Original subtitles

be in line with the psychological realities of the

define and interpret market information as either painful

emotional risk of trading. That is how you evolve towards the

expectations you will then eliminate your potential to

or threatening and thereby you effectively neutralise the

market environment. And then once you have those appropriate

end. When you adopt these five your expectations will always

acceptance of the uncertainty of each edge and the uniqueness

of each moment, your frustration with training will

definition of an edge. Now, when you achieve complete

will play out because it's only yours and not everyone's

Therefore, you can't expect to be right that your radial setup

again but every setup that you see and take and every bit of

exactly because for every trader, they are different.

improbabilities. No one knows what the probabilities are

always be slightly unique in one way or another and in its

price action, it's never exactly the same. It will

uniqueness, the market is just simply communicating

for and we execute them the same way over and over and over

our strict and clearly defined setups in our rules-based trade

plans, right? The setups have the same criteria that we look

truth is that every moment in the market is unique. We have

make up for your losers and more and the final trading

probability of winning than losing but when you win, you

win big and when you lose, you lose small. So, your winners

need to combine the strike rate with your average P and L per

your true edge. So your strategy may have lower

trade so that you know your profit expectancy as that is

than 50% right? Remember strike rate alone is irrelevant. You

about this truth is that your edge doesn't have to be greater

self-explanatory one to be honest. The only thing that I

would kind of personally argue or I should say maybe change

potential reward. Now the fourth trading truth is that an

edge is just a higher probability of one thing

happening over another. So a pretty simple and

that small risk you take on is the price you pay for your

what this means in more practical terms is that when

that trade losing. So you are essentially paying the market

you enter a trade you must have already accepted the risk of

misery than unfilled expectation. So you have to

to happen onto the market. Nothing else and I mean nothing

are projecting your expectations of what you want

to find out if your trade idea is going to work or not. And

fear or greed. You have to completely accept the fact that

That's why we strive to remain neutral as possible and look at

expect to know what happens next, what that means is you

will not do at any given moment or in any given situation. Now

neutralise your expectations about what the market will or

everything through an objective lens. So, we're not blinded by

else has a potential to create more unhappiness and emotional

you don't know what's going to happen noone does. If you

blinded to valid reasons of actually why you should not be

trade and you may actually be, you know, subconsciously

most conducive state of mind to produce consistent results.

taking that trade. In either case, you will not be in the

justify not taking the trade but on the other hand If your

losing, then you will gather evidence in favor of taking the

trade and you'll be looking for technical reasons that maybe

FOMO, your fear of missing out, is greater than your fear of

you're not even part of your strategy in order just to

any information you can find as evidence against taking the

against taking the trade if your fear of losing is greater

than your fear of missing out then you will start to look for

will then cause you to start gathering evidence for or

anxiety and you're going to be sitting there nervously looking

at your screen wondering if it's going to work and this

anticipate the next trading opportunity with fear and

probability game but if you still believe trading is about

and waiting to jump in without the slightest reservation or

being right or wrong then after you take a loss you will

hesitation because you understand that it's a

to the next occurrence of your edge. You know, you'll be ready

short-term volatility. So, when you understand that every loss

puts you that much closer to a win, you'll be looking forward

vision on the numbers rather than getting lost in the

is a probability game and you have to have that long-term

but we also don't know how much money the market is going to

only do we not know the sequence of our wins and losses

make available to us on our winning trades. Trading truly

remember it Now, another thing we need to consider is that not

many people just don't get this or they just don't accept and

underlying expectancy to show through so with a 60% win rate

you can still have seven or eight losers in a row and so

rate it could take 3050, maybe even 100 trades for that

right but this is because although you have a 60% strike

example there are only five green tickster solely five

winning trades when you think that maybe there should be six

although it's based on a 60% strike rate in the reality

What you also might notice in this illustration is that

is a sequence in which those wins and losses will occur.

