Can You Trust Your Trading System? | Trading Psychology

Hello and welcome to lesson nine of the advanced psychology course, the High Performance Trading. And this video is all about trading systems, which is something that most people misunderstand. Your system in the simplest terms should be a set of rules that over the long term, if executed correctly, will give you a positive expectancy, an edge. However, many systems are too complex, others are too simple, and for most people, they, they don't actually know what this system really does or whether or not it even has an edge. So I want to look at systems in detail to explain what they are, what they are not, what they can and can't do, and what makes a profitable system versus a losing system. Let's start with a quick recap linked to our understanding of probabilities from the last video. When your system edge is only slight, the outcome of individual trades or small clusters of results or are random and therefore they are irrelevant, you cannot assess your system on a small sample size of data. You will only know if you have a profitable system after analyzing large sets of results. And this is where most traders go wrong because they draw false conclusions far too quickly off a small sample size of results. The only way to establish the edge of your system is to trade consistently over many, many trades. And more importantly, you must concentrate on the process, the outcome. I think this is the key difference between professionals and amateurs. Professional traders are all about the process. And by that I mean executing the system consistently, taking the same steps repeatedly to allow your system to do its thing and for your edge to play out over the long term. If you follow the process, the results will take care of themselves. When I trade, I don't care whether this particular trade is a win or a loss. And I hope that now makes more sense. After the previous video, I know my system has an edge, just like the biased coins I showed you. So the only thing that matters to me is that I keep flipping that coin, taking the trades over and over. The more consistent I am at following that process, the better my long term results will be. It is process, process, process. But there's important caveat. Before you embark on a period of process based trading sticking dogmatically to your rules, we do need to take an important look at your system to evaluate it. That's why I've put this lesson at this stage of the course. It's an opportunity to properly assess your system to gain more confidence as to whether or not you do actually have a profitable set of rules that are worth committing your time to and following. With a process based approach, there's no point Sticking to a losing set of rules. So let's figure it out. By this stage of the course, you should be appreciating just how much oversight and awareness a person needs to follow a trading system consistently. You could have the best system in the world and never be profitable because it's just too easy to override, fiddle with or make changes to your rules. So when assessing any strategy, we have to come at the problem from the perspective of system one urges and the oversight of them. Things like the urge to overcomplicate or oversimplify a trading system, doubt and distrust. The constant urge to discard and replace trading systems, our tendency to blame our results on the system, being overwhelmed with too much information and becoming emotional after losing trades or winning trades for that matter. This slide from the last lesson reminds you that a profitable trading systems edge is probabilistic. The combination of entry, management and exit combined add up to a profitable advantage is in the long term. But system one creates short term expectations for trade outcomes. And when those expectations are not met, we run into all kinds of problems of pain, frustration and disappointment. Always remember that your trading system is not an outcome predictor. No system is. It only tells you what is more likely to happen, not what will happen, like a weather forecast. Using the analogy of sailing, your trading system, including the tools and indicators, are generally equivalent to the tools and equipment of a sailing boat. Your boat, of course, can only take advantage of the weather conditions, and even that is dependent on your sailing skills. Beginners in trading or sailing, like most other activities, obsess over the tools, assuming that the better the tools they have, the better their results will be. There's a phrase you've probably heard of that accomplished athletes, mountaineers, sailors and so on use for the people who think that tools and equipment will single handedly increase their performance. Which is all the deer? No idea. A good sailor can navigate across the oceans in a dinghy, whereas a bad sailor would sink even with the most advanced boat in the world. And likewise in trading. A good trader can make money with any system with an edge. And a bad trader will lose money even if they have the Holy grail. Now why do we have this obsession with tools? Well, what we marketed and sold is basically just a reflection of our own system. One desires and hopes. Take this ridiculous machine for instance. The desire is that we get a flat stomach. And understandably, we look for the easiest and most efficient method of getting those results. Getting out our credit card and pressing Buy now button. That's pretty easy. Changing our thinking, our routines Our habits, that's