, I’m going to sell it so that I can have a winning trade so I can make money.” Right? So I put in a profit target or I snatch a quick profit when I’m 20 bucks up or 50 bucks up or 5% up or 10% up or whatever it is, right? And if the stock instead starts going down, you go, “Oh, shit. I’ll just wait until it gets back to even.” And when it bounces up and when it gets back to even I’ll get out. So I don’t lose money. But what happens? Of course, it keeps going down. It keeps going down and the pain gets bigger and bigger and bigger until the trader can’t stand it anymore and goes, “Ah!” and they sell. And guess what? That’s the bottom and then the stock turns around and goes straight back up, right, because that was capitulation.

Adrian Reid:

That’s what happens when traders en mass cannot take the pain anymore. They dump their stock into the market, the price collapses temporarily and then there’s no more sellers, it bounces straight back up. All because that person didn’t want to be wrong and didn’t want to take the loss at the beginning when it started going down. So it’s completely the opposite of our training. I’m going to tell you, I’ve taken thousands and thousands and thousands of trades, literally and I’m probably wrong 70% of the time, but I still make a ton of money. Why? Because when I’m right, I make a lot more than I lose when I’m wrong.

Adrian Reid:

So if I lose a dollar seven times out of 10 and three times out of 10, I make five bucks. Guess what? I make a ton of money, but most people go, “Okay. I want to make a dollar, make a dollar, make a dollar, make a dollar.” And then don’t cut their loss and so the loss gets bigger and bigger and bigger and bigger. They make $7 because they’re right seven times, but then on the three trades that they’re losing, they lose like 10 times as much and that math doesn’t work out and what happens is, sorry, I’m going on a diatribe, I hope this is okay, but this is really, really important. This is the crux of why people [inaudible 00:07:38]-

Alex Cunningham:

No, this is perfect. This is perfect.

Adrian Reid:

So what happens is people don’t understand the math of making money in the markets. The math of making money in the markets is you have a certain number of winning trades and they are a certain size and you have a certain number of losing trades and they’re a certain size and it doesn’t matter how often you are right, you’re not going to be right a hundred percent of the time. There’s always going to be losing trades and when you are wrong, if you lose too much, it’ll wipe you out and when you are right, if you take that profit too quickly and have small wins, then those profits are not going to be big enough to overcome the losses.

Adrian Reid:

So you’ve got to allow the profits to get big, keep the losers small and take the losers while they’re small instead of holding onto them. You know this idea of turning a trade into a long term hold or waiting until I get back to even, that’s death for traders, because all it does is chew up your capital or it shrinks your account and maybe it never comes back because guess what? There’s a thing called bankruptcy. A stock can go out the back door, go to zero and you don’t want to be holding that in your portfolio. You want to be short selling it and writing it all the way down and profiting the whole way, right? Don’t hold onto a losing trade because you didn’t want to be wrong. Just accept the fact you’re going to be wrong most of the time. Just make those losses small and keep the winners, allow the winners to grow big and then the math works and you make money.

Alex Cunningham:

I think, I honestly think that might be one of the hardest things. It is, like you just said, admitting you’re wrong, because being wrong has, since you were a kid, I mean you spill something on the floor and your parents say “You’re not supposed to do that Johnny, right? That’s wrong.”

Adrian Reid:

That’s wrong.

Alex Cunningham:

That’s the wrong thing to do, right? So from, we’re toddlers, we’re taught to be afraid of that word.

Adrian Reid:

Yeah.

Alex Cunningham:

And being right has been hailed all the way up to the corporate world, right?

Adrian Reid:

Yeah, yeah.

Alex Cunningham:

But it’s really the opposite in trading.

Adrian Reid:

Well what’s and sorry, you’re exactly right. And it’s really hard to be wrong.

Alex Cunningham:

Oh yeah.

