Original subtitles

much smaller. Now, your performance discrepancy will be

have no experience in. Make sure you truly master your

probability setups as possible and that way the gap between

plays in training because we have no idea in what sequence

motivated you know you wake up and you're in the perfect

market conditions are not so great for your strategy so what

really master your craft so that wraps up this lesson. Now,

very very quickly because sometimes you can be insanely

be consistent with your actions. Don't vary your risk

minimized and lastly, don't get shiny ball syndrome and you're

your performance and the strategy performance will be

on each trade. Try to minimize missing as many high

the main thing that I want you to take away from this video is

hopping between strategies, styles, or instruments that you

or order our wins and losses will occur in. So, you need to

just really understanding the role that random distribution

you need to do is harness and use that energy and that

mindset for trading but at the same time potentially the

motivation to improve your strategy and your edge and

to your strategy or not and you need to be able to pick that up

aware of the market conditions and whether they are conducive

building out of spreadsheet and you can be really really

things that's what you need to be doing you need to be very

edge so when you have those quiet periods that's the

maybe you want to be getting into stocks commodities

different ethics pairs you know that is your time to do that

well in you know you can even be testing new instruments

why don't you just back test them you know in particular you

now as you move over into the more professional side of

perfect time and you can start to be gathering data you can be

refining your edge you know working out what market

conditions does it work in what conditions does it not work so

know really busy days or weeks I don't have that much time to

back test and improve my edge or potentially develop a new

need to make the suits of your time and you want to trade well

or your knowledge isn't currently at where it needs to

be to perform then what can you be doing in that time well you

market conditions aren't conducive or maybe your mindset

trying to chase the markets and losing money so when either

you're tempted to try and do what they're doing and you

trading that different pair or trying that strategy that you

know I've never even heard before and you just end up

these amazing entries maybe on pairs that you don't even trade

pair or using that strategy today then I'm going to start

think if this person's making loads of money trading that

loads of profit but it's been a quiet week for you so now

or the strategy that you don't even use and appearing to make

know Instagram Twitter YouTube and you see people catching

trade especially when you have a lot of outside influence you

out any short-term drawdown periods that are natural and

chance of your edge playing out efficiently and you will ride

may experience in the market now it can be difficult not to

expected during those more unfavorable periods that you

missed trades as much as possible so by doing those

sure that you are minimizing the amount of high probability

setups that perfect fit your trade plan and you need to make

profit over time. You still need to be reviewing your

things that is how you make sure that you have the highest

trades and making sure that you are executing high probability

that suddenly your equity curve will start to rapidly rise in

blindly executing every trade you think you see in the hope

patience. Now, this doesn't mean that you should just keep

strategies consistently, persistently but to also have

designed to explain just how important it is to trade your

that successful trading is just not possible. This graph is

and inexperience just ends up fueling each other's beliefs

complain about a situation where it meets other beginners

venting on social media and joining other trading forums to

looks good, Sue turns into frustration and dismay all over

who are in the exact same situation and their ignorance

one last try and goes on a hunt to find another new shiny

strategy that may look promising. This trader has now

impatient so he decides to give this whole trading thing just

entered a very dangerous downward spiral of doom. Starts

giving time for the underlying edge to play out over a large

enough sample size of trades, the trader is too annoyed and

experience to execute it correctly and again, without

they may know. The excitement of starting a new strategy that

again as the strategy hits a period of drawdown or more

likely that they just don't have the required knowledge and

draw down. They then decide that the strategy clearly must

appears to be working well lately for other traders that

around the break even mark or you know they're in a small

not work and just go looking for another strategy that

some really nice profital trades, they're still flirting

disheartened and they're really frustrated that despite banking

how most beginners approach the markets. They'll start trading

and you must avoid what's known as style drift. So to

a new strategy and only take a few trades before they become

become great at anything, you must be focused and specialize

illustrate that point even clearer, this is a scenario of

adopting a different style each time you run into difficulty to

over time, the results will cancel each other out and

generally, if you stick to a strategy consistently, then,

that's why the type of strategy isn't necessarily what's