hard. So guess which option we'd use. We've all done it. System one doesn't want to change and system two, that's just plain lazy. I bought a guinea key alarm clock once for my sleepless 3 year old in the hope that it would stop him from waking us up at 4am I wanted to just press click on Amazon, unbox something, plug it in and have the problem go away. It didn't work. Instead I needed to change his routine and be more consistent, which took weeks and was a lot harder work. When amateurs want to improve their tennis serve, they buy a better racket. It's an easy purchase and they get a hit of opening from acquiring something new. When you realize your house is in a mess or disorganized, it's much easier to go and buy a new set of shelves or storage than actually confront our day to day habits. Now, I'm not saying shelves wouldn't help, but only if all of the other fundamentals are in place. And the most common one, of course, is when we want to lose weight, we look for a diet that will supposedly do all of the work for us, which it never will. This is a simple diet that is guaranteed to result in weight loss. It's impossible not to lose weight if you follow those rules. That is a system with an edge. Now if you were Spock and you had unlimited self control 24 hours a day, you'd have no problem in executing that diet. But you're not. And the reality is that the diet cannot ensure that system. One falls in line and follows the process. The success of trading or dieting doesn't only depend on finding the best system or rules. It depends on your ability to execute those rules. And in dieting, what is metabolically optimal is psychologically difficult. And in trading, what is mathematically optimal is psychologically difficult, maybe even impossible. So it's no wonder that the percentage of people who fail at trading and diet are incredibly similar. The underlying problems are basically the same thing. So what can trading systems do? Well, it can identify probabilistic market patterns over the long term. So it can put the odds in your favor, however slight, over the long term. And to do that, it can generate consistent entry and exit signals. But what it doesn't do is predict market direction in any way. And it doesn't identify losing or winning trades like Tussin, a very slightly biased coin. The outcome is random on individual trades. And it goes without saying that a trading system cannot fought you to do anything. It might suggest that you cut a losing trade. But it's not going to stop you from thinking that just this once you should move your stop loss a little bit wider to give the position more room to breathe. Now, I know I keep repeating this. There is no relationship between a probabilistic pattern that your system is identifying and the outcome of any one individual trade. Outcomes of individual trades are completely random. And I'll go so far as to say that you should should not trade. If you cannot or you will not accept that that is dangerous. And here are some other things that a trading system can't do. It can't force us to predefine our risk before getting into a trade. It can't force us to accept a small loss before it ends up turning into a much bigger loss. It can't stop us from taking profit early. It can't prevent us from moving a stop tight to our entry point where we then get stopped out on a mild fluctuation and we watch the price carry on without us. It can't prevent us from hesitating, getting in too late or missing a move entirely. And likewise, it can't stop us from being impulsive and getting in too early. In essence, a system is merely a set of rules which advise us, but has no control as to whether you will or will not follow those instructions or act on that advice. And this goes for automated systems as well, by the way. People want automated robots because they supposedly take the emotion and the bad decisions out of trading. Robots are supposed to be the answer to all of this and basically trade like Spock. In theory, this is true. And a good robot following good rules absolutely will work. In reality, they don't work for the same reasons that no other system has worked for you. You override it. For a robot to work you, you would need to load it on chip platform, close your computer down and not log back in and look at it for at least 12 months. And of course you're never going to do that. Instead, you watch that robot obsessively and the instant you feel that the short term results are not matching your expectations, you turn it off, you ask for a refund, and you post a scathing review online claim that it was junk and didn't work. It doesn't matter if it's you who's supposed to be following the rules or a robot. At the end of the day it's still your untrained maladactive system, one that is in overall control and can pull the plug. A system in any form cannot make you A good trader ever. Now I don't know if you've ever heard of a sensory homunculus, but this strange creature is it. But basically this is what a human would look like based on sensory nerve endings. It's kind of how our brains see our bodies based on the input from our senses. These are the parts of our body that we paid most attention to. Well, this is what a trading homunculus would look like in graphical terms. This represents what most beginner traders place their emphasis of importance on. The massive right hand holding that laptop is this system. The smaller left hand with the briefcase of money is the money management. And then the tiny cranium holding a pea sized brain