The FI Guys Trading Podcast | Adrian Reid – Financial Independence Through Systematic Trading

Introduction:

Financial independence is something many people dream about, but what does it really mean to you? For me, it means having the freedom to choose how I spend my time, where I live, and what I focus on without worrying about money. In this interview, I shared my journey from working a corporate job to building a life of freedom through systematic trading. I’ll explain how I built confidence in my strategies, overcame emotional barriers, and stayed disciplined through market ups and downs. If you’re ready to take control of your financial future, read on—I’ll show you how I did it.

Key Lessons from the Interview

• Define Financial Independence for Yourself: Knowing what financial independence looks like for you is the first step to achieving it. For me, it’s about freedom and choice, not extravagant lifestyles.
• Systematic Trading Eliminates Emotion: I created rules-based systems to guide my decisions, removing the emotional rollercoaster that undermines many traders.
• Confidence Comes from Backtesting: By testing my strategies against decades of market data, I built the confidence to stick with them even during tough times.
• Patience Is Critical: In both trading and investing, patience is the secret weapon. I’ve learned to wait for my systems to play out instead of reacting to every market movement.
• Focus on Process, Not Perfection: My success isn’t about finding the perfect strategy—it’s about consistently following good systems that work over the long term.
• Anticipate Challenges: I expect market volatility and occasional losses. By knowing what’s normal, I don’t panic—I just stick to my plan.
• Avoid Information Overload: I’ve simplified my approach by turning off the noise, from news to social media, and focusing only on the data my systems need.
• Keep Strategies Separate: If you mix active trading with passive investing, you’ll likely sabotage both. I keep clear boundaries between my strategies.
• Understand Your Psychology: Trading isn’t just about numbers; it’s about understanding your biases and learning to overcome them with discipline.

Trading Quotes from the Interview

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Full Transcript of the Podcast Interview

Chris Monzon: [00:00:00] I wonder if there was a systematic approach to trading stocks that could complement your financial independence journey, today’s episode guest might just have the answer. While we usually explore paths to financial independence that focus on long term growth. They were looking into a different strategy, one that could be helpful to have.

In your financial tool belt, our guest, isn’t your average stock trader. [00:00:20] He’s helped hundreds transform their trading results with his proven strategic approach. Adrian’s mission is to empower people to make confident, systematic trading decisions. So whether you’re just curious to learn another way, some people pursue financial success or ready to dive in yourself, stay tuned to see how adding this knowledge could enhance your five [00:00:40] journey.

This is the five guys. Let’s get started. So tell me, Adrian. A little bit about your story. How’d you get into trading?  

Adrian Reid: Yeah, I, look, I started work, um, fresh out of uni, and it didn’t take me very long to realize I didn’t want to do that for the rest of my life, I mean, that’s, uh, the short story, right? And so I started [00:01:00] looking around to figure out what else I could do.

Uh, I didn’t have much in the way of, like, family money or, uh, Business experience or mentors that had done anything other than just being an employee, but I said to my dad, Hey, um, I don’t want to work forever. What do I do? Uh, he promptly laughed at me and said, you only just started, uh, and then told me that I need to [00:01:20] learn how to invest.

And he pointed me in a few different directions, you know, property and, and, um, and, and stocks primarily. And so I looked in, I looked into stocks. I didn’t have enough money for property, uh, and, uh, basically did what most people do. I tried a whole bunch of different things. You know, I’ve tried fundamental investing.

I bought companies that I knew. I bought brands that I liked [00:01:40] and trusted. I, uh, looked at some analyst reports and bought stocks that were highly recommended. I did all sorts of things. And, uh, you know, it took a three year journey basically to land where I am now. Yeah. Lots of failures, lots of, um. false starts, lots of frustration, lots of boredom, until I found the thing that really worked and [00:02:00] resonated for me, which was systematic trading.

And, uh, you know, I guess we’ll get into what exactly systematic trading is, but, you know, as soon as I found my way, my approach, everything changed. I became consistent and, uh, started growing.  

Chris Monzon: That’s amazing. So there’s a few things I want to touch on there. Number one, you said it [00:02:20] only took you three years before you found systematic trading.

First off, I want to congratulate you on that. My journey took me over a decade to finally figure out something that I could resonate with. So. You were definitely ahead of the curve, but it seems you’re also ahead of the curve in another reality in that your father told you, you need to learn to invest.

You need to learn about money. You know, I know for our audience members, you might be able to [00:02:40] hear that Adrienne has a little bit different of an accent than we do here in the States or wherever you are. Um, is that something that’s normal in Australia? Do people learn to invest? Is, Is money may be treated differently than it is in other places?

Adrian Reid: No, look, I, I think as a general rule, uh, financial education is lacking everywhere. I mean, I’ve got [00:03:00] students in my business all over the world, you know, just like no doubt you do. And, uh, I would say that most people learn this stuff far too late. You know, my, um, my dad pointed me in that direction and gave me some resources, but I was in my early twenties at this stage.

It’s not like I, I mean, Okay, compared to many people that might be early. But I started with [00:03:20] my kids when I started teaching my daughter trading when she was five. And, you know, that’s, that’s what I think is we should be doing. You know, we learn all of these things in school, but we don’t learn about money.

We don’t learn about saving. We don’t learn about compounding. We don’t learn about allocating, you know, uh, savings and capital to different buckets for different [00:03:40] purposes. Uh, but that’s what we need to be teaching the kids, our kids in the schools. It’s just, but it’s lacking.  

Chris Monzon: Yeah,  

Adrian Reid: we don’t have it here.

You don’t have it there.  

Chris Monzon: I would agree with that. Did your father growing up, did they ever teach you anything about money? Or was that like the first time he ever said like, go learn by investing? Was he doing that himself?  

Adrian Reid: Uh, he was investing himself. I won’t [00:04:00] say that. I mean, they weren’t big investors, but they were always very good with a budget.

Uh, they always knew what they were saving for. They had money in different, um, buckets for different things. Um, you know, there was the holiday fund, there was the investments, there was the everyday expenses, and all of that was pretty tightly [00:04:20] controlled. Some of that I inherited, some of it I didn’t inherit.

Um, but look, I would say they always did something. And he was always keen, uh, dad particularly I had most of the money conversations with, but I, I have had many conversations with my mother as well. He was always keen to [00:04:40] talk to me about it when I asked questions. And he would acknowledge that he didn’t have the answers in all cases.

Like I, I was far more interested in active trading than, than he was because I very quickly found fundamental investing or, you know, long term investing didn’t really suit my temperament. [00:05:00] And he hadn’t done any active trading. So we found a course together and he, he, he bought that for me. So I could get my first bit of education and looking back on it, I kind of laugh about what I learned in that course.

Cause it was pretty light and not that helpful. We  

Chris Monzon: all have that experience. So if we look back, what the God name were they trying to teach me?  

Adrian Reid: Yeah. Yeah. But, but it was a start, [00:05:20] right? And I was encouraged to invest in the education about money. And I think this is really. really important because a small amount of investment in your education around finances has a huge leverage effect 20, 30, 40 years down the track, right?

And the sooner you do that, [00:05:40] the sooner you start getting on the right track. You know, I would say one thing that I learned really early on that was absolutely critical was about risk management, risk control, you know, not being overly aggressive, the dangers of leverage. Um, and, I was also pretty good at math, [00:06:00] so I could figure out the impact of compounding, and I also could figure out that if I lost my money, that was a big waste of time, which was a big waste of compounding.

And so the, all of that came out of some of these initial conversations with my dad, and with um, the, the course that, that I ended up doing as a result [00:06:20] of talking to him about it.  

Chris Monzon: That’s wonderful that your father was able to realize what he knew, but more importantly, what he didn’t know. You know, what most parents do, if their kid asked them a question about something, and we all do this as adults, we’ll just start to dispose random BS that we have no idea if we’re telling the truth or not.

We just start saying stuff because the worst thing we can almost admit is [00:06:40] like, I don’t know. But the truth of the matter is, No one knows what they’re doing. We’re all just trying to make it through this life. So that was very cool for you to be able to have that experience with your father, who wasn’t just like, this is what you need to do.

He’s like, I don’t really know, let’s learn together. I’m sure that’s what has set you on this path.  

