Adrian Reid (founder of Enlightened Stock Trading) explains that even a small amount of discretionary decision-making (e.g., 1%) can let psychological biases (fear, greed, FOMO and a cited list of "50 cognitive biases") dominate trading, turning otherwise rules-based trading into emotional trading. He argues the solution is a fully systematic, 100% rules-based trading approach that defines entry, exit, position sizing, stop loss, and risk per trade. He promotes a two-day Market Mastery Bootcamp (90 minutes per day) to learn how to implement this systematic approach.
Chapters
Did you know there's a right and a wrong way for most people to make trading decisions? My name is Adrian Reid. I'm the founder of Enlightened Stock Trading. And in this quick video I want to share with you one simple problem that causes more trading challenges than anything else. And it's between here and here. You see, most people make trading decisions with some sort of rules in mind, right? Like, you know, when the price is above the moving average and when these other conditions are true and the market's trending up, then I'll look for my favorite setups and I'll decide which stocks to buy. The challenge with this is even if Your decisions are 99% rules based with 1% discretion, where you kind of assess what's going on in the world and make your own decision, that 1% discretion causes your trading to be 100% emotional. And this is an absolute killer when it comes to long term trading results. Because humans, believe it or not, are not good traders. We have too many psychological biases and too many emotions to be to be good at trading in the long run. We're not built for this level of volatility and also this level of uncertainty. You see, we've got emotions, you know, the typical fear and greed, which have a dramatic impact on our trading. Fear of losing money, fear of being wrong, fear of looking stupid, greed about getting rich, greed about getting our money back. All of these things, FOMO as well. But it's not just that, it's also this. I got a list here of 50 cognitive biases that affect traders. And I'm not going to go through all of these in this quick video obviously, but you can pause the video and have a look if you want, or go to my website enlightenedstocktrading.com to learn more. But 50 different cognitive biases that affect traders. These are biases that are flaws in our thinking that impact our trading decisions. And if you've got 90, 99% rules and 1% discretion, then there's plenty of room for all of these biases to slip into your trading. And this is the problem. So what is the right way and what is the wrong way to make trading decisions? Well, in my view, the wrong way is anything that allows all of that psychology to come into play into our trading decisions. The right way is to eliminate it, bypass it by putting 100% rules based decisions in place. Now what is 100% rules based decisions? What does that look like? Well, it means we trade with a system that tells us exactly when to get in and exactly when to get out of the market. We have a rule for every aspect of our trading. When do we get in, when do we get out, where do we put our stop loss? How much do we buy? What's our risk per trade? All of these things are all rules driven. And the reason this is so important is because if there's a rule for everything, then it's the rules that are making the trading decision. It's not ourselves, it's not our minds. Because when our minds are making the trading decision, all of this junk gets in the way, right? Plus our fear and greed. So if we can eliminate all of that or bypass it, rather by putting rules in place to define every aspect of our trading, then we eliminate that 1% subjectivity ballooning into 100% emotional trading. And this is the way we're going to succeed. So humans are emotionally complex. We have so many different biases and shortcuts in the way we think that, that we just don't make good traders. So we've got to trade more like a machine and less like a human and have rules that define everything that we do. And that's the right way to make trading decisions. It's after trading for 25 plus years and teaching hundreds and hundreds of students every year, I found that this is the absolute fastest and highest probability way for traders to become successful. Rather than working on your thinking and trying to clear your mind and try to be calm and manage your emotions and all of that, just bypass all of it by putting rules in place to define every single aspect of your trading. So if you want to take the next step and learn exactly how to do that, and if you're an analytical professional who really wants to master the markets and build 100% confidence in your trading, then click the link in the description and register for Market Mastery bootcamp. It's a two day, 90 minutes per day workshop, live workshop where we're going to be working on the the journey from launch to mastery of your systematic trading business. And I'll show you exactly what you need to know every step of the way. So I'd love to see you there. Click the link in the description, register for Market Mastery Bootcamp and learn how you can eliminate that 1% of emotion in your trading, go 100% systematic and give yourself a much higher probability of success in the markets. My name's Adrian Reed. This is enlightened stock trading. I'll see you at Market Mastery Boot Camp. Bye for now.