is our psychology. It basically of no importance at all. Now this is what it should look like. The system is now the least important. The money management is a little bit bigger. But now we have a massive head. How is in our mind which manages our decisions and behaviors. This is really the complete opposite of how most people see trading. So there are a couple of questions that need answering. Why do we overemphasize the role of trading systems and what are the negative effects of this overemphasis? Well, think back to your first introduction to trading systems as a newbie trader and I'll remind you of what psychologists call the primacy effect. The primacy effect simply describes the overweighting or, or the impact of the first information that you were exposed to on any particular topic. Generally, the first thing that new traders see when they start researching are systems. Marketers know that beginners are looking for a quick win, so they encourage the idea that you don't need to do much thinking. There's a huge overemphasis on the system and especially the entry signals. If it's red, seller, if it's green, buy, the system is promoted as doing all of the complicated stuff for us. So we don't have to put in much effort. Now to be fair. Marketers only sell us things that we want to buy. They tell us what we want to hear. Can you imagine how many people would whip out their credit card if they were told about probabilistic thinking and the need to override thousands of years of survival instincts? The marketing industry is exploiting our untrained system. 1 and while you may have moved away from that and you no longer believe the hype at an intellectual level, the primacy effect may still be in place somewhere below your level of consciousness. You've been bombarded from day one and you continue to be now with adverts and People talking about the system and basically nothing else. It's hard to detach from that kind of intensive or brainwashing, for want of a better phrase. The other issue is that successful traders who do sell courses themselves may not actually be aware of exactly what it is that's getting them the results. When you can do something very well, it's easy to underplay all of the complex stuff and oversimplify what you're doing. For instance, when you've been driving for years, it's easy to underplay the complexity of that skill and all the unconscious habits and routines and the muscle memory and intuition that you've built up over the years. It's one reason why parents teaching their children to drive may be a bad idea. They've just forgotten the complexity and they might over sympathize by saying things like, well, all you need to do is and just remember to or look, I just told you about this, why aren't you doing it? So when it comes to trading, some system sellers may not be aware that it is not their system that's delivering the consistency they are underestimating, or they're just not aware of the impact of their judgment, decision making processes, market knowledge, and most importantly, the state of their intuition and self control. They naively assume that you will get the same results as them if you just follow their system. And when it doesn't happen, they blame you and you blame them. The long and short of it is System one. The chimp hates uncertainty with a passion and actively looks for leaders to lead them out of that uncertainty. System one is programmed to be optimistic, to survive, and it prioritizes evidence based on anecdotal stories of success. If a trader tells you about how they went from begging on the street to earn in a million dollars a month following some simple buying sell signals, well, we want to believe that because we want to believe that we can do the same thing. So it's no wonder that systems that offer certainty or high win rates or promise high returns by charismatic people telling vivid stories of their successes are massively appealing. And this doesn't only affect amateurs. The best hedge funds that have been profitable for decades don't have high win rates, don't offer certainty, and the manager tends to be very modest and ordinary. None of that satisfies the chimpanzees. And these funds don't attract a lot of attention or investment. But then you've got the celebrity funds like Long Term Capital Management. They are flashy, they're high profile funds that give the illusion of offering certainty. They have high win rates, they predict high returns, and they're fronted by leaders who sang ultra confident. It's exactly what the chimp is looking for. And that's why they get hundreds of billions in investment. Now, of course, it's these funds that blow up spectacularly, while the genuinely good ones just continue to go unnoticed as they tick along quietly in the background. So all that may explain why System 1 overemphasizes the role of trading systems to begin with, but the reasons we continue to Even when we no longer believe the hype is down to something called substitution. Substitution is simply System 2's tendency, when confronted with a perplexing problem, question or decision, to make life easier for ourselves by automatically answering a substitute or a simpler question. Let me give you an example. Imagine you're a golfer and you're trying to answer the question why is my swing so bad? Or perhaps less negatively, how can I improve my golf swing? The answer may require uncomfortable self reflection surrounding your work ethic, consistency, motivation, habits and so on. That requires a lot more effort and you're