Adrian Reid: Yeah. And how good, I mean, how good is that? How good of a moment is [00:07:00] that when you can You find some commonality with your kid and you start working with them on something. I mean, it’s so much better than, go do your homework, you know, it’s, uh, it’s a, it’s a, I’d say next level of relationship, which, uh, which I really aspire to have with my kids as well.

My kids are, uh, getting towards this point as well. I’ve got one who, [00:07:20] who’s just about finished or just finished high school, um, and about to go off to university next year and, um, You know, conversations like this become really, really important.  

Chris Monzon: Yeah. And what I really liked about your, your dad, maybe he wasn’t, you know, a technical trader and he was maybe just spending less money than he made, you know, making money and then just investing the difference.

But those are the ABCs of [00:07:40] finance, you know, and I equate a lot of. Being good with money to being good health wise, you know, it doesn’t matter if you go out and you’re doing your infrared saunas and your cold plunging, and you’re getting your eight hours of sunlight or whatever a day, if you’re not sleeping well, if you’re not eating well, if you’re not exercising, the same thing with finance, if we’re not focused on making money, if we’re not spending less than we make, and [00:08:00] we’re not investing the difference in something that’s going to continue that compounding effect.

I don’t care what kind of trades you’re doing. I don’t care what kind of crypto, I don’t care about any of those other things. Because if we don’t have these three things intact, nothing else matters. So it sounds like your father was able to show that to you. Now you said that you eventually got into systematic trading.

What is that? [00:08:20]  

Adrian Reid: Uh, systematic trading is basically rules based trading. I mean, some people call it algo trading. Some people call it having a trading strategy. It could be trading systems. It’s all kind of the same thing. Um, the challenge with With trading is, most people, uh, don’t do it consistently. They don’t have a set of rules that actually works and, [00:08:40] uh, most people try and make their decisions using a bit of information from here, a bit of information from over there, some advice, some kind of gut feel, all of these things.

And that’s really, really inconsistent. You know, where we end up being, when we try and make discretionary decisions, decisions like that, we end up affected by our environment and by our [00:09:00] preconceived ideas and our emotions, and it’s very, very hard to make money. Systematic trading basically pushes all that aside and puts absolute rules in place.

If A and B and C are true, you buy. If D or E is true, you sell. So they’re objective rules that are not impacted by your emotions. They’re not impacted by [00:09:20] news and current events. They’re not impacted by anything. They just are rules that drive the decision. And the great thing about that is when you’ve got absolute rules, objective rules, you can test them.

And you can apply those rules to historical data and find out whether or not they worked in the past. And if they didn’t work in the past, [00:09:40] they’re not going to work in the future. So don’t follow those rules, right? If they did work in the past, there’s a chance they’ll work in the future. So maybe, you know, they’re safer to follow those rules.

It’s not an absolute guarantee, of course, but, uh, if you design the rules well for the system, then, you know, there’s a good chance you can make money in the future. And that’s what systematic [00:10:00] trading is all about, just having rules that work  

Chris Monzon: and following them. So here at the Five Guys, we mostly, you know, dispose passive income strategies, but from what I’m hearing, would you maybe agree that both success and passive, passive investing and systematic trading depends more on The consistency and following the proven process rather than just trying to be [00:10:20] more clever than the next guy in the line.

Adrian Reid: Oh, a hundred percent. Absolutely. I mean, success is so in every discipline, right? But in money, especially is so much about having a process that you follow. Yeah. Most active traders are so busy asking everyone else, what stock should I buy? Or what, [00:10:40] you know, what should I do to get rich? Right? What they should be asking is what is the right process to follow?

So that wealth building is inevitable, and it’s exactly the same as what you teach, right? You have a process for investing, which builds wealth. Like it’s, it’s almost inevitable [00:11:00] that that will happen. if you follow the process. But if you break the process, if you bend the process, if you skip steps in the process, then it’s not going to work, at least not as well.

And active trading, systematic trading, is exactly the same. You focus on following the process, which is, you update your data, you run the rules, you find [00:11:20] whether you’ve got any exit signals, you take them, you find whether you’ve got any new entries, you take them. And then you do your documentation, your record keeping, and that’s it.

You know, you’re not calling a friend, looking on Facebook, consulting Reddit, um, Googling the news, seeing what’s happening in current events. You’re not doing that. You’re just following the rules. It’s a process. [00:11:40] And I think that’s really important because A, it reduces time, B, it reduces mistakes, and C, it gives you a chance that it actually will work consistently.

And I think that’s what we need.  

Chris Monzon: I would agree with that. So my background before I became a financial advisor was in psychology. So behavioral psychology more specifically, what I’ve [00:12:00] noticed is that there’s so many psychological barriers that get in the way of people being good when it comes to both the strategic, um, you know, the strategies that you employ or my strategies.

So what psychological barrier barriers do you see that might prevent Vent investors from sticking to that proven process that actually works. [00:12:20] Why do we have so many biases that get in our way?  

Adrian Reid: Well, why do we have so many that get in the way is because we’re human, right? It’s our brain is built in evolutionary terms for survival.

It’s not built for building wealth in a current, you know, in the current environment. You know, [00:12:40] we don’t, we don’t have, uh, wild animals chasing us anymore, but our body and our, our mind and our, you know, our, our, um, psychology reacts as though we do, you know, whenever we’re faced with a threat or with fear or anything like that, we have the same evolutionary sort of reactions.

So it’s tough. Yeah, and [00:13:00] having rules that are simple and easy to follow that we have confidence in can really bypass a lot of those psychological challenges. You know, I did a, um, a bit of research into all of the, well, into the psychological, or the, the biases, the psychological biases that affect traders, [00:13:20] and there’s dozens and dozens of them, right?

And. You know, just looking down the list, I was thinking, yeah, okay, I’ve, I’ve had that. I’ve had that. I’ve had that. I’ve had that. I mean, over and over again, there’s so many different flaws in human thinking, and we can either spend the time to work through that and process it and [00:13:40] build our psychology and all of that, or we can put a simple, simple system in place that bypasses it.

And, you know, the thing about compounding is the early stages are really important. You know, we can’t afford to have. Five, ten years of working on our psychology to finally [00:14:00] get clear to make good discretionary subjective decisions. We just don’t have that time. We need that time for compounding. So you’ve got to bypass the psychology, put rules in place that work.

Whether that’s increase your income, reduce your spending, uh, invest the difference in a passive strategy that you follow, you know, every single week, every single month, or whether [00:14:20] that’s you put a certain set of amount of money into a trading account, you follow this system and use a certain set of position sizing rules and you trade according to these rules, ignoring everything else.

It doesn’t matter that much. I mean, they can have different outcomes, but you need to follow a process that bypasses the psychological issues.  

Chris Monzon: Yeah. In addition to the [00:14:40] process, what I find is that, you know, you might have the perfect process, but if you don’t have the discipline to follow through with that, then that process is, is, is moot.

So have you, what, what kind of things can investors develop or use in order to develop that discipline in following the plan when, especially when the market feels unpredictable in the future, because no [00:15:00] one knows what’s going to happen in the future, regardless of what the pundits on TV might want to try to tell you.

Adrian Reid: Oh, and then the least of all, right? I mean, listening to the news or the media about the future of the financial world is just a disaster because all they’re trying to do is hook you with, um, with either fear or greed or panic or whatever it [00:15:20] is so that you’ll watch the next ad that comes up in the ad break so the channel makes money.

It’s absolutely nothing to do with educating you. It’s all about hooking. So, um, you know, the first thing we’re going to do is turn off, turn off the news. Yeah, I think the, the next thing is we have to have confidence in the approach, you [00:15:40] know, we need to deeply understand it, not just pay lip service to it, because if we don’t deeply understand what the approach is, how it will work, what could happen, then when something potentially difficult or stressful happens, and we haven’t expected it, it’s very easy to freak [00:16:00] out, panic, and start messing with the process.

Now in a systematic trading world, what we do is we have our rules and we backtest them. So we take those rules, we apply them to all of the historical data. So we can use 20, 30, 40, 50 years of stock market history. And we can say, if I followed these rules over time, what would have [00:16:20] happened? And you can see, you know, the equity would have grown over time, but it’s not just about how much money you would have made.