specific training style will not perform as well but

but you won't overcome less favorable phases by just

important but it's the one that works for you that matters most

enjoy market cycles when your training style outperforms

other styles and your experience cycles when your

that's where your processes and your results will become more

will take off so you know go D on that and specialize because

predictable, scalable, and therefore sustainable. You will

of none so don't try to spread yourself too thin at the

focus on and specialize in is where that compounding momentum

have to sacrifice the others identifying what you should

trading if you try to do them all you're probably going to

surface level to truly reap the benefits of one strategy you

most likely end up a mediocre jack of all trades and master

good at scalping day trading swing trading and position

all trades and master of none because there is a million ways

you don't know any of them in true depth so you're a jack of

to make money in the markets and odds are that you won't be

mastering their current strategy or the pairs that

where you know you know many strategies and many pairs but

to trade new pairs or a new instrument or you know even new

potentially even weeks if you're more of a swing trader

test it, gather data, refine their plan, and actually master

when you are an experienced trader with a specific

is just going to lead to an extremely scattered approach

beginners who are just starting out they have a tendency to

the bottom graph. So even though the strategy ends up

So, remember these two account equity curves? They would

a part of business and understanding the true nature

hundred different traders tends to produce a hundred different

they haven't mastered their current strategy yet and this

going to happen next she only finished a month on 2% despite

his risk management and kept his risk small and consistent

month, that will add up to a ridiculously large amount of

to something else just because the market may have shifted or

analytical skill level. The same strategy one trader

they're already trying to trade and they're already moving on

but nine times out of 10 they haven't even come close to

strategies entirely now this isn't necessarily a bad idea

but market conditions are just not conducive to the pairs or

this time, you know, beginners traders they often start trying

conducive for your system. You know, there could be days or

the instruments that you are trying to trade. So, during

it. These things all take time and just cannot be rushed. Even

strategy, market conditions are not always going to be

don't stick with it long enough to actually learn the strategy,

trade a certain strategy only as long as profit. They don't

see it out long enough to see their edge play out or they

trades and as he doesn't understand the probability

happens to be a winner and once again Sam consistently six his

only risks half percent of this trade out of fear so she only

returns Let's run through some examples with three different

perfectly follows his rules ex executes the trade and is also

rewarded 4% for his efforts. Now the second trade setup ends

it takes a minus 1% loss now the fourth trade is a pretty

like I was saying when you've collected more data with your

revisit this plenty of times throughout your trading career

strike rates or this kind of slightly lower strike rate but

yeah yeah you know it's just a probability model and it's just

even but then oh sorry in decent profit but if you used

need to make sure that you really are reviewing your

thing you should see as well even with the 50% edge you can

hands and this can just really help you to kind of get a bit

and you have an amazing you know strategy and edge in your

issue for them. Now this is a very exaggerated example due to

in the sequence of your winners and losers right now the other

reward and see you know how they can go and still get away

that you actually collect in your trade journal from the

you need to ground yourself and prepare yourself for that

you just drop that down to 4. 1 there you go just about break

profit line forms an equity curve that presents a massive

spreadsheet useful exercise to go through and you know look at

with emotional interference really kind of getting in the

winners and losers and how luck actually plays a massive role

really a high risk you know a high reward to risk ratio but

look so yeah have a play around with it you know see how low

expanded this to another 10, 000 trials it's going to come

taking the exact same trades as Sam Tom was disciplined with

essentially the exact same strategy but random

distribution between much rockier start for the trader on

massive negative repercussion in the long run because that 10

Sarah's fed up with trying to second guess the market by

generate by the exact same profit expectation. So

short-term losing streaks. Now, the final mistake that so many

you know at some point you're nearly over 10 grand and then

on a total return of 14% Sarah who decided to vary her risk on

perfectly follows his rules and he executes the trade with 1%

setup also ends up being a losing trade Sam obviously

month so he decides to still execute the trade and then also

banks 5% instead of 10%. Tom has now also lost the last two

down as her last two trades with both losers with high

the most disciplined and consistent trader he ended up

to your rules and follow your strategy when you experience

risk and he ends up banking a 4% return. Sarah also sticks to

MC traders make is hopping between different strategies.