not going to get a quick answer or solution. System one doesn't like that because it's only interested in here and now, not the future. So IT recruits System 2 to switch the question to something that can be answered or acted upon much sooner and with less effort. If the original question was why is my swing so bad it gets substituted for which new club will get me the best drive? It's only a subtle difference, but it can be answered quickly and you get a dopening hit in doing so. In trade in the original question might be what is it about my judgment, decision, self control or skill that is not maximizing profitability and consistency? That's going to take some time and effort to figure out. So you substitute it for which other system or tool will give me greater profitability and consistency? Am I managing winners and losers as best I can get? Switched to what indicator can I add that will filter out more losing trades? And of course when you get a new indicator, you get a dopamine hit. Am I doing everything to make the best use of my system? The answer to that might be quite painful to accept, so it's quickly changed to what tip or trick can I apply to beat the market? Which plays into our tendency to optimism. And of course a question like why am I not able to trade this system profitably? Will quickly be substituted by why is my system not getting results? Which is the classic of both blaming the trading system and is more likely to lead to distrust in the system or abandon it completely. You can see how something as subtle as this stops you from ever doing proper reflective analysis of your trading. And it feeds into the other maladactive system one processes. You have to be an extremely self aware person to recognize this in yourself. Okay, so that answers the third question. We over emphasize the role of trading systems from a combination of the primacy effect from when we first entered into trading, the fact that a lot of good traders don't realize it's them, not their system that is responsible for the results, and the fact that marketers are all too ready to exploit our desire for certainty. But most of all because of our own tendency to substitute hard questions for easy ones so that we can avoid uncomfortable honestly with ourselves. But what are the effects of this overemphasis? Well, firstly we slip into thinking that there is a direct cause and effect between our system and the results. As a child you learnt how the world worked by looking for cause and effect. We learn by doing something, then seeing what happens and then learning the relationship between the actions and the outcome. Of course in trading there is no direct short term cause and effect. And you might completely accept that after watching the last video on probabilities. But that doesn't mean system one isn't still looking for it and will do it automatically and effortlessly if you burn your hand on a hot pan. System one wants to know how to modify your behavior to avoid the pain of another burn. If you take a loss in trading, System one wants to modify your behavior to avoid the pain of another loss. Unless it is understood and controlled it, it will inevitably lead to a continuous fiddling, modifying and experimenting with your trading system and all that does is creates inconsistency. You are never trading the same system long enough to gather enough of a sample size to accurately assess its effectiveness and the edge. The second effect of overemphasizing the role of trading systems is that it can lead to reducing trading to a tally of wins and losses, which is a binary stone age concept. It's a form of counting how many points you've got. The same thing we do with sports. That's completely maladaptive in trading because success for us is measured by the size of our profits, not the number of wins that we've achieved. If we start keeping a tally of how many wins we've had, we are much more vulnerable to leaving losing trades open in the hope that they turned around backing to winners or taking profit early simply because we want to secure another point to add to that scorecard. But perhaps the most problematic effect of overemphasizing the role of trading systems is over complicating it by continuously adding layer upon layer of indicators and rules, supposedly to improve it. Every single one of us has done this, either as we back test systems or after a string of real time results. And it follows a very predictable cycle. You start by isolating a single or small cluster of losing trades and thinking about how you could have done things differently to either avoid them or turn them from losers into winners. You then add a new layer to your system in the form of a new indicator or rule or parameter to filter out those losses, which over time adds to more and more complexity. And the irony is we add layers and filters to try and help us with our thinking. But when a system gets to a critical level of complexity, it adds more confusion as more and more rules and indicators and concepts begin to contradict each other. And this confusion and contradiction inevitably leads to less profitable trades, which you try and isolate and fix. And you can see how this just goes round and round in a cycle. In complex environments like trading systems and processes have to be as simple as possible, or as Albert Einstein once said, make everything as simple as possible, but not simpler. Einstein's experience in patent offices before he came to be a physicist taught him that the best solutions and the designs