Trading Psychology Blind Spots Series #3: Your Trading System

Hi, Brian McAvoy with Inside Out Trading here today, and we're talking again about blind spots. And today's blind spot is really critical, has to do with trading systems. Before we get started, make sure that you subscribe to this channel and if you're on YouTube, make sure you go ahead and click the notification bell. Okay, so we're talking about blind spots. And this is really critical no matter what endeavor you're in, but especially in trading, because if something's in your blind spot and it's, you know, it's giving you trouble from, you know, enjoying trading and making money and all that kind of stuff, if it's in your blind spot, it's going to remain there, you know, for as long as your awareness doesn't include it. So with the blind spot, I mean, this is why I'm bringing these things up to you, is so that you can become aware of it. You can see if it's affecting you, how it's affecting you, and what to do about it so that it's no longer in your blind spot, it's now it's in your awareness. You can get it, you can address it and get it, you know, move beyond it. And that's the whole point of these videos. So, anyway, today we're going to talk about trading systems. And actually there are a few blind spots with trading systems that really cause a huge amount of heartache, a lot of grief that leave you open to, you know, getting scammed and ripped off by, you know, people just selling crap, and also just a whole lot of frustration. And, you know, when we're talking about trading systems, here's like, one of the biggest blind spots that really there is when it comes to trading systems. And that is that from a system standpoint, a repeatability, a consistency standpoint, because everybody's always looking for the consistent profits. That's the magic buzzword. You know, all the scammers out there, they're sitting there saying, oh, you know, look at this great strategy we have, you know, and, you know, it'll provide you those consistent profits forever. And look, it's so clever. And the blind spot is realizing that the blind spot is not seeing that a strategy is not the same thing as a system. See a lot of traders, and it's easy to not see this when you first get into trading and even to remain blind to it. It's real easy to assume that just because somebody has a clever strategy that it's a good system and it will be repeatable over time. And this is, again, this Is huge. Because if you're sitting there, you get this great strategy. Buy low, sell high or trade within the range. Pick tops and bottoms, trade breakouts, divergent, flag. I mean, there's a thousand different strategies, but the problem is the strategy is just an idea for getting in and out of the markets. A system is how you're going to do it hundreds or thousands of times over a period of months or years. Just because you have a good strategy doesn't mean that it's automatically a good system. Now another one. And this is a blind spot. You'll hear again, magic words. Oh, but it's rules based. I have rules. Hey, just because you have rules, that doesn't mean that that's going to provide you the consistency, that that's going to let you trade and get consistent results in the dynamic markets. Markets are always changing charts. You know, it's never the same from one day to the next. There's similarities. But every day you're dealing with a dynamic marketplace just because you have rules. Okay, I mean, here's perfect example. Get in it. Okay, here's a rule number one, get in at the beginning of the trend. Rule number two, get out at the end of the trend. Those are rules. Not that easy to implement consistently though. Just like buy low, sell high, pick tops and bottoms. Those are all rules when the market turns, get out. Okay, no, that's not necessarily a way to do this over and over and over again consistently. Now, how can I say all this? I used to be a quality manager. Quality assurance, one of the foundational concepts and principles in quality assurance, knowing your outputs for your processes, you, is how to make things consistent. I mean, that's the whole, like I said, that's a foundational thing of quality assurance. Now, quality assurance is perfect for traders because again, quality is where you go into any business and you say, all right, what are your processes? What are the things that you're doing over and over and over again? And how can we make them first of all, really good, good, you know, best practice. This is the best way to do this and then make it consistent so that it can be done the best way over and over and over and over again in and day out, week in and week out, month in, month out, regardless of who's there. That was my job for a lot of years and I loved it because it was really cool. When I was in mechanical engineering, you know, we could design a perfect machine. But as soon as you threw people into, you know, into the mix, now, hey, all bets are off because People are variable. Quality was like the flip side of the engineering equation. Quality is okay, this is how you make the process and the machine and all the variables, you know, that go into the process, including people. This is how you make it consistent so you're always, you know, you're getting the desired output. And again, this is perfect for traders. Okay, so how does all this come into it? Well, again, a blind spot, you know, understanding what trading is. Trading is a decision making process. We talked about this in the last video. Okay, so the whole thing is how can you make your decisions in a consistent manner? Okay, that's where a lot of people think, oh, rules based, well, rules help, they're a step in the right direction. But if you don't understand how the whole system comes together so that it actually is a repeatable process, a consistent process that gives you consistent outputs, consistent profits, or at least it's no longer gambling because now you've gotten it to the point where it's repeatable and it becomes measurable. That's when you know you've got consistency, is when you have a measurable repeatable process. Just because somebody sitting there saying, you know, yeah, we got this great strategy, look, we got in here and we got out here, look at all this money we made. You can do it too. Well, okay, it's a good strategy, but is it repeatable? Can we make it repeatable? That's the trick. And unfortunately again, the blind spot is, and it's so easy to get caught up in, you know, so many sitter saying, yeah, you know, look at this great strategy. You know, we made all, we're making all this money with it. Okay, the blind spot is it's a great strategy, but is it a good system? You can't just assume that just because somebody says it's a good strategy, it sounds clever and all that, that it's going to be repeatable over and over and over again. And this is why so many people, you know, they buy a great signing system, you know, drop 500, 1000, 3000, $5000 on this excellent sounding system. But it's really just a clever strategy and the repeatability isn't there. And that's why, you know, 30 days later you're giving up because it's just not working. It's not producing the desired results, especially not the consistency. And that knowing ahead of time. It's because whoever created it, they don't know how to create a real system. They're good at strategies, very clever. But you have to learn how to, you Know, look at a system, evaluate the strategy, and then evaluate the system. Okay, is the strategy sound? Does it make sense? And the system, is it a good system or does it have flaws? Buy low, sell high, hey, best system ever made. But can you do it over and over again? Yeah, that's the trick. Good strategy, tough sit, you know, not a good system. So anyway, the lesson from all this is don't just assume that because what you're looking at sounds like it's based on a good premise, that it's going to be a repeatable true system where it's repeatable, it's systemized properly, you need to challenge it, you need to test it, you need to understand how to spot the problems, how to test it and measure it so that I collect the metrics so that you know how good it is. I mean, just because somebody says it's profitable, great. If I have to place 100 trades a year to make 20 bucks, it's profitable, but it's not good enough. So you don't want to know, just is it profitable? You want to know how profitable is it? What are my percentages? What are my probabilities? What's my potential drawdown? What's my potential profit? You need to know your metrics about the system and you need to know how to test it. So when you go into the, you know, when you go to trading it, when you go to, you know, putting it to, you know, the test in the markets, you know, before you ever risk money, what to expect from it realistically. Anyway, I hope this has been helpful. This is a big blind spot for a lot of people, assuming that just because somebody's got a clever sounding strategy that it's a good system. It's not. And don't assume that it is. That's how a lot of people really get hurt. So hopefully you found this helpful again. You know, we're going to continue this, we're talking, we'll talk about more blind spots tomorrow. But you know, if you found this helpful, please share with your friends, give me a like down below and we'll see you in the next video. Talk to you soon. Cheers.