10 trades you can expect on average that six will be

performance of your edge you may know that out of the next

define an edge. So in other words based on the past

winners and four will be losers. But what you don't know

between wins and losses for any given set of variables that

In the third truth is that there is a random distribution

you're in the mindset to react instead of trying to predict.

plan and you see our criteria has now been met then you can

execute without emotional interference okay so make sure

rather than hesitating out of fear it's a subtle but

extremely important difference and then when you look at your

do nothing just means you're being patient with confidence

meets your criteria and you just sit on your hands and you

situation so you look at your plan and you see that nothing

do next instead you just react and you have a plan for every

energy and trying to predict what price action is going to

what ifs instead think if then so don't sit there thinking

level and it does X and Y then I'm going to do Z but it go if

steps ahead of this stuff so that way and you're not wasting

that truth that truth releases you from the expectations of

that to think improbabilities, you have to create a mental

sample size of trades so that our edges have more than enough

Trading A Zone, which I'm sure many of you have heard of, says

opportunity to work. Now, Mark Dunnes in the book called

not attach their own self worth to the outcome of an individual

trade that they take. So as a result, it's much easier to

come out net winners in the long run. So don't try to

wheel, or roll of the dice. In other words, they're not

care and because they don't have to know what's going to

restricted by their unrealistic expectations about what is

casino and the professional speculator effective, and

predictability of the game at the macro level that makes the

collective basis, just the opposite is true. If a large

ability to believe in the unpredictability of the game at

you have to believe in the uncertainty and

at the start it's all pretty much down to luck but it's the

to perform a large number of trials for the true underlying

you compound and start to scale your account. It's basic human

training. Now, in fact, many successful entrepreneurs and

versus micro. So, we know that if you focus on each trade

trading that day because there's no way they're going to

avoid pain and protect you at all cost and remember it views

what if price does this you know what if price is that

your screen you know watching price move don't be thinking

next in order to make money so when you're sitting in front of

know, they're going to try and force their will on the market

by taking more risk on poor setups to try and get rid of

even larger stakes and trying to avoid realizing the loss.

difficult you know given all the unknown variables it's just

not necessary to create consistent results. All we have

principles of a probabilistic environment. A probabilistic

predictable and remember the law of large numbers you need

prefer in the situation and write down your answer. Okay?

the micro level and simultaneously believing in the

volatile and unpredictable right you could first start off

event because aside from the fact that it would be extremely

people chose option D. So 84% of people chose the option of

onto it and that's why the majority of traders they take

is because once we have something the majority of

completely accepted the fact that they don't know what's

twenty-four hours, I looked at the results and 81% of people

see this when you speak to people about their preference

trade and the second layer is the macro level and at this

stay focused on keeping the odds in their favor and

few months ago where I asked those who follow me a couple of

on risk taking. So, I ran the survey on my Instagram story a

will emerge that produce a consistent predictable and

we'll call the first layer the micro level and at this level

trading. The first of which is what I like to call the macro

biological fear response from our primitive brain and you can

you have to think in terms of probabilities as that small

one trade, are you? So, over a large sample size of trades,

businesses, they use this structured thought process and

gratification. However, if you start to employ your primary

imminent survival. To the untrained brain of mind, any

the profit expectancy of option A so sure gain of 700 pounds is

obviously 700 pounds but for option B it's actually slightly

to avoiding pain your primitive animal brain is just trying to

emotional brain was built to manage, consistent and

over time and on a longer time horizon than which our

is risk management and that's all we're doing to make money.