were simply described. They were easy to understand and were very neat in most of the fields, from physics to software and process design. This is a really well known concept in that if you're in an environment of low uncertainty, where all of the information is available, like a warehouse, then the system should be complicated. For instance, Amazon's distribution system is complicated, but it can afford to be, as it is possible to know pretty much where every single variable is at any given moment. But in other environments, where things are so uncertain, unknowable and complicated, it's impossible to create a system of rules and processes to guarantee the best results. Something like our own highly complex, ever changing lives, for instance. The only kind of rules that are effective are incredibly simple ones. In complex, uncertain environments, the best rules are simple, concise, easily remembered and easily executed. The issue is that when we face a complex problem, we look for a complex solution. And when that doesn't work, we look for an even more complex one. It's counterintuitive, but complex problems usually have a very simple solution and even the best minds fail. Of this, this is Harry Markovich, an American economist who designed some of the very well known portfolio management systems and who won the Nobel Prize for developing the mean variance portfolio theory. Basically, that's a system that helps investors to diversify their portfolio and allocate their funds efficiently across many different assets. It is extremely complicated and it's a great example of answering a complex problem with a complex solution. But the funny thing is, when he retired, he admitted that he didn't use his own Nobel Prize winning system. Instead, he used a system called 1N, which simply means split your money equally between all funds. And multiple tests and studies have proven that 1N beats mean variance portfolio management in an average of 90% of cases. Simple works best, but no one's going to get a Nobel Prize for that. There is also, as we all know, a real tendency to overemphasize the role of the entry and underweight the importance of trade management and the exit. Most traders think that if they find the right entry, everything else is just going to take care of itself. A little bit like backing the right horse right at the start. In truth, money is made when we exit, not when they enter. And this is where most efforts should be concentrated. It was one of the first lessons I got taught when I started my career. It's been proven time and again that a random entry, like flipping a coin to pick the direction, can be profitable depending on how the position is managed and closed. As far as systems are concerned, entry, while not irrelevant, is the least important component. The thing with trade entry is we are incredibly vulnerable to the confirmation bias. Confirmation bias simply describes the process of believing or accepting something and then scamming for evidence to support that theory. For instance. And without wanting to get controversial, if you're in favor of tighter gun control, you will scam the news statistics and anecdotes that support your belief. If you think that more guns create a safer society, you will do exactly the same thing. In both cases, you'll look for evidence that supports your belief and you'll discount any evidence to the contrary. In trading. This is what the confirmation loop looks like. When we get bad results, it confirms the entry was wrong. Good results confirm the entry was good. Both situations confirm our belief that the entry is the crucial factor that somehow causes the result, or we are making the false and decidedly anti probabilistic link between cause and effect. Okay, so that's quite a lot of information, but hopefully I've answered those two questions in terms of why we overemphasize the importance of our system and the effects this has on our trading and results. I'll leave this summary slide here. If you want to take Some notes. But now it's time to address the elephant in the room. I am constantly saying to you that you need to follow your system and stick to the rules consistently over a long period of time. In other words, stop system hopping. But you may need the system hop. We all know that about 99% of retail traders will never ever succeed. And in previous lessons in this course, I've discussed all of the many reasons why. But as it relates to this lesson specifically and the overemphasis that unsuccessful traders place on their system, it might be a good idea to ask yourself whether you're doing the same. Why are you using the tools, indicators and the various rules within your system? They may very well be fit for the job, but it's a very important question to consider and potentially it's uncomfortable to reflect on, which is all the more reason why it should be done. You may be using a system or an indicator because you paid money for it and you don't want to waste it. That is the sunk cost fallacy. Perhaps you're well known within a certain trading community and you are emotionally very committed to a certain style of trading. Could your status sub self or your ego handle abandoning something that you are so heavily invested in? Or maybe you're just relying on something because so many other people are as well. Don't forget that in trading, what most people are doing is by definition not working. And that leads to the million dollar question. If trading systems and entry strategies are not as important overall, as