how it is traded. In fact, the same strategy in the hands of a

profit when it's compounded month on month, year on year.

trade and he too banks 2% so to a the month Sam who had who was

to 12% difference between Sam and the other two traders each

completely underestimate the true nature of random

profitable and another trader unprofitable depending on upon

of random distribution will help you to religiously stick

and so he decides to skip this trade setup as he just can't

finished the month on just 4%. So, although all three traders

well in profit after a large number of trades when amateur

rules follows his strategy perfectly and banks a 2% trade

4to1 or a 5to1 can be the difference of whether or not

fearful this time and thankfully he executes the

of perspective sometimes you know no matter how experienced

traders experience the second scenario in the trading their

the previous trade Sarah starting to feel really angry

little bit more sort of accurate information here

yeah save a copy play around with it and make sure you

seeing the previous trade that he decided to not get involved

each trade depending on how her emotions were and how she was

he's feeling a little bit unsure after taking a loss on

If they all have the exact same strategy and the same

skipping high probability trade setups is going to have a

and the last trader is Tom. He keeps his risk fixed at 1% but

at the market and she wants to make her money back so she

plan by always risking 1% on every single trade and he

really powerful and definitely will become very useful as well

doubles her risk again we're seeing 6% in the trade

up being a losing trade. So Sam takes a small minus 1% loss.

resulting in a large minus 6% loss Tom's however you know

in and ended up being a huge winner Tom decides not to be

you're doing the strategy is awful you can't make any money

the previous trade but he's still in a small profit for the

trade setups. Now all three of these traders all trade the

with the same rules. Now the first trade setup for the

at 1% but he let the fear of losing get the better of him

desktop quickly popping open yeah and just having a quick

missing out on the large return so the final trade of the month

3percent on this trade. So she ends up with a painful minus 3%

your edge by you know, varying your position size risk and

first trade so she decides to break her rules as she risks

feeling because she thinks that she you know can predict what's

setup which ended up being a big winning trade and he

He always sticks to his rules and he always follows his trade

are very commonly made are changing position size risk on

breaks her rules by varying her risk on each individual trade

of the high pobability trade setups that she sees but she

sizable winning trade as Sam continues to six his rules and

is rewarded with a 10% winner. As Sarah is now sitting in draw

causing him to hesitate and skip a higher poverty trade

each individual trade and skipping high poverty trade

strategy occurs and it is actually a winning trade. Sam

goes out the month in the green in this example, destroying

executes the trade and he takes a 1% loss. Now the third trade

varying her risk so she finally decides to just stick to her

he has a bit of a habit hesitating and skipping some

you are I think it's always worth you know savings to your

model of the strategy, it takes a massive hit to his confidence

distribution the first two of the three fatal mistakes that

trades and make sure that those losses that you took actually

identifies. The second trader is Sarah. She also executes all

maybe just click file on the top left hand corner and click

so as the majority of amateur traders do not understand and

the sheer number of trades. But the point is that most

traders. So the first trader is Sam and he trades consistently.