Adrian Reid:

So how do we make ourselves right, as traders, and win? That’s the key, right? This is the key to staying in the zone and following the rules because if you tie up your ego and you’re thinking about being right, your measurement of success on whether this trade is a winner, “Did I get this trade right?” That’s a losing strategy because everything will work against you right? But if you say, “Okay, I’m going to have lots and lots of trades, I’m following a process.” That process is like production line in a factory okay? So think of the General Motors, the Toyota factory, right? They pump out cars. How do they pump out cars? Exactly the same every single time. They follow the same process, day after day, car after car, over and over and over again right? They don’t measure their success about how perfect this car is. They measure their success about is our process stable and repeatable, right?

Adrian Reid:

And you got to do the same thing for trading, because that allows you to be right hundred percent of the time. So we follow our… I have trading rules, right, in my systems. If I follow my trading rules every day, I get to pat myself on the back, I did a good job. I was right today. I did the right thing. I’m a good trader. It doesn’t matter if my trades lost money because the trades aren’t the main game. The trades are just part of the output of the process. If I followed the process, there’s going to be winning trades and losing trades but if I follow that process over many years, I’m going to make a ton of money. So I get to be right.

Adrian Reid:

If I followed the signals, if I took the buy when I was supposed to, if I took the sell when I was supposed to, I was right. I did the right thing. So when you think about it like that, it’s actually easy to give yourself that, to give ourselves that need of being right. You just have to remove yourself from the need to be right on that trade to make money on this ticker because that’s irrelevant. What’s relevant is the process you’re following and did you follow that process well? And of course, is that process profitable? You need a profitable system to follow, right?

How Start Being Profitable As A New Stock Market Trader Pt 4 w/ Adrian Reid

Alex Cunningham:

So part of what you just said in that last section is one, have a system, right? Develop a system, find a system. If this system work, you don’t want to spend years of pain, use that system. If you want to go through years of pain, find your own system, read hundreds of books, right. There’s really this road or that road, follow your system don’t need to be right. Right? And am I missing any super simple… Because those are some really simple things that someone can do tomorrow, right? Or Monday as you may. Right? That’s so things people can do on Monday when the market opens here in the U.S. What other super simple things can the beginners out there do to start their journey to profitable trading?

Adrian Reid:

Great. Really, really solid question. I’m glad you asked. If you are already trading, then what you want to do is take a stock take of your portfolio. Because a lot of traders will have, stocks they’re trading right now and those positions, the ones they’re happy with and they have this other stuff they don’t talk about anymore.

Alex Cunningham:

Do you have something to say? Do you have a message you want to get out to the world? Or do you have something that you’re just super passionate about maybe cooking or traveling? Well, you can start a podcast. I use Anchor by Spotify. It’s the easiest way that I’ve found to make a podcast. It has the tools that allow me to record and edit my podcast, right from my phone or computer.

Alex Cunningham:

And again, it’s all in one place. And when you’re hosting on Anchor, you can distribute your podcast on listing platforms like Spotify, Apple Podcast, and many more. So if you have something to say or a story to tell or something you really love to talk about, you want to be on Anchor, right. And it’s totally free, which is the best part of all. So download the Anchor app and go to anchor.fm to get started today.

Adrian Reid:

I was waiting to lack this back to even, oh, that’s a long term, hold bullshit. Sorry. That’s not a long term hold. That was a mistake that you didn’t correct. Right. So one of the best things you can do is have a critical objective look at your portfolio. What are you holding that you shouldn’t? Where are you collecting bigger and bigger and bigger losses? Because you’re not willing to pull a trigger and get out, and probably the easiest way to do that. Most retail traders are alongside only. And if you are holding a stock that’s below the 200 day moving average, guess what? That stock is clearly in a downtrend. You should not be holding it long because it’s costing you money. Right? The only stocks you want to be holding your portfolio are stocks that are going up.

