Are you trying to make money trading stocks using obvious ideas?
Adrian Reid argues that intuitively obvious trading ideas (what "feels" right) tend to stop working once widely adopted, because the action of many traders erodes the edge. He uses profit targets vs. letting winners run and his own "20-bagger" anecdote to show how systematic, repeatable approaches with small per-trade risk can capture rare large returns. He closes by encouraging viewers to learn how to build and backtest their own trading systems and offers a call-to-action to schedule a session.
Chapters
I think one of the big reasons why people fail at this game, the trading game, is that they do things or they assume that the things that are obvious, the things that just make sense intuitively, are the things that are going to work and make you money in the markets. The trouble with that is if everyone is assuming that something is going to work, then it's no longer going to work. Maybe it did once upon a time. But what happens is if everyone believes something to be true and everyone is doing it, then the more people try and pile in and use that strategy, the less and less effective it becomes, because more people are trying to get in and out at the same prices. So what happens is if everyone believes something works and everyone is actually doing it, the edge goes away. And all of a sudden it's not profitable anymore. And people who are doing what you. What they assume works because it's intuitively obvious, start losing money. So what you really need to do is think about what is it that people aren't doing, or what is it that people can't psychologically do in the trading environment, because they're the things where you can extract an edge and where you can actually make money. Take, for instance, Profit Targets. Profit Targets is a great one, because who doesn't want to make a profit, right? So there's heaps of books out there and lots of websites and courses and everything that talk about, once you get to a certain level of profit, you should take that off the table, or at least take some of it off the table and close the trade and move on, find the next one. And that's great, because what happens is you get a certain profit, once you're up a little bit, you grab that profit, you bank it, and you move on. You find another trade. So it feels good to do that. Why does it feel good? Well, it feels good because you were right. You got to be right. You got to have a winner. And having a winner in the markets makes you feel like a champion. It makes you feel like you've outsmarted the market, like you know how to trade and all of these things. But the trouble is you've missed out on something. When you take that profit off the table, you miss out on the opportunity for an even greater profit, and that's what kills your overall profitability. Maybe you made money on that one trade, but what about the money that you left on the table? See, the less intuitively obvious thing to do is to not grab that certain profit is to let it go, let it run, let it build, and Grow even more over time. Because if you're able to do that.
Instead of getting that certain 10 or 20% profit every now and then, you can get a 10 times, 20 times, 50 times return on your initial investment from one of your trades. If you can grab that sort of profit, that's like a five bagger, a 10 bagger, a 50 bagger, then that totally changes the game. But doing the obvious thing like using a profit target and taking a small profit off the table will never ever allow you to capture those huge multi bagger profits. That, that can really change the game for you.
My first 20 bagger really just changed the whole trading game for me. Because what happened is all of a sudden instead of trading 30, $40,000, all of a sudden I was trading a couple hundred thousand dollars as a result of one trade. And some people might say, well, that's luck, right? Because you took all these trades and you just happened to come across that one trade, that return, that huge sort of return. But it's actually not luck because what it is, it's something different. It's having a repeatable approach and putting yourself into the market in a measured and cautious and strategic way or systematic way to allow you to take advantage of those opportunities when they come along. So having a set of rules that guide when to get in, when to get out of the market and putting yourself into the market many, many, many times with a very small risk each time is something that's going to allow you to capture some of those really big profits. But doing that obvious thing of setting a profit objective and taking that money out of the market, that's really not going to allow you to capture those super profits. And I think that's one of the prime examples of why people fail. Because they assume in trading that what's obvious.
What intuitively makes sense, is going to make them money. And it's just not so. And it's one of the reasons why when I'm trading for myself, when I'm teaching other traders, I teach them how to build their own trading system, teach you how to build your own trading system too, if you wanted to. Because what it allows you to do is take those intuitively obvious kind of ideas, the things that everyone talks about in the markets, and test them and make sure that they actually work. The amazing thing is when you know how to test an idea, when you know how to put together a system and evaluate it on past data on all different markets, and pressure test it and optimize it and all those things, when you know how to develop a system properly and test a system concept properly, you discover something really interesting. What you discover is that all of the.
Intuitively obvious things, like I said earlier, just don't work. Or if they do, they work so poorly in comparison to some other things, other concepts which are much more psychologically challenging to do, like letting your profits run, like having a trailing stop exit instead of a profit target, like taking less trades but allowing them time to grow instead of trading frequently, like you're running on a hamster wheel. When you know how to develop your own trading system, you can test all of these concepts. And all of a sudden you don't have to take anything like that on blind faith anymore. I think if more people knew how to build and test their own trading systems or to test other people's ideas, I mean, if you read in a trading book a certain signal or certain rule or indicator or whatever, you can't just take that on blind faith because maybe it worked for the author once upon a time, or maybe it works on this one particular niche in the market. But you're different. You might be trading a different market. The book might have been written five years ago. You need to be able to test that concept. Even if that indicator, even if that idea seems intuitively obvious.
Then it's probably not going to work, or at least not as well as you would assume. You need to be able to test those ideas. So anything that you think should work in the market, I'd encourage you, just don't take it on blind faith. You need to learn how to test and back test your trading system ideas or test other people's ideas rigorously so that you actually get that confidence that it works. And once you do that, nothing is taken on blind faith. Most of the actions that you are almost the signals you were taking in the past, you realize they just don't work. And so you can start to narrow in and find a set of rules that really work for you and allow you to make money out of the market consistently. And when I learned to take to build systems and to test ideas and everything in the stock market, things changed dramatically for me. Because as soon as I went systematic, as soon as I started following rules in my trading, all of a sudden.
I traded less, I had less stress, and I made way more money because I wasn't making mistakes following these ideas that just don't work. So if that sounds like something is interesting to you, then just click the button below and answer a few simple questions. It's going to give me a bit of an idea of where you are with your trading. Based on those questions, I'll give you some feedback. You can schedule a session. We can have a chat about how you could proceed and improve your trading from here. So again, my key message for today is don't just assume the obvious. Things will work if it's intuitive and if you think it makes sense, it's probably not going to work in the markets. You need to learn how to test and analyze all of those types of signals and ideas to make sure that they actually work in the market. So again, if that sounds like something you're interested in, then click the button below, answer a few simple questions about your trading and and I'll get back to you with some ideas about how you can improve and move forward from here. That's all for this video and I'll see you in the next one. Bye for now.