It’s about how much time did you spend underwater? you know, how many wins did you have? How many losses did you have? It’s answering the question so you deeply understand what might happen. And when you know what might [00:16:40] happen and you become comfortable with the fact that the strategy works regardless, okay, yeah, all these difficult things happen, but look, it builds wealth over time.

Then it doesn’t matter that much. You know, you expect that there’s going to be adversity. You expect there’s going to be losses. You expect there’s going to be down days, down weeks, down months. [00:17:00] But when you expect something, you know it’s coming, it doesn’t shock you, it doesn’t cause you to freak out and panic and, you know, bypass or ruin the process.

You just keep following the process. I think the better we understand the strategy we’re using, the more able we are to follow through with it.  

Chris Monzon: I would agree with that. So maybe the volatility, the concern, the [00:17:20] trepidation is a feature of the system, not a bug of our system.  

Adrian Reid: Oh, absolutely. Yeah, absolutely. I mean, there’s another thing that causes a lot of problems, and that’s that in school we’re trained to be right.

You know, we’ve got to get the right answer. We’ve got to, uh, not embarrass ourselves when we put our hand up in class, right? If the [00:17:40] teacher calls us to the, the board to write the answer, we better be right or the class is going to laugh at us. You know, we, we, we want to be 100 percent right. And, uh, that’s what we kind of did to try and survive the school system, right?

It’s the same everywhere from what I hear. And the need to be right [00:18:00] actually is a huge challenge for investing. You know, it’s a huge challenge for trading because we have uncertainty. We didn’t know if the market’s going up or down tomorrow. We don’t know if the market’s going up or down this month or even this year.

And anyone who tells you otherwise is just dreaming. you know, they might have a view, [00:18:20] but best case, they’re making a guess. So we need to be able to cope with that uncertainty that we might be wrong in the short term, so that we can be right in the long term. Now, a trading example is, I have a trading strategy which has made me a lot of money, you know, many, many hundreds of thousands of dollars, [00:18:40] and that strategy trades individual stocks.

and it’s wrong on 70 percent of trades. Okay. Now most people go, Whoa, that’s horrible. You’re wrong. The majority of the time, how can you possibly make money? Right. But when I’m right on [00:19:00] that strategy, the wins are really, really big. And when I’m wrong, the losses are really, really small. So the math actually adds up to a positive expectation of profit overall.

So, You’ve got to be willing to be wrong to follow that strategy so that you can be right about the, you know, the outcome, [00:19:20] you know, be willing to be wrong on individual little decisions so that the big thing. You know, turns out the wrong way. Does that make sense?  

Chris Monzon: It does. I’m sure I could see that both the passive strategy or the passive investor and the systematic trader like yourself would both face challenges just sticking to the course.

And you just said like 70 percent we’re going to [00:19:40] fail, but I know that 30 percent are going to succeed. So maybe what could our passive investors borrow from the discipline, the systematic trading systems that you have in order to Do better on their own. Or maybe if they decide to go to systematic trading, that way they don’t fall into these biases, into these [00:20:00] issues that we all, that we all face.

I’m sure you didn’t come into it. Someone taught you’re going to fail 70 percent of the time, but succeed 30%. And you’re like, Oh yeah, 100%. That sounds great to me. Like, I bet that, that you were also like, no, no, no, no, no. That, that sounds crazy.  

Adrian Reid: It took me a little while to figure that one out. Um, for sure.

Look, I, I think one of the big things [00:20:20] that passive investors can borrow from systematic traders like me is, um, the idea of, uh, backtesting. to learn what could happen so you can build comfort and confidence, right? So in my world, I take my trading rules, I put them into some software, [00:20:40] and I run, that software looks at all of the market history and finds all of the buyers and sellers over time and assembles it into a portfolio.

Okay, that all sounds a bit technical. It doesn’t really matter that much. The point is you get feedback on what the strategy would have done over time. You know, what does the, what does the profits look like day by day [00:21:00] in the past? What sort of return did you make? What sort of drawdown did you have? You know, what sort of win rate did you have?

All of that to get a lot of data, a lot of information about how the strategy performs. Now, if we go across to the passive investing world, how does that relate? Okay, let’s say you were a passive investor and you were just dripping, um, [00:21:20] money weekly or monthly into an ETF. Maybe the SPY or maybe the Q’s or something like that.

Like, I don’t, I don’t know what you’re necessarily promoting, but, um, you’ve got a passive investment strategy that’s going into a particular vehicle. If you don’t know what that vehicle has done in the past, then there’s a [00:21:40] good chance in the future you’re going to be pretty shocked and freaked out.

Right? But if instead you study, all right, I’m going to invest in the U. S. stock market and I’m going to do it through this exchange traded fund, the SPY, for example, and you look at what the SPY has done over time, you go, okay, over time, [00:22:00] this is the sort of long run return it’s had. However, there’s been days where it’s been up this much or down that much.

And most people would be shocked about how big the down days can get. Yeah, if you know that that’s coming and it happens, it’s like, Oh yeah, I’ve seen that before. Right. And most people would be shocked about how [00:22:20] much the market can go down in a week or a month. But if you’ve seen it before, it’s like, Oh yeah, I’ve seen that before.

This is all right. I’ll just buy more when I drip my cash in next time. Right. The dollar cost averaging will work in my favor. For example, if you’ve got a dollar cost averaging strategy, most people would be [00:22:40] completely freaked out if their investments tanked 20, 30, 40%. But if you’re just buying and holding a broad market ETF, that’s going to happen at some point because you’ve just got to look at the past and you’ve seen that it’s happened many times.

Now it doesn’t happen every year, right? But every now and then we go through bull [00:23:00] markets, we go through bear markets, and if you know what to expect, Then you go, yep, that’s normal. I’ll just carry on with my strategy. I know I’m going to come out the other side of it. So I think this idea of backtesting to really deeply understand what could happen, I think that’s one of the most important things that all types of investors can do.

You know, really [00:23:20] deeply understand what could happen.  

Chris Monzon: Yeah, once you’re able to look at that past and say, this has happened again and again and again, and I’m going to be okay. And especially once you’re able to add those rules based systems to everything, it could really help to remove those emotions from the decision making, because that’s the most dangerous part of all this.

It’s our psychology and it’s our emotions of fear, but more fear and [00:23:40] greed. Those are the two things that Really get investors to react negatively towards what’s going to actually help them grow wealth in the long term.  

Adrian Reid: Yeah, absolutely. I think another thing, another aspect that all investors struggle with is patience.

You know, no matter what style of investing [00:24:00] we’re doing, patience is just so important. You’ve got to have the patience to wait for the signal. You’ve got to have the patience to, um, wait for the entry and the exit, you know, you’ve got to have the patience to let the market do its thing. Let the investment play out.

you know, to wait for your, you know, [00:24:20] the, the trigger in your investing plan. You know, you don’t want to take money out at the wrong time because you’re emotional about it. You’ve got to be willing to wait. And most of the money in active trading, interestingly, and investing is made by sitting on your hands, doing nothing.

letting the investment do its job. [00:24:40] You know, in passive investing, you’ve got to put the money there and then, you know, keep, keep dripping the money in, but sit on your hands and just let the market grow. Let the income come in and reinvest it and let it build. In active trading, we have to wait for the signal, buy [00:25:00] the stock, and then don’t worry about what that stock’s doing.

Wait for the exit. If we can just wait for the exit signal, then we have a chance of realizing the profitability of our system, our strategy. But if we’re not willing to wait, if we get freaked out by the little ups and downs in the market, then it’s very hard to make [00:25:20] money.  

Chris Monzon: Have you found that sticking to these rules for yourself to have helped to avoid those emotional decision making when you’re doing your trading?

Or how long did it take you to be able to finally understand that like, this is just the game and like, this is it? Rather than letting your emotions be like, but maybe this time is different. Famous last words of every single investor, right? This time is different. [00:25:40]  

Adrian Reid: Um, look at the beginning, I did find it emotionally tough.

And this is part of the journey of becoming a consistent and confident and profitable trader. Um, the thing that made the difference for me with active trading was actually testing my emotions. So as in backtesting my [00:26:00] emotions, this is why I talk about it to my audience. Let’s say I’m following a strategy and I get a signal to buy a certain stock and I look at the chart of that stock and I go, Ooh, you know, that’s really volatile.