survival mechanism. It does not perceive risk, only threat. So,

trading performance. So, going back to this diagram, the real

So hopefully you've watched the first episode in this module

infatuations, naiveties, and skepticisms about trading and

what I want you to do is just take a few seconds to think

was your answer with the majority or the minority? So

the majority of people chose a guaranteed gain of 700 pounds

a guaranteeing gain of 700 or B -a 75% chance of gaining £1,

of trade entries down to a much more manageable amount of

simple questions and I asked would you prefer A a sure gain

over the 75% chance of gaining £1, 000 and a 25% chance of

this stuff so they just happen to be very balanced individuals

from the start and they don't even realize what's really

gaining nothing because humans generally tend to be risk

already successful, they don't even really know about any of

things from their lives into the market. The traders who are

stress so much important on it. You really have to break down

management. However, you know, to the short-term immediate

instead you want to be thinking okay if price comes to this

off the radar and it's why we have placed such a massive

operating in the market at every moment meaning at this

trading edge looks like you know that is what it looks like

either really naive or they're really skeptical off the radar

everyone who has a good strategy that holds a profital

relaxed because they are committed and willing to let

between real biological fear and the psychological

discomfort of risk but the essence of successful training

let the numbers fall as they to. All the while knowing that

susceptible to making costly mistakes. So they stay very

and the sample sizes are big enough then they're going to

happen. Literally, anything can happen at any point in the

emotional or otherwise on each individual hand, spin of the

trades per month, you know, a week, a you can change your

going to when they are sitting in a trade nor are their egos

fundamental truths. The first truth is that anything can

to do is keep the odds in our favor and have a large enough

mindset applicable to trading consists of these five

seem not to be able to lose and then they have periods of

are still going to have periods of winning streaks where they

need to know in order to make money consistently. They don't

losing streaks where they tend to lose more often than they

win but this is a bell curve and this is what a profitable

do have good analytical skills but they have completely

what trading means to them because when you can break

that approximately around this ballpark and then we still have

successful at what they do because they have learned and

completely off the chart. Whereas the professionals are

going to happen to next and more importantly, they don't

in a draw down for a while or maybe on a hot one streak but

people just bring their own stuff into the market and if

expectancy so the true edge to play out that start is very

on what like you know 10 to 20 positions a month or a week

probability opportunities so that we are stacking

infinite possible potentials with layer upon layer upon

broker. So now when we sit down at our computer and we have

infinite times a month because we are building a portfolio of

technical confluence to filter out the you know the infinite

trades taken is actually relatively certain and it is

pulling the quantity of trade setups down by filtering

level you have to believe that the outcome over a series of

improbabilities so difficult because it requires two layers

twenty trades a week or a month that is much more practical and

their decision-making processes each and every day. So, how can

of beliefs that on the surface seem to contradict each other

they're up this end projecting I can never lose then they are

possible. Infinite trades obviously not so much. Because

that we can actually logistically sit at our

solid perceptions that people bring into the market you know

enough of trades are taken with a profitable edge then patterns

losing streaks on the left half of the curve but trading an

until the end of time with a fixed one-to-one RR, you will

look at two mental models that we can use to apply to our

the right half of the curve and you'll have some that form your

infinite number of positions every week, it's not really

distribution between our winning and losing trades,

practical or realistic, is it? And the transaction cost will

will fall in, just like the roulette table but on a

It's the same way when many traders will take a loss or two

subconscious mind to recognize this and to start taking action

time and experience and these principles are not exclusive to

just keep gambling and gambling. Sometimes there's

reward. So anywhere on the area over on the right hand side is

You will see the polarities in trading. You know, some people

possible amount of trades so that way we're not trading

clicking the buy button you know whenever you felt like it

instincts in the market, it's pretty much a sure way to lose

only 50 pounds, it may seem like that is not enough reward

the activity on social media and you'll see it first hand.

