Adrian Reid (speaker) presents a contrarian suggestion: rather than suppress emotions, traders should capture their emotional reactions and convert them into testable trading hypotheses and rules. He outlines a four-step process—(1) write down the trigger, (2) form a testable hypothesis, (3) codify it into an if/then trading rule for backtesting, and (4) evaluate whether it adds value—and stresses two prerequisites: you must already have a rules-based trading system and know how to backtest. He closes by pitching his Enlightened Stock Trader certification program for traders who need help learning system design and backtesting.
Chapters
So today I'm going to tell you to do something that I guarantee no other trading educator anywhere in the world is going to tell you to do. I want you to bring all of your emotions and unleash them on your trading.
So here's the thing. We all know that emotions kill our trading results. When our emotions go up, our intelligence goes down and we end up making bad financial decisions. But the trouble is, unless you're a cyborg, it's pretty much impossible to eliminate all of the emotions from your trading activities. There's just too many moving parts, too many things that go wrong. And let's face it, we're all humans. We have emotions and we can't get rid of them. And even if we could, probably wouldn't want to because it wouldn't make us much of a human being after all, would it be? But to succeed as traders, we need to find a way to deal with our emotions so that we can make good financial decisions and make consistent and profitable trades. So in this quick video, I'm going to show you a simple four step process so that you can harness your emotions and use them to actually improve your trading results. So here's how you use your emotion to improve your trading. The first step is to write down what actually caused you to have that emotional reaction. Did your system or indicators or charts have some sort of pattern or characteristic on them that caused you to be uncertain or fearful or afraid of taking that trade? Describe that in some detail so that you really articulated exactly what caused you to have that emotional reaction. The second step is to convert that description into some sort of hypothesis. So when the index has gone down for three days in a row, then it's a bad trade, or when the stock chart has a lot of gaps in it over the last five to six trading sessions, then it's a bad trade. Whatever the example is for you, convert that description that you did in step one to a hypothesis that is testable. The third step in the process is to actually take that hypothesis and convert it into trading rules. The index filter is a great example. So, you know, sometimes I've been afraid of taking a buy signal when the market has been trending down heavily over a number of trading sessions. And that causes me a little bit of fear. And so what you can do in that situation is, say, is codify a rule that says, you know, if the market index is, is down three days in a row, then don't take a trade. Once you've got that codified as an if then statement that you can put into code in your system, in your backtester, then you can actually go and do the test. And you can test your original trading rules with this new hypothesis rule and without the hypothesis rule. And the final step is, once you've tested it, you evaluate the does this rule add value or not? If it adds value, then your emotional reaction has caused you to identify a rule that improves your profitability. And your trading results will be better from now on because you can take that new hypothesis and incorporate it into your trading rules. But if that Hypothesis destroys value, I.e. it makes your existing system or rules less profitable, then you know that you need to ignore that emotion going forward. You don't incorporate that rule and you continue trading with your existing rules. So it's a four step process. Write down what caused the reaction, convert it to a hypothesis that you can test, codify it so that you can run a back test, and then run the back test to do the analysis to see if it actually adds value or destroys value. But here's the catch. In order to do this, you, you need two things. Firstly, you need a trading system or set of rules that you're running your trading by. Because if you don't have rules, then basically everything you're going to be doing is driven by emotional reactions and none of it is going to be profitable in the long term. So you must have a set of trading rules, or even better, a complete trading system so that when you have one of these reactions, you can codify a hypothesis and test with and without that hypothesis in your trading rules to see if it improves your results. The second thing you need is you need the understanding of how to back test systems and rules. Now if you don't have those two things, then that's the first thing. They're the first things you need to develop in order to improve and make your trading more consistent. If that's the case for you, then my enlightened stock trader certification program might be exactly what you need. Because in that program, what you learn is how to develop and test your own trading systems and rules. How to take other people's rules or ideas and back test them to make sure that they're profitable, or at least they've been profitable historically. And do it in a way that gives you a high chance of future profitability, gives you confidence because you've done the testing work. One of the big challenges most traders face is that they get their trading ideas from, from books or courses or seminars. And if you don't know how to test them, you're operating on blind faith. And if you're operating on blind faith, the emotional control is so much more difficult because you don't have that evidence, that confidence that your systems and your rules are actually profitable. So if you're ready to really improve your trading results, if you're ready to step up and actually face what's been holding you back in your trading, to face the fact that your emotions have been affecting your trading decisions, and to learn how to test and design a system to eliminate the emotions from your trading and enable you to harness your emotions to improve your trading profitability and make more money in the markets. And if you're ready to do that with less time, less energy and less stress, then click the link below and fill out the application form. Just a couple of questions to help me get to know you, to see whether or not I can help you, whether or not the program is right for you. But this program is not for everyone. If you're not willing to actually test your ideas, if you're not willing to step up and actually take responsibility and drive your own trading, if you're not ready to actually want to control and learn how to design trading approaches that are profitable and validate them and do that sort of work, then this program is not for you. But if you are ready to step up and actually start taking control of your trading and learning the skills that you need to succeed, learning how to back test your systems, learning how to validate ideas, learning how to control your risk, and learning how to write a trading plan which will keep your trading on the straight and narrow and help remove and eliminate the emotional impacts of your humanity on your trading, then this program might be exactly what you need. So take two minutes and fill out the application form at the link below and I'll get back to you and let you know whether or not the program is right for you. If it is, then I'll show you how it can help and how it can work in a little bit more detail. But don't worry, if the program is not right for you, then I'm going to be the first one to tell you. Because I don't want to waste your time and money or my time and energy trying to force fit something that isn't right. So click the link below, answer a few simple questions, and I'll see you on the other side. Bye for now.