I don’t want to buy that. That feels, you know, risky or something. Yeah. I just have an emotional reaction to what I’m supposed to be doing. [00:26:20] Right. What I do then is go, okay, what was it precisely that gave me that emotional reaction? What, what, what caused that reaction? Oh, that stock is jumping all over the place.

It’s really volatile. There’s lots of gaps overnight or something like that. So then what I can do is I can take that observation and put that as [00:26:40] a rule into my strategy. and test whether that made my strategy better or worse. Like if I avoided stocks that jumped all over the place that were all gappy and just filtered them out in my strategy, would that make me more profitable or less profitable?

And again, this is one of the advantages of systematic trading [00:27:00] is that you can, you can create rules and test them very quickly and easily, right? Um, so I would do this over and over again. It’s like, Oh, gappy chart. Don’t like that. Oh, last time I bought that stock, I lost money. I don’t like that. Um, Oh, last time I had this much profit.

it went back down to zero and ended up losing money. So maybe I should take profit here. All of these sorts of [00:27:20] reactions people have when they’re actively trading, they’re testable. And if you can test the emotional reaction, you can objectively see, does this add value or destroy value? That’s super powerful.

Because what I found after testing so many of these dozens and dozens and dozens of reactions I was having [00:27:40] to my strategy, I found that the vast majority of them destroyed value. It’s like, Oh, maybe I should just follow the strategy. right? And, uh, it becomes easier and easier because you realize, oh, that’s just my emotions and you’re going to separate yourself from that.

It’s like, I’ll just follow the strategy because it always works. It doesn’t always work, but you know, it just works over time. [00:28:00] So, um, you know, that ability to objectively evaluate your emotional impulses is a huge advantage. I would say I have doing systematic trading, um, on the passive investing side.

Really, I think what we’ve got to do is get good at observing ourself and saying, Oh, okay, my emotions [00:28:20] coming up here. It’s driving me to do something that’s different to my written down strategy. So therefore, that thing that is driving me to do is probably a mistake.  

Chris Monzon: Yeah.  

Adrian Reid: Yeah. I would say a good rule of thumb is anything that is not written down in your investing strategy [00:28:40] is a mistake.

Yeah. So if you’ve got it written down, follow the strategy. Any impulse to do anything else is probably a mistake. I think that’s a pretty good rule in as a general rule of thumb. That’ll keep you out of a lot of problems. And same, same is true in active trading.  

Chris Monzon: I’d agree with that. I mean, Sun Tzu that once said, you know, know thyself.

And if you know [00:29:00] thyself, you can hopefully avoid your worst reactions. You know, one thing that I really respect about the systematic traders, people who have the passive strategy don’t know is you never really get, or you do get that gut check and passive strategies, but you only get them every five or 10 years.

With the systematic traders or the guys who were in, or the crypto bros or [00:29:20] whatever it is, they’re getting those gut check constantly. So they actually get to test their mettle as it were. against their strategy and say, can, can my emotions. Hold with this because every single, um, you know, person who’s like me, who’s the passive strategist, they can be like, Oh yeah, I can take as much risk as I can.

And everyone says they’re risky when the markets are going game [00:29:40] busters. But the moment the market turns, they’re like, no, no, I’m not risky at all. I’ve never said I was risky. Why’d you ever put me in a risky thing? The thing I like about the systematic traders that I like about the crypto people like yourself, Adrian, is that you’ve been like, I’ve been in the trenches, I’ve actually seen how bad it can get, and I know I can still stick with it.

Right. So. Are there? [00:30:00] What, what can, what can you maybe tell to our people that are passive investors is how to get through that, how to get that gut check, how to really feel like I can make this through it. Cause I know we can look back, we can see like it’s happened every time, but when you’re actually in it and there’s emotions are running high and you see everyone’s panicking, running for the [00:30:20] door, you’ve got to be crazy to be like, no, no, no.

I’ve seen this before. I’m going to stay inside this fire because I know it’s going to be okay.  

Adrian Reid: The first is a really good question. I think it’s really powerful. I think the best thing you can do. is zoom out. You know, so many people are glued to the TV screen. They’re looking at what happened last [00:30:40] night, yesterday, this week.

But if you’ll just, instead of looking at this very narrow kind of window of history, like, Oh my God, the market’s crashing. It’s down 8%. It’s like, wait, hang on. Zoom out and look at the last 50 years. It’s like, look at where we are now. Look at the crazy thing that’s [00:31:00] happening on a 20, 30, 40, 50 year time, time scale.

That crazy thing is just a tiny little bit, right? And it puts things into perspective. So, and this is, I think this is true even outside the financial world. When you’re immersed in something and something [00:31:20] is going wrong, it feels like the whole world is coming down. But if you can step out of your little sphere and get some broader perspective, you can about the whole universe.

I mean, we’re a little speck of organic matter sitting on a rock, hurtling around a ball of burning gas amongst billions of other balls of burning gas in the entire [00:31:40] universe, right? Just get some perspective. Like the world is not falling apart because the market was down a couple of percent yesterday.

And if your financial world is falling apart because the market was down a couple of percent yesterday, that’s a big hint to say you’re doing something wrong. Chances are you’re over leveraged, you’re [00:32:00] taking on way too much risk, you don’t understand the market that you’re in or what you’re doing, you’re in the wrong instrument, something is wrong.

If your financial world is really falling apart because of some little wiggle or maggle in the market, you need to look at the because it shouldn’t be. I honestly could not care less. what happened in the market yesterday, last week, [00:32:20] last month, last quarter, doesn’t matter. You know, I, I sleep well whether the market, you know, was down 1%, up 5%, down 10 percent today.

I don’t care because I know my strategies will work long term. It’s about getting perspective. I would say zoom out. Don’t look at anything. If you’re a passive investor [00:32:40] particularly, I wouldn’t look at anything less than a two year chart of what the market is doing. You know, these people looking intraday, Oh, what happened today?

They got their phone and they look at their, Oh, you know, I’m rich. No, I’m not. Uh, it’s like gets your observations in line with your strategy. How often, I mean, here’s a good question. How often do you [00:33:00] have to observe the market to see what’s going on to correctly run a passive investment strategy? How many times do you need to look at the market?

Chris Monzon: Precisely zero.  

Adrian Reid: Exactly zero. So if you look at the market any more often than zero, you’re exposing yourself to negative feedback that’s going to cause your [00:33:20] emotions to go haywire. For trading, so again, I’m active systematic trader. I trade on daily charts and above. I don’t do intraday. So it’s only daily charts or longer.

So daily and weekly mostly. I don’t look at the market during the trading day because I don’t need to look at the market [00:33:40] during the trading day to run my strategies. I wait till the market’s closed, I update my data, I run the rules, I place the trades for the next day. That’s it. And I do all of that outside of market hours.

Very rarely do I have any clue what’s happening in this trading day, because it doesn’t affect my strategy. It’s not required to make a [00:34:00] decision. And I would say the vast majority of people check in on what’s happening in, on their, in their account balance far more often than they need to for the strategy they’re running.

Chris Monzon: I’d agree with that. And sometimes it takes the discipline to set up those systems in place to get. Get that out of your [00:34:20] life. Like for example, for myself, when I was doing systematic trading, much like yourself, I found myself every day looking at it. And when I went over to passive, I still kept that up of looking at it constantly.

So what I had to do was delete all the widgets off my phone. Like I used to have stocks on my phone as a widget. Those are gone now. Like, if I want to look at it, I have to go to my computer. [00:34:40] I don’t even look at it on my phone. Like I, that’s a rule. Like I can’t look at it on my phone. I have to go to my computer, turn on the computer and do it that way.

That way I’m creating. Barriers and barriers and barriers to, you know, hurt myself because I think that’s what I want. I want to hurt myself. So why not put barriers in place? Yeah, brilliant. You know, I found  

Adrian Reid: it  

Chris Monzon: so enlightening. [00:35:00] I  

Adrian Reid: had a very similar thing when I first went systematic, right? When I was trading initially, I was using discretionary approaches.