rules risks 1% of the trade so she also banks 2% now after

forefront of your mind all the time right have a score through

punch that into here and then you can just have this at the

results. Winning streaks and losing streaks are just simply

spreadsheet this will become even more kind of later on as

like you really don't know what you're doing even though you do

thereabouts 1% difference just how different your equity curve

exact same strategy. They all have identical trade plans all

better idea of what these three numbers look like then you can

exact same profit expectations in an extremely controlled

always executes high quality trade setups that he

literally have a 1-one risk reward you have no edge right

you can even go with strike rate and your you know risk to

to put that down by just 10 pounds right of you can end up

somewhat confident on the back of his previous win. So he

takes another small minus 1% hit after taking a big loss in

feeling confident at the start of the new month so he

testing but also your live trading data in your journal so

to bring back that down to your expected yeah your expectancy

yet you have an extremely extremely profitable edge here

play around with it and you can be able to edit it. So if for

median looks like you know if it's around 50%, then you know

sort of more break even so yeah really really useful tool

that you're you're essentially trading above the average and

actually deal with that and accept it and really understand

you've nearly made you know, 1314 grand there like you know

trades and if they were then that's okay then you know and

that you have here right and then if you were to do it again

you know sticking to the trade plan remaining cool you know

with being you know breaking even or just being slightly in

face the pain from another potential loss and he ends up

you've collected a lot of data and obviously the ongoing data

depending if you want to kind of go for those high

win you win 100 poundsand then when you lose you lose 100

risk, she's feeling very skeptical and resentful so she

Sarah was feeling very confident after winning her

loss just on that one trade. Now Tom is still feeling

managing their emotions and they manage to trade through it

a rules. She risks 1% and she also banks 4% return. Tom is

inevitable kind of losing streak is probably going to

very likely that you're just basically you know at the hands

however, you know, they may experience a much more choppy

start soon right you're probably going to hit five or

just looked at when they are placed side by side. Now the

trades that you're executing and you'll know you have a lot

your own trade plan and you've done a lot of testing on it

part of your strategy edge and they were high pobability

that next trade you're going to start feeling that fear of

execution that fear of loss and you're probably going to start

video that it didn't kind of ask you to save your own copy

it you know they really accept it they're the ones that end up

this in theory and they go yes yes I get it but when you're in

then higher RR yeah really spreadsheet I think this is

six losers in a row or you know a few or at least you know five

you can believe in and trust your edge and you know it's

complete flip side to that if you know hitting 1012 winners

here and just look you know sometimes it's going to feel

or six losers out of the next nine trades for instance just

the middle of that actually happening in the markets you

number here and don't put a negative number of your loss

in a row but you know of what your edge look like what your

you know I think a lot of people can kind of understand

you're profitable you know it's very very fine margins even if

profit because you can see the slight differences between a

we get later on in the program when you have obviously devise

it and the people that don't because the people who do get

way so this is just a really really kind of useful

essentially so yeah this is a really really useful

of random distribution at that point but then likewise the

know with your real money in the line it's a very very

digging yourself into a massive drawdown because you know you

now again it doesn't mean that when you go in losing streaks

the edge starts to play out and the profit curve really starts

different story you know between the people who can

that you just keep blindly executing trades just going

were valid and part of your trade plan you know they're

this like imagine in that period right how many trades is

with you know a 50% strike rate and look at this you can have

when you're flipping that coin you know you're going to hit 10

setups to show the damage that this can have in your account

basically assuming that you withdraw after every single

weeks or you know it depends on how active you are in the

know not 100% following your trade plan with zero you know

so just refresh it by putting a different number and I'll put

reward ratio for now but let's say you had you know even

that you know 21 trades and you've literally just won you

markets you're going to feel like you don't even know what

going to start doubting and questioning your ability you're

look at this right you go nowhere you break even for what

making mistakes and you're probably going to start you

than 51, but it kind of just shows you you know there or

right you've got a 50% strike rate right ignore the risk

of any trial involving chance are distributed randomly. So