Adrian Reid:

Also, have a look at stocks that you’re holding and see, Okay, did I miss an exit signal for any of these? Did I hit a stop loss that I didn’t execute or I chickened out on? Did I…? And this is if you’ve got some sort of rules, right? So anything that you should have exited bite the bullet, shut it down, start fresh. Don’t hope that it comes back. Maybe it will maybe it won’t, right? But the thing is the first job is to protect that capital. I’ve never, ever blown up an account. Most retail traders blow up many, many accounts as in lose all the money in the account many times before they finally figure it out. The thing is, you don’t have to do that. If you cut your losses, you follow the rules you get out, when you’re supposed to, you won’t blow up an account.

Adrian Reid:

You may not make a ton of money until you’ve got good rules, but you’ve got to do that. Then the next thing you can do is look at the trades you’ve got and notice how big they are. And this is another huge mistake traders make. If you love a stock, you love the story, you love the CEO and it’s made you money and you buy it. You probably buy a lot, relative to the size of your portfolio. If you get a tip and you’re like, oh, I’m not sure about this one? And I don’t really know this company? And I’m not sure about that industry? You probably buy a little, right? But the reason you bought a lot versus little is a hundred percent emotional. There is no fact in it, there’s no reality. It’s purely emotion and the trouble is then you’ve killed your diversification.

Adrian Reid:

Because If you’ve got a couple of big positions and then some rats and mice of things that you won’t really high conviction on. If those big and big positions turn around and go down, you’re going to really hurt. But to survive long term, we need good diversification across many stocks, different styles, different systems, different markets, even. And so all of my trades are sized consistently. Every trade looks the same when I first open it. I don’t have huge trades that I think are going to the moon and some small trades that I identify my conviction on, because that’s just my emotion talking. I don’t have a crystal ball and no one else has a crystal ball see all the company, doesn’t have a crystal ball. So you can’t bet the house on any one thing. So have a critical look at your portfolio.

Adrian Reid:

And if you really are betting the house on one thing, maybe it’s worked out for you so far. But let me tell you that was luck. That’s probably not skill and that’s hard to admit, right? But it’s probably luck because you didn’t have a crystal ball when you opened it. And there’s all sorts of good story stocks that went nowhere. If you happen to get on one and say, okay, well now I’m a hundred percent at the whim of that company. If that goes badly, then I go badly. And that’s not a good place to be. So let me summarize. If you’ve got a portfolio in the market already and you’re holding stocks that are clearly trending down like stocks below the 200 day moving average, think really carefully about, should you get out of those stocks and just stop the bleeding?

Adrian Reid:

Right? That’s the first point. Second point is, are there stocks that you should have exited? Any stop losses that you didn’t follow through on? Any exit signals or triggers that you didn’t follow through on? Have a look at those, maybe it’s time to stop the bleeding. Third, have a look at your position size, across all of the holdings you’ve got and ask yourself, am I really diversified? Or am I really heavy in one stock or another? And really light in others? And maybe have a think about, should I make my position size more consistent between trades? So that I’m actually a bit more diversified.

Alex Cunningham:

I like that and that shoot, as you’re speaking I’m thinking about portfolios that I have open and I have entirely too much Robin Hood. I have bought entirely too much and I’m feeling the pain right now. So that’s definitely, I take your advice. That’s definitely one I got to cut and reevaluate because it is, it’s size entirely too much in one of my portfolios for sure. So, that’s good advice that even I can take. Right? And anybody else who’s listening. You’ve got some Robin Hoods in there too.

Alex Cunningham:

Maybe not Robin Hood itself, but you’ve got some maybe you have D. Walk, maybe you have, I don’t know search Spotify or Snapchat. You have too much of something in there too. So take agent’s advice. But thank you. Those tips that I say the last 20 minutes for any beginner is gold, right? It’s at least two or three books worth of information. Would you agree?

Adrian Reid:

Oh yeah. And look, I mean just those things alone or save you the first two years of pain, right? The name next year of pain is the next step you’ve got to take, which is get a system, learn how to test it and evaluate it to build confidence in it so you can follow it. Because as soon as you’ve got that, then none of the noise matters.