I was looking at the market, I was reading the news, I was looking at the analyst reports, I was doing all of that. And I was looking at the charts and indicators and all of that. And it was taking me four or five hours a night. Right, to do [00:35:20] my analysis, to make my trades. And then I went systematic and that all of a sudden dropped to like 20 minutes, 30 minutes max.

Because what do you have to do? Update data, run the rules in the system, place the trades. Job done. Very simple, right? I don’t have to do all of that extra superfluous stuff. [00:35:40] But I found myself Kind of feeling guilty that I was doing so little to make my money, because I was making good returns. It’s like, Oh, you know, maybe I should, you know, do more.

So I started reading news and I started doing some of these other things again, and my trading got worse. There’s all [00:36:00] this extra stuff, all this extra time, all these extra check ins that weren’t important for my strategy. And so finally I just eliminated and said that’s it. I haven’t read a newspaper for decades, you know, it’s like even the thought of picking up a newspaper Bores me to tears and scares me about what junk is going to go into my brain [00:36:20] because I just don’t want to have all of that extra Unnecessary information coming into my brain that’s going to affect my my investing approach  

Chris Monzon: Yeah, and it’s such a conundrum for people because you know, you grow up and maybe you’re an athlete, maybe you’re just in school and you realize that the more effort I put into things, generally, the better of a [00:36:40] result I get.

But in the markets, regardless if you’re a systematic trader or a passive investor, the more work you put in, obviously, oftentimes, the worst results you get. It’s one of the few places in the world. That you can just stick to your process, do less work and get there. Like there’s no one who’s going to walk into an NFL Columbine and be like, I haven’t trained for like the [00:37:00] last six years, but I think I can do this.

You know, uh, Adrian, I’m a jujitsu coach as well. Like that, that’s, that’s my other like fun thing that I do. And what I noticed a lot is, you know, people will say like, I’m going to take it back to what you were saying earlier, where just taking that wider perspective. When someone’s in a fight with somebody.

They can’t see anything, but besides why it’s in right in [00:37:20] front of them. And the moment that they get out of that match and they come and they see the video, there’s like, Oh my God, I could have done so many other things, but I was so hyper focused on doing this one move that I didn’t, I lost everything to this one, one move.

Um, it’s crazy how there’s, once you see the way broadly, you see it in all [00:37:40] things.  

Adrian Reid: Yes, a hundred percent agree. And I think the, the, the little golden nugget that you just dropped there was. Once they watched the video, like that was just a little throwaway line, right? It’s the post match video replay, like what did I do?

And I can imagine in, in sports, that’s a huge thing, right? If you’re trying to be [00:38:00] elite, you, you need to debrief, dissect exactly what you did and didn’t do, the cues you saw, the cues you missed, the timing, all of that. In investing, that’s your journal. You know, that’s your, your trading, if you’re an active trader, that’s your trading journal.

Hey, this happened today, I saw this, this is how I [00:38:20] felt, I took this trade, but I shouldn’t have done, I made this mistake, here’s what I saw, this is what it made me do, or this is what it made me feel, and that’s what that made me do, like dissecting and recording all of that, being honest with yourself about what really happened, and, uh, you know, if you convert your emotional trauma, you [00:38:40] know, madness that we all have about our money into journaling, instead of into half thought through action, we’re going to do a lot better.

Because in journaling, you’ll notice patterns, you’ll start to understand what’s driving you, you’ll start to understand your strategy more. [00:39:00] It’s really is, it’s like the post match replay that you watch. Okay, what mistake did I make today? And why did I make that mistake? And how can I avoid making that mistake in the future?

And often the great thing about a simple investing strategy, like a set and forget, you know, type thing is. It’s very simple to know, did I [00:39:20] follow my strategy today? You know, did I stick to my budget? Did I put my, uh, my savings away somewhere separate first? Did my automatic investment plan put the money in the right spots?

Did I avoid looking at the market and checking my phone 15 times today? Yeah, so there’s not much to check. Anything else is a mistake.  

Chris Monzon: [00:39:40] It’s so funny. I always find that when people are the person who does check it every day, you know, they see the tops, they see the bottoms, and they zoom in on the minute.

You know, you just back out, back out, you know, if you’re on your mouse, just scroll out, scroll out, scroll out. And you’ll see that that chart You know, given that you’re on a, given that you’re on like a normal index, not, not on like a specific holding, perhaps it’s going to be up into the right at a 45 degree angle.[00:40:00]  

And that looks a lot nicer than if you zoom in to any minute by minute, any minute by minute looks terrifying. But as you zoom out, zoom out, zoom out, it makes this clear, beautiful line that we all want to see on our performance charts.  

Adrian Reid: There’s another trap as well. And the trap is in investing. If you’re not careful, there’s a [00:40:20] lot of negative feedback.

You know, if we look at a chart, let’s say we look at how the market moved today, right, and you look minute by minute, the number or the percentage of minutes each day where the market was down compared to where it was at some previous point [00:40:40] during the day. is a very high number. Like there’s a large percent of minutes where if you’re watching a chart minute by minute, you’ll be feeling poorer than you once were.

And that negative feedback is crippling. You know, money is hard enough without adding unnecessary negative feedback. And you think if you’re watching the [00:41:00] market every 15 minutes during the day, it’s like, Oh yeah, what’s happening now? Oh, what’s happening now? Oh, what’s happening now? Right? You’re looking on your phone.

There’s so much negative feedback. And if we’re doing that, and that, that, that feedback doesn’t drive an action, like it’s not part of our strategy. All we’re doing is [00:41:20] giving ourselves negative feedback for no reason. And when we zoom out, and we only check the markets at the interval required to run our strategy, then the amount of negative feedback reduces massively, and the whole thing becomes easier to stick to.

So part of [00:41:40] it’s zooming out and part of it is just really understanding how often do I need to be checking that what’s going on to make my investing decisions. You know, I need to check once a day and only once a day. And in fact, now I’ve eliminated that as well because I’ve fully automated everything.

So my entire [00:42:00] portfolio is fully automated. I run trading systems on the Australian market, the US market, the Canadian market, the Hong Kong market, and the crypto market. So I’ve got, you know, well over a dozen different strategies running. It’s all fully automated. So I, most days I don’t know what the market is doing.

All I know is at the end of the day, I get my [00:42:20] email saying what trades happened. Were there any, you know, things I need to check in on or fix the errors? And I take that action and fix it. So distancing myself from the negative feedback has made a huge difference psychologically.  

Chris Monzon: Yeah, that cognitive bias we all have that our losses hurt two to three times more than our [00:42:40] gains.

And we also have a cognitive bias that we anchor to the highest level that things were. So if you buy in at 10 and it goes to 15, well, now my cost basis is 15. That’s the way my brain does it. And then any time that I see it go up, now my system is working the way it’s supposed to, but the moment I see it go down, oh my god, my system is broken, and you see it go up [00:43:00] again, you’re like, well, okay, that doesn’t really matter, like, it’s a fluke, goes down, I need to freak the hell out, like, burn the ships, let’s, You know, I don’t know what I need to do.

Like I need to sacrifice a cat or something to figure this out. That’s the way that I’ve seen so many investors and they just, they struggle. And I just don’t know how to fix that with the exception of going through one of my year long [00:43:20] programs of breaking that down over and over and over again. But obviously that’s not scalable to so many people.

So Adrian, are there any simple indicators or maybe signals that our passive investors or even our systematic traders can use to maybe gauge the market’s health to gauge their own biases against what the market might be [00:43:40] doing?  

Adrian Reid: Look, the, the simplest things that work are pretty long term. I mean, again, so just to be clear for everyone, we are getting into the active trading sort of category here, but it, you know, one of the strongest.

technical indicators that actually works and actually makes a big difference is [00:44:00] the 200 day moving average, for example, right? So you take the closing price of the market today and you average and the last 200 days and you calculate the average. And when the current price is above the 200 day average, the market’s going up.

When it’s below the 200 day average, the market’s going down, right? That’s pretty [00:44:20] obvious. It’s super blunt. It’s easy to calculate. It’s on every single charting package online and, you know, in your broker and all of that. Super easy to do. And the difference between when the market is above or below is immense.

Above the market, there’s a lower vol above the 200 day moving average, there’s low [00:44:40] volatility. Above the 200 day moving average, the average gain per day is higher. Above the 200 day moving average, more days are up. Above the 200 day moving average, there’s very few kind of big crashes and drops. Below the 200 day moving average is highly volatile.