they're all the way over there on the left hand side you know

nature to prefer immediate gratification over delayed

000, but a 25% chance of gaining absolutely nothing so

you would win 1hundred percent of the time but either I look

losers, it will look a lot more like a bell curve. So, when you

opposite side of the trade that you do is 100% of the time so

swing. You know, go and look at the forums online or some of

then likewise if you think that you've got a 0% property of

irrational so it's completely irrational to think that you

and you're going to lose 100 times in a row that's obviously

value of the underlying 50 50 edge of a one to one risk to

can win 100% of the time right because if you took the exact

have to do is flip to the opposite side of the trade and

in the morning, you know, they are much more likely to keep

trades that you've taken are really low. But as you take

people answered the way they did because it all comes down

gamblers get hooked. You know, once they've made a loss, they

When you're trading one-to-one reward to risk, the number of

sporadic. They're going to be all over the place. So the

chances of you stringing together you know four or five

scenario only 16% of people chose option C and so 84% of

higher at £750 pounds in the second scenario, the guaranteed

all risk as a biological threat to life but now that you should

nothing over the choice of a guaranteed smaller loss of only

profit expectancy of each decision you will find that

they tend to be risk seeking when it comes to losses. They

700 pounds. Now the majority of people chose option D because

ten, 20, fifty, a 000 trades. Over time the law of large

their profits and they run away too quickly when they're in

executing flawlessly which in turn makes them less

want to give that back to the market. So now in the second

losses or maybe four or five wins in a row is pretty high

So after the survey was up on my Instagram story for

and it will be in the tail ends of the curve when the number of

humans are violently opposed to risk losing it we want to hold

chose option A with 19% of people choosing option B. So

avoiding when it actually comes to gains the reason why that is

then some are so resentful. They're so skeptical. ****

profitable trading becomes possible with good risk

trading strategy is because the human mind is not wired to

think in terms of probability. Rather it's designed to think

guaranteed loss of 700 pounds or a 75% chance of losing 1,

statistically reliable outcome but here's what makes thinking

our odds of profitability are higher than our odds of loss

000 pounds and a 25% chance of losing nothing. Again, take a

brains are built around fear and the avoidance of fear as a

are so infatuated with trading. You know, they really think

what you think the market should or should not do truth

looks like this. This green line represents someone's mind

going on here, you know, behind the scenes of other people who

goes nowhere, right? It just ranges and it goes sideways.

completely flip around into resentment and you'll

individually, there will be a random and unpredictable

at 100% probability of a win and it goes up on a log scale

know, they think they're going to quit the job and be a

predict or know in advance the outcome of each individual

win. And these again are the polarities of the losing

and naivety are with trading the bigger that you'll flip

it goes to that level and it does A and B then I'm going to

0% and they think, I know that some trades are going to be

unpredictability of the game so the outcome on each individual

mind is infatuated now beginners, they tend to lean

irrational doubts and fears because people tend to bring in

edge are not making money is due to their risk preference.

involved in a way that makes them have to be right. They do

and it never will. And then you'll compare your true

okay then I ask them a second question would you prefer a

about those options pause the video if you need to and then

number two you do not need to know what is going to happen

easily. So, the probability of a win, they start down here at

do C right so have a plan for everything you want to get two

we know from the pendulum diagram before? When someone

called are you destined to fail and you will know that one of

market or in any given trade. There are always unknown forces

framework or a mindset that is consistent with the underlying

the probabilities, their edges, play themselves out and just

if their edges are good enough with strict money management

masses. And the bigger that your misconceptions, fantasies

then down here at these amounts of trades a month that means

losers but I'm a training god. I'm going to win most of the

evidence of technical confluence to make sure that we

filter out trade setups so that we are left with just high

happen next. They don't place any special significance,

computers and take those positions. You know ten to

lose. I'm a trading God. All the way around to I can never

in line with probability. Now, naturally, this does come with

we start to think as successful traders in? Well, let's take a

right? We have no idea what sequence our winners and losers

Forex which over time pretty much eventually cancels out, it

enough. However, in trading, you're not going to only take

take a small number of trades, you know, just like the coin

option D has a profit expectancy of minus 7 hundred

moment in this trade anything can happen and when you accept

you flip your mind and you think ah I can never win.