Adrian Reid:

And you’ve got a process just like the production line, cranking out cars, day after day, you’ve got a production line that cranks out signals trades that you can follow that fit you in terms of your personality, that fit your lifestyle and you can actually follow them and you’ve got confidence in it. So then trading becomes “easy” and I’m doing air quotes around “easy” because we’re listening on a podcast because it’s never easy.

Alex Cunningham:

Yeah.

Adrian Reid:

You still all got to mind, you’ve still got to guard your psychology. You’ve still got to make sure you don’t take too much attention to what people are talking about on the latest stock tips and what’s pumping and what you’re missing out on all that FOMO and everything. You’ve just got to follow your process. So psychologically is a hard game, but process wise, once you do those things I said at the beginning and once you’ve got a set of rules, a system that you can follow that you’re confident in. Process wise it’s easy.

Alex Cunningham:

So tell me before we go, I do want to talk about Enlightened Stock Trading because I mean you said, you had the corporate job and you had an hour to 30 minutes a day to really… To learn this stuff. Do you think it would’ve been easier for you, had you had access to something like Enlightened Stock Trading? Would you have just wanted to figure it out yourself? Or would you think you would’ve bought into the system and then trained yourself to trust it? What would you have done back then?

Adrian Reid:

Oh, look undoubtedly it would’ve been easier. And I know that for a fact, because I’ve taken hundreds and hundreds of students through my course and got them trading profitably very quickly, much more quick. It took me three years, right, to get profitable. And I didn’t lose a ton of money in that time. But you know that was hours at night after my day job, not just the 30 minutes, the 30 minutes is the result of learning how to do it.

Adrian Reid:

I had to learn first and I was teaching myself so lots of reading. I mean, you can see some of that here on my bookshelf behind me, lots of reading and lots of trial and error and trying different approaches and all of that. But what I do with Enlightened Stock Trading, because what I realized is the main problem is the emotion and not knowing exactly what to do with confidence.

Adrian Reid:

So what I do with my students now is I teach house and why assist systematic trading works. And we’ve covered some of that today, some of the emotional things, getting rid of the noise, getting a consistent process, all of that, there’s obviously more to it, but getting confidence around why systematic trading is the best way to get profitable quickly. That’s the first step.

Adrian Reid:

Second step is giving rules that work. So I’ve got rules that work in Australia, Hong Kong, most of the Asian markets, Europe, U.S., Canada, different rules that work in different markets. Because I’ve been doing this a long time of… Developed lots of different training systems. And so I give my students rules that work, but most education courses stop there. It’s like, “Oh, just do this and you’ll make money” You’re like, “Okay, great” So you start trading and while you’re making money, that’s wonderful.

Adrian Reid:

But then you start going into a bit of a drawdown because no set of rules makes money all the time. And then the trader typically loses confidence, starts second guessing things, starts kind of misbehaving in the markets and loses even more money. So I don’t do that. I give the rules and then I teach the process to test evaluate and build confidence in those rules. So I don’t want anyone to trust me. I give the rules and then I give you the process to evaluate the rules so you know in your heart that they work.

Adrian Reid:

And when you’ve got that, then you are empowered as the trader and this is the key. You’ve got to be self-empowered taking tips from someone else, taking someone else’s rules and following them blindly that’s no good. Because that only works if you’re making money. But as soon as you go into a little dip and everyone whose trading goes into a dip, this is what we call a drawdown, but that will happen. You’ve got to maintain the confidence.

Adrian Reid:

And so I teach the rules and I teach the process to build that confidence test and evaluate the systems. Then the trader is self-empowered and then they don’t need me. Now I’ve got a trading buddy, not a trading dependent. I’ve got three kids I don’t need more dependants. I love my kids they’re great. But I don’t want hundreds of students saying, “Hey Adrian what should I do today?” No, the answer to what should I do today is followed the rules. Follow the rules.