The average profit per day [00:45:00] is lower or negative. and bad things tend to happen. So if you want, if you’re looking for a technical rule to look at that says, okay, where is the market going? Are we going up? Are we going down? Just a simple 200 day average, uh, makes a big difference. Now, a simple, a trading system, [00:45:20] like something that I would deploy in my portfolio, is a combination of fairly blunt, simple rules like this, that each individually have a significant edge.

right? So you have a rule that says the market’s going up so you can buy. If the market’s going down, don’t buy because you’re probably going to lose, right? [00:45:40] You have a rule that says the stock is low volatility because believe it or not, low volatility stocks tend to grind up and make you more money over time than stocks that are bouncing around all over the place in general, yeah?

So a few simple rules like this, you combine them together into a complete strategy and then you can follow them, and.  

Chris Monzon: have a high chance of making money. Now, earlier [00:46:00] you said that your, no, I think that was great. I mean, I, I feel like in order for someone to really get what you’re getting at, Adrian, they would need to get in contact with you to, to see the system in place.

Like just saying that, and we’re, we’re going to get to that in a little bit. Um, but you talked about now your system is fully automated. Does that only happen for people now that we have the admin [00:46:20] of AI, or is this something that could have been? done a long time ago with just the strategies you had before the advent of chat GPT.

You know, I know most people, you can go ahead and do whatever they want.  

Adrian Reid: Yeah. It’s not, it’s not an AI thing. What I’m not doing, I want to be clear as I’m not outsourcing my trading decisions to some black box, you know, language model that someone else has [00:46:40] trained and God knows what it’s going to do.

Right. That’s, that’s, that’s not a good strategy. Uh, no matter what the marketing online tells you, right. Um, what I’ve got is a trading. an investing process that works to use your language and approach, right? There’s a certain set of rules that I follow. [00:47:00] Yeah. In my, um, situation, I’ve got many different strategies, but if the stock does certain things, I’ll buy it.

I’ll buy a certain amount of it. And if it does certain other things, I’ll sell it. Now, I can manually determine whether that stock is a buy or a sell or I can put those rules into the computer and the computer can tell me. It’s only then a [00:47:20] small leap to say, all right, the computer can tell me if it’s buy or sell and by the way, don’t tell me, tell the broker and place that trade.

So that’s just connecting all of the building blocks. You know, I’ve got the data, I’ve got the trading software, I’ve got the broker and I’ve got a connection between the software and the broker that actually does the placing of the trades. And then I’ve got a report that [00:47:40] kind of spits out and tells me what happened.

Um, so it’s, it’s not an AI thing, it’s just, uh, you’ve got to have the right modules of tech, you know, technology and link them together. And that’s been possible for, for years. It’s just, most people don’t do it because there’s a little bit of technical kind of work involved. Um, I’ve made it pretty easy with, you know, the approach that I use.

Recently, it’s [00:48:00] probably become easier than maybe 10 years ago, but yeah, it’s been possible for a while.  

Chris Monzon: Good. I’m glad that you talked about the AI thing. I just, I was trying to like lead you there and say, like, I wanted you to say it, but I didn’t want to say it. Yeah,  

Adrian Reid: I think outsourcing, outsourcing your decisions to, to AI at this point is, is highly dangerous.

Um, we, I don’t think it’s proven [00:48:20] enough yet and to be honest, simple things work, you know, and an AI model, that’s not simple, right? An AI model can probably do, you know, way more complicated math, calculations, relationships and everything than we can, but that doesn’t make it profitable tomorrow. And I think this is key, we know a few, [00:48:40] there’s a few simple principles that really work in the markets.

You’ve got to keep your risk low, you’ve got to buy stocks that are going up, you sell them when they start going down, you, uh, um, have a few different types of trading strategies that make money in different sorts of conditions, you diversify across different markets, because not all markets are going up at the same time.

There’s a few, like, core [00:49:00] principles that work. Don’t, uh, I wouldn’t be replacing those with, uh, some big black box called AI.  

Chris Monzon: I would agree with that. The process should be simple. and easy. But unfortunately, our brains make it simple and not easy. But if you just set it up right the right time, it is simple and easy.

Now, I know you’ve taught [00:49:20] many students on your, your, your trading system on, did you invent this trading system yourself, Adrian? Or is this something that you’ve kind of learned and pieced together from other, um, you know, people that you studied at the feet of? How, how did this come about?  

Adrian Reid: Um, uh, look, I, I have a few original thoughts in my life, um, but I have learned from many, many, many people, right?

I, [00:49:40] I read well over 200 books on active stock trading and futures trading and all types of trading and pulled together an approach which, which works nicely and neatly for, for me. Um, the individual rules are all very simple. because simple is what works. But the magic, and this is one [00:50:00] of the kind of, I guess the best lessons, the magic is that you don’t need a brilliant, amazing, fantastic set of rules.

You don’t need the best set of rules ever. What you need is good rules that are stable over time and will keep you safe. And then you go and find another set of [00:50:20] good rules that’s just a little bit different, or a lot different. and then another set, and another set. So having a portfolio of systems, a portfolio of strategies that are good, that’s the magic.

And this, this took me a little while to learn. I had one really good strategy that I loved, and I followed that for seven years, and I made a ton of money. [00:50:40] That’s all I did. I was absolutely dogmatic about it, because I found one thing that worked. So I stuck with it like a crazy person. that was great because I made a lot of money, but I also left a huge amount of money on the table because that strategy didn’t make money all the time.

You know, it made money when a [00:51:00] certain type of stocks was moving in a certain way. But now I have strategies that make money when the market is trending up smoothly. I have strategies that make money when the market is volatile. I have strategies that make money when the market is going down. I have strategies that make money when Hong Kong’s going up.

I have strategies that make money when the US is going up. I have strategies that make money when Bitcoin’s [00:51:20] going up. And Bitcoin’s going down and all of those things, but they’re all simple and they’re all good, but not amazing. But when you combine lots of good strategies together, you get a diversification effect, which is magic.

Chris Monzon: Speaking of diversification, would you say that there might be room for both an active and a [00:51:40] passive strategy in a well rounded portfolio if each one of them. is set to serve a specific purpose?  

Adrian Reid: Oh yeah, no question. Absolutely. Um, I, I know plenty of people that do one or the other or both. There is a caveat.

If you do [00:52:00] a passive investing strategy, don’t muck it up by tinkering with it in an active trading way. And if you do a active trading strategy, don’t muck it up by saying, Oh, I lost money on that stock. Let me put that over here in the investing bucket. And I’ll just hold that for until it breaks [00:52:20] even, and then I’ll sell it.

Like if you’re going to do two different styles of investing, there needs to be a firm line down the middle, and they should not muck up. ruin or mix with each other, because we’d like to believe, Oh, I’ll just apply this cool thing here that I learned over there. We’d like to believe that’s going to make it better, but [00:52:40] it almost always makes it worse.

So don’t bastardize the strategy with some components of a different strategy. Have, this is my passive investing bucket, and this is what I do over here. This is my active trading bucket, and this is what I do over here, and understand the objective. Understand the risk [00:53:00] profile, understand what’s likely to happen.

and follow the strategy, but don’t mix them up.  

Chris Monzon: I would call that, you know, clear lines, especially when you’re driving on the road, you know, you have clear lines that differentiate your lane from somebody else’s lane. And if you’re crossing over into that lane, you’re messing up in some way. And if they’re messing to your lane, you’re messing up in some way.[00:53:20]  

You, you kind of touched upon it a little bit, but how can investors balance between, The passive and active approach without adding too much complexity to the system and therefore, you know, making it moot.  

Adrian Reid: First of all, I would say that if you want, in order to be an active trader, [00:53:40] you need to really want to learn it.

You need to be really fascinated by the markets and the movements of the markets and understanding it and finding an edge in it. Like that’s got to be fascinating. A lot of people think, Oh, I should trade a bit more actively because then look, I could have made money from XYZ stock, right? You know, [00:54:00] look what everyone, all my friends made money from this stock.