I say, and simpler is better, then why does it seem like everyone else believes the exact opposite? Well, quite simply, the amount of belief does not equal the amount of truth. Remember that all of our behaviors are survival strategies. We've evolved to put aside our own analysis and curiosity and go along with the common view to ensure that we have the protection of our community. As individuals, as loners, we wouldn't have survived in the past. But when we share beliefs with our tribe, when we conform, when we follow, we thrive. Herd mentality is not a derogatory or insulting turn. It is hard wiring to us for survival. But trading is not aligned with nature as it were. Our real world natural instincts prevent us from succeeding in the modern artificial trading environment. Mark Twain once said, whenever you find yourself on the side of the majority, it is time to pause and reflect. I put it a slightly different way. I say the crowd are wrong about everything. And of course I'm talking about trading. If most retail traders are not making money, why follow them? The fact that the crowd are failing is Proof that what the crowd are doing is wrong. It doesn't work. You cannot succeed at trading doing what everyone else does. This is the one environment where you need the courage to stand apart, be isolated, go it alone, take 100 responsibility on your shoulders, and lose the safety and protection of the tribe. That is not easy, at least not in the beginning. I would however, say the good news is you are clearly that kind of person. You can succeed. You're taking the time to watch this series of videos and lessons on a difficult topic that almost no one else is interested in. So you've already left the crowd. You are working on yourself. You are doing what is difficult, but what is necessary. And you should be proud of that. Okay, so now let's look at some ways that you can evaluate your trading system so you can have the confidence to stick with it and know that you are not wasting your time. And there are some basic principles that can predict to a certain degree whether a system is likely to have a positive expectancy or not. And don't dismiss how simple this checklist is. Firstly, does the system cut losses? If your system doesn't cut losses or in some way close you out of losing positions, there's really no point going any further. You have a negative expectancy system with zero long term edge. Does it let winners run? In other words, when a position is making money, is it allowed to remain open and make even more? If your system cuts that profit potential prematurely, you are less likely to have a positive expectancy system in the long term. Is the average win likely to be bigger than the average loss? Now this is a bit more complicated or a gray area than the first two points, because to know an average, you need to have a large sample size of trades to assess. Which you won't have to start with, obviously. But as a rule, look at the profit to loss ratio. If your system has a one to one ratio where your take profit is the same size as your stop loss, it's much harder and less likely you will have a positive expectancy in the long term. If your take profit is smaller than your stop loss, you're reducing your odds even more. The biggest bigger your profit to loss ratio is in favor of a bigger profit, the more likely you will have an edge. As a general rule. Now I'll need to expand on those three points because win rate obviously plays a factor. So let me explain how this ties together. The bigger the individual profit targets, the lower the win rate you require to be profitable in the long run. Think about simply having a one to one ratio where your wins and losses are both $100. In that case, you would need to predict the price direction at least 51% of the time to make money. In other words, you need to be good at being right, which in financial markets is incredibly hard if not impossible. If you make $100 per win but only lose 50 per loss, you only need a 34% win rate. Whereas if you reverse that ratio and you make $50 per win but lose 100 per loss, you would need a 67% win rate. It is a lot easier to have a bigger profit target than it is to predict the price direction. If your system requires a high win rate, you should have far less confidence that the system has a real edge. If the system can make money with a lower win rate, you should have more confidence that it has a real edge. So cutting losses quickly and letting winners run will automatically make you much more likely to have your average profit bigger than your average loss. And you have an edge. Have tight stops and big profit targets, or better yet no profit target and use some kind of trading stop to maximize the returns on the occasional times that that trend goes on then on. In other words, limit your losses but don't limit your profit potential. Those three factors are an easy indication that you have an edge and you should stick with your system. The next thing is the risk of ruin. Remember from the probabilities lesson that if something can happen, no matter how unlikely it is, it will happen. So when assessing a trading system you have to ask if there is a risk of ruin built into the system rules. Is this something that if or when the worst case scenario happens, will it wipe out your account? So averaging in or dollar cost averaging is an example of something that is built into the system that adds to the risk of ruin. Now averaging in is when you buy the price goes against you. So you buy some