you know 10 consecutive losses in a row so although you make

right three to one definitely more than achievable especially

over time it shouldn't out and break even yeah look at this

should say is the strike rate the average win and the average

smashing over half a million over 5, 000 trades, and

surprising thing here is that both of these equity curves

trade right be hit ten losers in a row now if you're on the

slightly into negative territory and it floats around

randomly assigns numbers to those trades so the three

know three trades so this could be played out over a number of

just like all of the downloads you can make a copy and save

have 12 consecutive wins in a row in the sequence and you

can look like even though that's a pretty much the edge

know 10 consecutive losers so at some point in here you know

on their account equity curve that gradually moves from the

columns that you have to play to work with the three rows I

tails in a row now imagine that's you when you're trading

remember this is without compounding right so it would

let's put in not even the high let's just put in really simple

because if you look at this kind of you know equity curve

toss experiment let's say you have a 50% edge and when you

to be about you know 23000 trades and then boom you're off

nought. 1% across 5, 000 trades can make quite a sizable

going to start doubting and questioning your strategy

kind of how you know the just a true random distribution of of

is where the strike rate is actually quite a bit higher

let me just change this again back to 50% and let's see what

in 50 again you can see look at this right this is a 5050 edge

right you win as much as you will lose on your losers and

it just kind of shows you you know the the real kind of and

back down eventually to zero pounds so that just shows you

you're probably going to start struggling you know to to take

charts right and you hit ten losers in a row I'm sure you're

make a copy then you can save it down to your own drive so

of these numbers down here you know just in a random way but

yeah essentially how this spreadsheet works it's very

looks completely different like this is kind of a perfect

yeah and then you get another one right so imagine you you

of the wheel for an edge to play out too. Now, some

essentially then distributes your wins and losses across all

out is random and that not be predicted either with any

bit more information so it tells you what the actual true

distributed randomly such as the underlying edge, right? So,

be a **** time more of those compounding in here but this is

loss so let's start out with the you know a standard coin

yeah as you can see strike rates 50% so what it does it

very similar to the one from the coin toss the coin toss

difference to your equity curve so it's just why you've got a

or minus 1% but a very slight difference you know even just

example actually of just what's popped up here of I mean this

add up. 60% of 10 trades should mean six winners right? So why

module and essentially you have 5, 000 trades this time and it

would hold true but in the real world, however, this is simply

of a coin flip you know you win it's a one to one risk reward

chance are not perfectly and evenly distributed. They are

based on that edge there now over here it gives you a little

an absolute fortune right with this edge and you know you're

the exact number that you put here it's usually within plus

the expected result of the strategy will play out over

experiment spreadsheet to make sure that you put in a positive

way results are perfectly and evenly distributed. This theory

this is the probability calculator that I've built and

it comes all the way back down again now there's you know we

strike rate is of those 5, 000 numbers and it's very rarely

experience a lot of losing trades before their profitable

the exact same strike rate and the same reward to risk ratios

spreadsheet from the what is an edge lesson earlier in the

bottom left to the top right with their total profit pretty

for both accounts. The profit curves are generated from the

pounds so yeah just remember again like the coin toss

let's take a quick look at that probability calculator. Okay so

reached out to me for help you know when they have a good

differences between the two account equity curves when we

edge really starts to play out. Now you can clearly see the

the edge is so slight like in a casino it might take 200 spins

were produced from a probability calculator that had

much remaining in the green from the very start of their

account equity curve that can track sideways and even be in

the break even marked for a short while before eventually

to take off and then the big money is earned. Other traders

traders, they might end up having a relatively smooth ride

start during the first run of trades as they just dip

haven't I won six? Well, in a perfect world, you know, one

10th trade you know most beginners was reasonably

time. The timing which it takes for the underlying edge to play

missed in that time period and a really common theme that

the red for quite a while at the start in they can

work right? Because with a 60% strike rate strategy by the

profitable trades now all three of these mistakes are

aren't showing we naturally begin to ask questions. It is

successful trading where luck actually plays a role. So

questions was that they had taken a very low amount of