I should be buying that stock. If you’re shooting yourself into active trading, I think then that’s a warning sign and I wouldn’t do it, right? Because there is a lot to learn. Like, my strategies are simple, but there is a learning curve, [00:54:20] I’m not going to lie, it takes effort and it, and, and dedication, just like mastering anything.

The amazing thing is, once you do master it, it can build amazing wealth for decades, and it doesn’t matter about your physical health, as long as you can click the right buttons and whatever on the computer, you can, you can build wealth with, um, with active [00:54:40] trading, if you’ve got the right strategies in place.

But you’ve got to do that work first. You can’t just, you know, mess around with it, try it out, you know, follow a few tips here and there, follow a few hunches and expect to make money. You, you won’t because it’s a competition and it’s one of the toughest competitions in the [00:55:00] world because there’s a lot of people investing in how to extract profits from the market.

So one way to win is have a passive set and forget strategy. That’s great. Another way to win is have proven systems that you can apply over and over again because you’ve built the confidence in that system and in [00:55:20] the process and you do that with discipline. But to get to that point, you need to learn a few things.

So I think the first guiding principle is don’t shoot yourself into trading. It has to be a must for you. I love the markets. I’m fascinated by the problem. I love the fact that different things move in different ways and [00:55:40] humanity, their, their collective kind of emotion of humanity moves the markets and that creates opportunities for profit.

I love that. And so I would do this as a game, even if there was no money involved. That’s, that’s, that’s how much I would say you’ve got to like the markets in order to be an active trader. then invest the time to learn. [00:56:00] You know, don’t just think you’ll figure it out. That’s like thinking you’ll figure out brain surgery.

It’s like, Oh, let me just try my hand at brain surgery. You know, you need something, you know, fixed up in there. Let’s just chop you open. We’ll poke around and see what happens. And we’ll try and get you fixed up. How’s that sound? It’s like, that sounds crazy, but people somehow [00:56:20] think it’s normal to just poke around in the markets and, you know, try and try the hand at it.

It’s not going to work. And what’s worse, sometimes it does. you do get a little win or a big win. And that’s the worst thing that can happen. It’s like, oh, first stock I bought, it went to the moon, man, I’m good at this. It’s like, no, you weren’t, you’re [00:56:40] lucky. So it’s gotta be a should, it’s gotta be a must, not a should.

And you’ve gotta invest the time to learn. And you’ve gotta, um, build the confidence so that you’ve got a process and not just do what all the other people are doing. Because remember, the vast majority of people lose money. when they’re actively trading. You don’t have [00:57:00] to lose money. I don’t. I’ve made a lot of money in the markets, but you’ve got to rise above what everyone else is doing in order to succeed.

Chris Monzon: Yeah. I think it’s so hard for people because, you know, we know the statistics. 97 percent of money managers can’t beat the market. Yet every young man sitting in their base, in their mom’s basement believes, but I’m in the 3%, like me [00:57:20] alone, clicking on some buttons is going to win. And maybe you’ll win in the short term, but it’s going to be really hard when there’s millions of dollars in teams of people with fiber optic cables in order to make trades milliseconds faster than others.

But you think due to your infinite wisdom that you can somehow beat the market. Now, I want to ask, Oh, go ahead. [00:57:40] Good.  

Adrian Reid: Oh, a couple of things in there that I think are important to pick up on if I, if I, if I could. Um, the people in their basement thinking that they’re going to out with the market and the fund managers who can’t outperform the market, there’s some, some important differences to understand, and I know you understand this, but, you know, just to, to share to, um, to the listeners, [00:58:00] um, fund managers act like active mutual fund managers have some inherent flaws in the model that make it very difficult for them to outperform.

You know, they’ve got a, they’ve got a lot of expenses. Right, they have to pay their staff, they’ve got buildings and advertising and marketing, so they have to pay money out. [00:58:20] Where does that money come from? It comes from the fees they charge the investors. And so, even if they were able to perfectly match the market, they have expenses.

which means their performance is going to be a little lower. But then they also have room for mistakes and mucking things up and then their performance is probably even lower still. The great thing about [00:58:40] private trading is that we have, we don’t have those expenses, so we have that advantage. We also, as private traders, we don’t have to be in the market.

Which is a huge advantage. The fund manager, they have to be invested. Because how would you feel if you gave your life savings to a fund manager and they just let it sit in cash and say, man, I’m not paying you [00:59:00] to let my money sit in cash. I can do that for free in the bank. So they have to have it invested.

Whether the market’s hammering down, going sideways or going up. As the private trader, we can sit aside from the market and wait for the opportunity. So if there’s a bear market, we can just wait, wait, wait, wait, wait, wait, wait, wait, and then [00:59:20] when the market starts going up, then we can get in. So we’re at a huge advantage.

However, it doesn’t change the fact that, you know, 97 percent or whatever it is of active traders don’t make money. But that’s because they don’t have rules. They don’t have risk management. They don’t have discipline. They use too much leverage and they’re not diversified enough and they watch [00:59:40] the market too much and they make any number of other mistakes that we haven’t yet talked about in this podcast.

I  

Chris Monzon: agree with that. Thank you for bringing that up, Adrian. Another thing to, to add on there for why the fund managers often can’t beat the market or beat traders like yourself, who are doing it on their own is. When you have investors that give you their money, they expect you to be doing something with it.

And oftentimes when you’re [01:00:00] expected to do something with it, your incentive is to make, do something now that will benefit you in the short term, but oftentimes it benefits you in the short term, eating a donut, skipping the gym, you know, skipping leg day. It’s going to hurt you on the longterm. So we see that over and over and over again.

And that’s why, if you look at like the best performing Um, you know, active managers, [01:00:20] one year they’ll be the best performing, the next year they’re zero stars. Because whatever got them to be the best performing is not the thing that’s going to keep them in the long term. You know, Warren Buffett used to talk about, um, a batter, a baseball batter that would sit there and he would look at the strike zone and he knew that if the ball was in this strike I pretty much guaranteed to [01:00:40] hit a home run.

So Warren Buffett kind of surmised that I, as the investor, I can sit there and just wait for fat pitches all day, because unlike that batter, he only has three times and he’s out, but I can sit here all day and wait and wait and wait for that fat pitch. Same thing with the systematic trader who. isn’t held by Wall Street’s demands of, it must be good [01:01:00] right now.

You have the time, the effort to just sit and wait and be patient like we talked about earlier.  

Adrian Reid: Yeah. And we have the advantage that in a week or in a day or a week or a month, it doesn’t matter if I underperform. Whereas if a fund manager underperforms, what happens? Investors pull their money and they give it to [01:01:20] some other fund manager who didn’t underperform because investors chase returns and that, that means the fund, the fund manager is terrified of underperformance.

So what do they go for? Average. Because they don’t want to underperform. So they’re all just around the averages, just tweaking a little bit. They’re terrified to go too far [01:01:40] away from what the broad market, um, you know, weightings are, because if they do, they might underperform, then they might lose a big chunk of their assets, which will drop their income, which will mean their business is in trouble.

Us, on the other hand, it doesn’t matter if I underperform for a month, In the process of following my [01:02:00] strategy, which outperforms on average year after year after year, I’m going to have good months and bad months. I don’t have to care whether I’m better or worse than the market in that moment. I just know that my strategy works.

Chris Monzon: And from a fund manager, you show me the incentive and I’ll show you the outcome. If the incentive is I outperform and I get a high five and an award, but I underperform and I get fired. [01:02:20] My goal is to just be average. Yeah. Like that’s the incentive. Exactly. Right.  

Adrian Reid: Exactly. Right. Incentives matter.

Incentives matter. And you’ve got to look at always putting your money and the incentive of the place of the person that’s taking, you know, taking responsibility for that money.  

Chris Monzon: Now, Adrian, both systematic [01:02:40] traders and passive investors can feel the temptation to quote unquote outsmart the market. But I think by, by we’ve talked in this whole podcast about proven processes is the key to success.

So what do you think actually drives investors and traders alike to feel that they can quote unquote beat the market and how can they overcome [01:03:00] this human urge to do so every time?  

Adrian Reid: I suspect more than half of the people on the planet think they’re smarter than average. Yeah, I, you know, I suspect We all have, I know we all have ego, right?