more at a cheaper price and then you can keep giving that multiple different levels. The logic is the price doesn't need to come back very far before you recover and you make a profit. It is a great strategy in the short term and it will give you a very high win rate, consistent returns and it can work for a very long time, but eventually it will fail because the price one day won't come back, it won't turn around, it just keep going against you. And when it does, you have in much bigger position exposed and you lose everything. This is a strategy with a built in risk of ruin with guaranteed within the rules themselves. Alliance Capital Management were a fund that Famously did this with Enron. They'd successfully used an averaging strategy for years and years with great success. And then they failed and they lost everything because they kept buying Enron all the way down to zero. Using high leverage is another strategy with ruin built into it. So are Martingale betting strategies or grid strategies. They work for a while, sometimes a long while, but eventually they are mathematically guaranteed to fail. Your system does not have an edge if you use any methods that include a risk of ruin. If you think about all of those methods, so averaging down, Martingale or grid, they all do the same thing. They fail point number one to cut losses. In fact, they do the opposite. They add to the loss, avoid them. They provide no edge. That's it. Those simple four points are what will tell you whether you are likely to have an edge or not. I'll use the analogy or the example of technology in regards to trains. Old steam trains of 150 years ago were simple technology with very few moving parts, very little that could go wrong with them, and the parts that did break were easily identified and fixed. There are steam trains still running today in pristine condition. Modern trains are far more complex. They are certainly more advanced, they are more comfortable, they are capable of so much more. But with such complexity, far more things can break and go wrong. And when they do, finding that fault and fixing it is more difficult. And often it can't be fixed. Modern trains simply don't work for very long. They don't last. When they break, they're scrapped and they're replaced entirely with something else. Trading systems are very much like that old technology. They should be simple with very few moving parts, easy to operate, easy to understand and easy to fix. Answer the questions on MAT checklist and you'll have a good idea whether you have a system with an edge or not. So in terms of system one pushes and system two oversight, when it comes to assessing your trading system, these are the symptoms that you're looking for. So overcomplicating or oversimplifying, doubt and distrust, system hopping, fiddling and experimenting, blaming information over well and analysis. Paralysis and anger or pain from losing trades. All of these symptoms are the fallout and the consequence of over reliance or over emphasis on trading systems. So the system to oversight that you need is to review your system and ask yourself whether you see the system as an outcome predictor. Do you ever substitute hard questions for easier questions? Do you ever slip into direct cause and effect type analysis, especially when you're under pressure? Or do you obsess over the win rates. Has your system become over complicated? Have you added layers over the months and the years? Does your system overweight the importance of the entry compared to the management and the exit, which of course is where the money is banked. And if you are, is this overweighting of the entry perpetuated by a confirmation loop? And lastly, are you using any tools or strategies or indicators simply because it seems like they are popular and everyone else is doing it? I will remind you of the quote from Albert Einstein to make everything as simple as possible, but not simpler. Only when your documented actions are simple and consistent will your trading intuition be free enough to grasp the complexity. And what I mean by that is if your trading System is a 20 to 30 page manual of complex rules, you will be totally consumed trying to follow it and you will not have the capacity to pay attention to the whole picture of what is really going on in the market. To build good trade and intuition, the secret ingredient to successful trading, you need to allow your attention to be on the market, not on an over complicated set of rules. And I'll leave you with one more quote from James Allen. Men are anxious to improve their circumstances, but they're unwilling to improve themselves. And I think that sums up why people overemphasize the role of the trading system. Now the next lesson in the course is the big one, decision evaluation. Every lesson so far has been about what you do and why you do it. So essentially looking at the mistakes, the next video is how to trade correctly, how you prepare for trading, what you do before, what you do during, and then how to analyze your performance and improve the next time. It's very much a culmination of what we've covered up to this point and probably what you've been waiting for me to get to make sure you click through to watch that video as soon as you get the opportunity and perhaps go back and re watch some of the other previous videos just to make sure that you understand everything. I know they're long videos, but some time invested now will save you years in the future. So thank you and I'll see you in the next one.