really nice profit who potentially even trade a

just because the the spreadsheet will not work so

tracked any missed trading setups in that time period

trades. Sometimes in the first 20 trades. In situations where

this down to your own drive so that you can keep it for life,

of just strictly sticking to 1% risk per trade continuously. So

against our very nature to keep doing something that doesn't

analysis right they've got good skills but they're confused as

when they commit to these mistakes so whenever trader has

whatever reason when you clicked the link below this

trades you know usually less than 10 and they had not

to why they're not consistently making money I will ask them

how long have they been trading that strategy how many trades

environment. This just goes to show true nature of how results

account activity and they need to keep a little faith at the

the second fatal mistake they make is skipping high

degree of usable accuracy. So this is the only area of

not the case. Results of any experiment or trial involving

became very clear very quickly after asking them these

profitable strategy actually working in their favor you know

completely different strategy and then what does that do that

strategy but by the time they do so generally the market

and they see social traders you know appearing to bank some

them to maybe hesitate or develop a fear of execution.

unfortunately so common among uneducated losing traders and

strategy they know what they're doing with the technical

strategies. So an amateur trader may experience some draw

sometimes your edge will play out you know in the first few

taking a trade if the pain from recent losing trades has caused

expected to have won six times. You know the numbers seem to

to imbalance perceptions in a really emotional reactive and

either. See almost everyone has disciplined to stick to the

probability trade setups. So you know the classic cycle of

going to happen next so they decide to risk 3% on it instead

it just completely screws up the probability model of a

rules you know five or six times but eventually if results

have they taken and how many valid trading setups have you

actually suited their initial strategy and then they end up

conditions have then flipped back to an environment that

that often leads new traders to make the following three fatal

And then the third and final mistake is hopping between

mistakes that completely destroys their rage in the

corrective market conditions then maybe they go on Instagram

to make money and I do think it's the failure to truly

They feel overcertain because they think they know what's

you know they start to have a really good feeling about it.

amateur trader can adopt is trying to predict when they

fear and greed can cause traders to potentially skip

on each trade. So this is where traders pick and choose

is just going to lead to frustration caused by that

gives them some FOMO and then they switch over to another

market. So the first of those is changing position size risk

different levels of risk on individual trades. So they

missing out on what would have been a series of highly

understand and grasp the key concept of random distribution

that impulsive primitive behavior time and time again I

down you know during potentially choppy and

see traders you know they have a decent they still can't seem

be now one of the most unproductive habits that an

might risk 1percent on one trade then on the next trade

think their winning trade should occur and this obviously

knows a sequence of what their winning and losing trades will

when winning and losing trades are likely occur so the random

and ultimately lose money in the market. So, in trading,

expectation discrepancy and then that frustration can lead

we'll talk about random distribution in reference to

and losing trades are likely to occur. So, essentially, the

part of why so many amateur traders, they lose confidence

lack of understanding in this very concept is a significant

distribution of winners and losers because noone on earth

sequences of our wins and our losses and I believe that a

random distribution is the random order in which winning

and see the outcome of different strategies depending

that's going to help you to think in terms of probabilities

on both their strike rate and reward to risk ratios which

will go through during the lesson together so the final

is a probability calculator that is a really powerful tool

piece of the puzzle to truly understand ability and

profitability in trading is random distribution. Now,

you go so there will be a link in the notes below the video

hesitant to use the word cool to describe a spreadsheet but I

and they understand it. They have sound technical analysis

that they have. There's also a really cool spreadsheet. Well,

like spreadsheets and I think it's pretty cool so yeah there

traders make that just completely destroys their edge

for you to download your own copy of the spreadsheet which

I've narrowed it down to these three fatal mistakes that these

skills but yet they're still not consistently profitable and

people over the years who are actually in command of an

In this lesson, we're going to go through some practical

extremely profitable trading strategy. You know, they know

trading examples and we're going to use these examples to

really dig deep into the reasons why I've seen so many

strategy because that is where the freedom lies.