Talking about how, you know, if we just did this, you know, the little [01:03:20] voice inside our head that drives us to do different things. We all think that when we get told something in confidence or we read something that, you know, we’re, we’re onto something. You know, this is, You know, I’m, I’m, I’m in early, or this just happened, no one else knows about this yet, but [01:03:40] most of that in the financial world is delusion, because the dis, look, the markets aren’t completely efficient, but they’re fairly efficient, and they’re, they’re more efficient.

then assuming that little old me sitting, you know, in some small [01:04:00] town on the coast in Australia can find something out before someone big who will actually move the market and bake that, bake that event into the price. Right? There’s no way I’m finding information out before people that really move the market.

It’s just not, it’s just not happening. I mean, they [01:04:20] know before it hits the news. They know before it hits the stock price and they’re already positioned to profit from it. So I think we need to accept that we can’t outsmart the market. And, Observe the chatter and observe the impulses, journal about them, [01:04:40] and then try and be humble.

Like, okay, I know I have these feelings that I think this is a good buyer, I think that’s undervalued, but what I think doesn’t matter, the market doesn’t care about us. What matters is do I have an objective set of rules that has proven to work time and time again over many years. whether that’s [01:05:00] a passive buy and hold investing strategy, dollar cost averaging, or whether it’s an active trading strategy like what I use.

You’ve got to ask yourself, do I have a strategy that is proven here? And gut feel, or intuition, or um, chasing the latest hot thing, or the rumor that you [01:05:20] heard on Reddit, or whatever, like that is not a strategy that is proven time and time again. That’s gambling. And the problem is gambling is addictive.

because you get infrequent payoffs. Unpredictable. Even if you have the expectation, even if rationally the expectation would be that you [01:05:40] will lose money long term, it’s like, oh, I made money on that stock. Oh, that was good. Like, oh, let me try to do that again, because if I could do that a couple of times a year, I’d make some pretty good coin, right?

It’s addictive. So we have to acknowledge that if we get into that, it’s addictive. Good investing, good trading is boring, right? It’s [01:06:00] just a process. Click, click, click, click. That’s the reason I automate it. Because the execution is boring. What’s interesting is the thinking, the coming up with the strategy and the testing of it to prove that it works and then deploy it.

Then just follow the rules.  

Chris Monzon: That was beautifully said. I didn’t know if there was really an answer to that question. That could [01:06:20] have sufficed, but you You hit the nail on the head, man. So I’d like Adrian to give you the chance to tell our audience about you, where they can find you, anything. The podcast is yours.

Adrian Reid: Oh, thank you. Um, so look, I mean, if you’ve enjoyed the conversation, I’d love to help you learn a little more about, um, active systematic trading. Um, [01:06:40] so Adrian Reid, obviously from Enlightened Stock Trading. So, uh, come check me out, EnlightenedStockTrading. com. Um, and I think there’ll be a link around here somewhere with some free resources I’ve got, uh, at EnlightenedStockTrading.

com. slash free dash trading dash resources. Go there and you’ll get some free courses and cheat sheets on how to [01:07:00] improve your investing, your trading, and even a free system to show you what a good trading system looks like. So go there, check that out. If it appeals, then schedule some time. We can have a chat and see if I can help you out, improve your trading.

Chris Monzon: And I will add that into the show notes. So if you’re looking around for it, just click on that button, scroll down there and you’ll find the links inside there. Now, Adrian, we [01:07:20] are a podcast all about financial independence. And what I found is that financial independence means something different to each individual person.

So I’d like to ask you, what does financial independence mean to you? Or if you were financially independent, would your life change in any way?  

Adrian Reid: Oh, great question. And it’s such a good question to end on because you’re right. It is different for everyone. And if I can [01:07:40] start the answer by saying if everyone could define what financial freedom, financial independence meant to them.

It would be a lot easier to achieve it because you know what you’re shooting for. So for me, it’s about having the, uh, the resources, having the passive or semi [01:08:00] passive income that I can generate myself. To be able to do the things what I want, do the things that I want, where I want, with whoever I want, whenever I want.

Now, that doesn’t mean first car class flights every other week to a different country, although that’d be nice. It’s not required for me. It just means I don’t have to have a job, [01:08:20] you know, I don’t have to worry about, um, where the money’s coming from to go to the grocery store. You know, I don’t have debts that if I have a down week or a down month or a down year, I’m going to get me into trouble.

You know, I just want to be able to live my life, uh, spend time with my family, socialize, go out, travel a bit, and not [01:08:40] worry about where the money is coming from because I know the investing is good at taking care of it. So for me, I mean, there’s obviously numbers around all of that and everyone’s numbers will be different depending on what countries you live in, so I won’t go into the numbers, but that, that’s really what it’s about, you know, I just want freedom, you know, I, I, I’m not about private jets and lavish lifestyles and [01:09:00] Lamborghinis and all of that, I mean, that is garbage, you know, the people who are flashing that around, they’re actually not rich, they probably don’t even own the things.

Yes. Okay. Some of them are, but most of them are, um, yeah, for me, it’s just about having freedom and choice.  

Chris Monzon: You said something there at the beginning where you said if everyone could define what financial independence meant to them. [01:09:20] Life could be so much easier. And as someone who has been a financial advisor for quite a while now and manage money for a while now and have a background in psychology, there’s so many questions that people ask when it comes towards money and they’ll ask it in a million different ways, but in reality, they’re asking one of two fundamental questions.

Am I going to [01:09:40] be okay? And how much is enough? Oh, these are the two things in our life that we search for thriving and striving. Am I going to be okay? How much is enough? It doesn’t matter what question you’re asking me as a financial advisor, you are hitting on one of those two fundamental questions. So if you’re able to answer those two things for yourself, [01:10:00] you’ve basically won the game.

And from there, it’s just getting to that end point of what is enough.  

Adrian Reid: Yeah, I think that’s really insightful and, and, and super valuable to your, to your clients. Um, here’s a, an insight on from my journey, which I, I think is really [01:10:20] powerful. The day I felt free was not the day I was financially free. It was the day I knew I was going to be, because I had a strategy that was working.

Yeah, that day when I was on the bus, you know, going to town, realizing I wasn’t going to have to [01:10:40] do this forever. That was the day that I was free. It was years after that, that I quit my job. I left my, my, my last job in September of 2012. And I’ve been a full time trade, uh, private trader ever since. Um, but when I realized that was many years before, that I was going to get there.

Because I had a [01:11:00] strategy. I had a process. I was confident in it. I was following it and I knew what it was going to take to get me there. That was when I felt free.  

Chris Monzon: The power, the power of a process driven plan that is driven by principles that actually work is amazing. Just a level that most people [01:11:20] unfortunately will never attain because they’re afraid to look at it because if whether you think you can you think you can’t, you’re right.

If you think you can achieve it, you’re going to find ways to make it happen. But if you think it’s impossible for you, you’re also right because you’re never going to look for ways and even if you do find that way, you’re going to think not for me, it’s for somebody else or they’re trying to chip me or whatever it is.

And I’ve been in [01:11:40] both those mindsets. I know what it’s like to grow up poor. I know what it’s like to feel like the world is against you. And one of the best things we can do is to realize that it’s all your mindset. Your mindset is the thing that’s preventing you from doing anything. Yeah, completely.

And  

Adrian Reid: everything. Yeah, I completely agree. Absolutely right.  

Chris Monzon: Well, Adrian, I would like to thank you so much for coming and adding so much value to our audience today. I [01:12:00] will be sure to add links to everything that we talked about here inside the podcast, um, notes there. Um, But guys continue to strive. Please share the five guys with one person that you, if you found value today, um, like subscribe, all that good stuff, and we will see you on five Friday feedback this coming Friday to talk all about this and give you some more great insights.

So I’m Chris, [01:12:20] he’s Adrian. Later. This video podcast is sponsored by Monzon Wealth. The content in this podcast is for informational purposes only, and should not be considered financial advice. We do not endorse specific products or services. Past performance does not guarantee future results. The opinions expressed are those of the hosts and guests, not the podcast [01:12:40] sponsor.

It is crucial to consult with a qualified financial advisor or professional who can provide advice tailored to your specific needs before making any financial decisions, investments, or taking any other actions. If you are seeking specified help, you can reach out to Chris at monzonwealth. com.