Adrian Reid says trading tip services overwhelm you with too many trades, triggering fear and greed. His fix: build your own rules-based system. He gives an example: buy stocks at all-time highs, sell if they drop 20%.
A 20% drop from the subsequent all-time high.
And you know what happens when you, when you have a tip service like that.
There's more trades than you could possibly take. And.
Every psychological issue that we have as traders, as human beings comes into play when you're trying to pick from between one and the other which one you want to take. Just can't possibly take all of them. And so in a sense, you may as well almost have no tips and just throw a dart at the dartboard because at least that would eliminate your psychology and the challenges we face because humans are not very good at making trading decisions. It's just, you know, it's not what we're built for. We're built for surviving in a social environment and running away from danger and keeping ourselves alive and all these things. We're not built for managing risk in financial markets or making financial decisions in the face of fear and greed, going all over the place.
So in a sense, the big problem is that you are actually as the taker of tips, you're out of control of your trading because you get sent.
Information, instructions, buy this, buy this, buy this, buy this, buy this, sell that, and it's up to you to say, okay, well, I'll take this one and I'll ignore that one, and I'll take this one and I'll ignore that one. And you don't have the background from all of those.
Tips to make consistent decisions. You might be able to make sensible decisions sometimes, but other times you're going to make decisions which are less than optimal. And this is the whole problem with the trading tips industry. They all, all of the tip providers give you more trades than you could possibly take because then they can say, look, look at all of our trades, look how well they did. There must be something wrong with you. You better buy our next service or you better buy our premium thing, or you better do this or that and stay subscribed because you haven't figured it out yet.
In reality, the way to get past it, and actually it's quite simple, the way to get past it is to take back control of the generation of trading decisions. Now, I don't mean subjectively deciding should I buy this stock, should I buy that stock, but it's take your decision making and make it objective, rules based. If you've watched some of my videos, you've probably seen me talk about systematic trading as the answer to a lot of our psychological problems. And the reason it's the answer to our psychological problems as human beings is because it takes our psychology, our biases out of the equation. A system is a set of logical rules that says if A and B and C is true, you buy. If D or E is true, you sell. There's no what about this, what about that? The news says this, the brokers say that, the analyst report says this, my advisor says that it takes all of that out of the equation. It gets rid of all the noise. Single source, right. The other advantage is when you become objective in your decisions. The rules can be tested.
Because the decisions are objective. You can codify them and then run them over past data and see how it performs. And as soon as you do that, you can say, oh, I actually have an edge, I know what to do, I'm confident in these rules, I can follow them.
Whereas when you're getting the tips like I don't know if this one's going to be a winner or if that one's going to be a winner, I don't know if I should buy the bullish ones or if I should just buy the hot stocks or maybe I should buy a bit of both. You know, all of that uncertainty goes away.
And so the real shift is to take back control.
Make your decisions on an objective basis, a systematic basis, and then test those rules you're going to use so that you build confidence in them. And then you can ignore all of the, all of the tip providers from then on. Because if you've got rules that you've tested and you're confident in, all you have to do each day is run the rules and see which stocks come up as a buy and which stocks come up as a sell.
Now probably sounds easier than it actually is, but the rules can be really simple. You know, simple rules like now don't, don't go and follow these rules. But just as an illustration of what it actually is profitable, if you buy a stock the first time, it makes an all time high like it's, it was up here and it comes down and it makes a new all time high. It's obviously going up at that point, right? It's pretty scary to buy an all time high, but you can't argue it's going up make sense. And so if you bought a stock at an all time high and then you held it as long as it kept going up, but if it fell 20 from its subsequent all time high, from its subsequent high, if it fell 20%, then you get out, what that's going to do is it gets you in 100% objectively. You don't have to debate like clear and obvious when it made a new, all time high. So you buy and then you hold it until this other absolute objective thing happens. And that allows you to stay in the stock as long as it keeps trending up. But if the stock turns around and starts going down, you get out, and hopefully it keeps going up so that when it turns, turns around and goes down a little bit, you've got some profit, which is the difference in between.
And so simple objective rules like that, obviously, there's much better rules, but that one, that, that rule, with the addition of a couple of little filters, will actually beat the market. Higher return, lower drawdown.
So that eliminates the need for the tips. It eliminates the confusion and the overwhelm. And I think that that's, that's, that's the secret, right? Go down that path and you take control back.