Alex Cunningham:

Right, right, right. No, I love it. And it’s simple and it’s something like you said, you don’t have to blindly trust anybody. Right. You’re learning how to test them, to make sure, okay, well I’ve been losing money for a week now, do these still work? Let me test them. And you’re building that, rebuilding that confidence in yourself. So where can we find these rules? And right through the Enlightened Stock Trading, where can we find you and your business?

Adrian Reid:

Yeah. So if you want to learn more, I’ve put something together for your listeners Alex, if you go to enlightenedstocktrading.com/marketadventures.

Alex Cunningham:

Okay.

Adrian Reid:

Because, that’s where we are. You can go there and I’ve put some free training together and a free course so that people can learn a bit more about systematic trading and what that journey looks like. And then as a result of downloading that, then we’ll end up talking and if you’ve got questions I can help you out and help you take the next step. So, and all of the rules and the process, the test, the approach to testing, that’s all covered in my course which is called the Trader Success System. So just start with resources and then let’s go from there.

Alex Cunningham:

Awesome, so enlightenedstocktrading/marketadventures. Let me actually take that down so I can put it into the show notes. Right. I wasn’t expecting that. So that’s great enlightenedstocktrading.com/marketadventures. And like I said, if I’m the show notes here, surprise to me, surprise to y’all. So it’s happy surprise. And hopefully whoever signs up for that, you can get some… At least some insight as to how to look at what is going on today, right. Or look past what’s going on today, which is the goal, right. To look past all the noise and to find your own path.

Adrian Reid:

Yeah. And when they go… When your listeners go to that resource and get it, I’ve got a Cheat Sheet there, which is called the market CPR Cheat Sheet. And there’s a whole bunch of other Cheat Sheets that you’ll get as well. But the reason I mention it is because it expands on what we talked about of what should trader do on Monday, right? When the market opens to make sure that they’re not going to get hurt.

Adrian Reid:

To clean up the portfolio all of that, that’s there in a Cheat Sheet step by step, what to do? How to think about it? So, and there’s a few more steps as well. So if you jump into that, get those resources, you’ll learn something you can action immediately, and you’ll learn about systematic trading. So is that something you want to sort of implement in your portfolio to stabilize your results and become a long term successful trader.

Alex Cunningham:

Anyone who’s listening, take some notes and jump right in, right. You’ll be waiting for this episode and for Market Ventures to come back, to kind of explain what’s going on and rather than explain it, I’m going to give you a new pair of eyes through the Enlightened Stock Trading courses as was given to us by Adrian, so that you can see what’s going on. Right. So thank you again for coming on. And any last words or a quote you want to leave us with to kind of help us, I guess, stay motivated and be excited for what to come.

Adrian Reid:

Yeah. Thank you. I just love the podcast name Market Ventures and trading really is an adventure. It’s not something that anyone will master overnight. It’s a lifetime pursuit. Right. But the great thing is you don’t need a lifetime of experience to start making money. Because you can always improve and take it to another level very quickly my students are getting profitable, getting consistent quickly as in months, not years. Right? And then it’s like, oh, there’s this lifetime where I can pursue this thing, which is like a puzzle that always, it evolves and it changes and you learn new things and you adapt and it never gets old, It never gets boring.

Adrian Reid:

And its personal freedom. It’s like, it’s just, you. It doesn’t rely on the economy, it doesn’t rely on your boss, it doesn’t rely on commuting to the office, it doesn’t rely on anything apart from you committing to be a trader. And to me, that’s the ultimate side gig to build our wealth, to get free because that’s what it did for me. Because you’re completely self reliant on that. And that to me is amazing. It’s an adventure, it’s a market adventure. I really love the podcast. That’s why I was so excited about coming on this one.

Alex Cunningham:

Well, thank you. And I appreciate you coming on. Thanks for giving us that, Adrian.

Adrian Reid:

Alex, thanks so much for having me really appreciate your time.