to refuse a certain gain of 700 pounds in a one-off trial. Fair

go to sleep that night with the pain of being in draw down. You

options B and C are actually mathematically better decisions

your money. So, the hard part here is retraining your

layer of filters so we're basically using filters with

a 1% win it's a binary outcome with the zero skill required

difference of fifty pounds rapidly adding up, you know, as

right so the Y axis is getting infinitely bigger so the point

50 quid. Now, although in both scenarios, the difference is

will have some trades which form your winning streaks on

at 0% probability of a win and how many do we find each month

button and you close your eyes and you just kept randomly

doing this. So you've literally just gone from I can never

trades in a row which is obviously completely normal and

loss is 700 pounds is actually the better decision because as

source experiment, the results are going to be completely

That means that you are dealing with an underlying edge of 50

whatsoever so then over on the Y axis on the left hand side we

focus of our emotional brain, all risk is a threat to our

of one to one. So if you think that your probability of

000 loss or with a much smaller chance of potentially losing

know how to calculate probabilities and calculate the

few seconds or pause the video just to decide which one you

that pain. So in both of these questions the majority of

suffering a certain guaranteed moderate loss and this is how

triggering of threat automatically produces a

taking their chances of potentially losing a bigger 1,

trading. So down here on the bottom X axis we have the

would rather risk a possible big loss in preference to

opportunities were allowed for a fifty-50 probability of

they're going to make millions and get rich tomorrow. You

way. You can see both polarities. Here's a truth.

naivety turns into resentment and skepticism. Why? Cuz you

winning positions because they can't handle the pain of giving

write down and take note of your answer of either A or B

It's a process by which we assign levels of risk so that

back the profit that they can feel in their hands. They don't

the emotional survival brain is incapable of distinguishing

trade because you just throw a dart at dart bold right and you

overcorrect and you'll have a losing streak of say five

Now another massive factor that plays a role and why not

Trading is impossible. No one can make money consistently

you'll get pissed off and annoyed and you'll start to

the reasons people find it so difficult to stick to their

objective truth is in the middle. Find an edge by using

to risk ratio of 1 toone right and we know that in trading you

in terms of survival and self preservation. Biologically, our

layers of technical confidence to reduce the infinite number

bell curve to have a much higher probability of success.

way anyone can make money in it it's all the lie I hate it you

different diverging results to them due to their judgements,

means you think you will win every single time with a reward

log scale so how many trades per month do we actually find

through all of those, it makes a massive difference to your

has gone into naivety when they have a lopsided perception of

time and they have a scale, right? Their mind scale that

in just 6 months, you know it's easy I saw some random guy do

it on Instagram going to have a Lambo by Christmas right we've

any naive fantasies that you may have or any of your

all heard these people before or you know these beliefs sway

psychology and what it means to trading edge. It's why we

emphasis on and spent time breaking down trading

and infatuation, so you're thinking Forex is I'm

can enter a trade at random and still lock in one to one you

doing this. There's a reason most people are off the map and

just set the profit target and the stop loss at an equal

worldwide you know 90% of them are either green or red they're

can actually lock in a 1 toone reward to risk at the time of

distance and then you can only be stopped out for a 1% loss or

the only person who gets rich in that situation is your

so if you want to take the whole demographic of traders

look back around to the mind game. The mind game is the

higher probability of success that you will have. There's an

a bell curve because even the best traders in the world they

completely changed and improved our probability model to one

the roulette wheel, then why isn't everyone doing it? Why

winning is at 0% then it obviously means that you think

realistic and empowering you can keep your beliefs the

probability on our side so then that when we do this We end up

depending on if you're more of a day or a swing trader and

master speculators as photon traders is to find an edge by

trade trade trade every single minute of every single day

win 50% of the time and you will lose 50% of the time. You

they're projecting I can never win then they're skeptics if

towards skepticism and resentment all the way up to

trading game. And to understand how successful traders think,

we're going to look at two mental models to help you think

probability of a winning trade based on a reward to risk ratio

naive but mastery is in the middle if you log in to a

know your beliefs sway between these two polls then naturally

you'll never win a trade and if you think it's 100%, then that

like a winning and successful trader. I'm sure we're all

lose 100 trades in a row with a one to one raw to risk and show

the other end so thinking Forex is an absolute scam there's no

interesting way of finding out where someone's mind lies

start to add up rapidly. So, what our job is, our job as

brokerage account and you know you hobby a mouse over the buy

full-time trader just a few weeks or months. You know, and

winning right and you think you just can't win no matter what

numbers starts to kick in and it returns to the expected

irrational thinking because it's just not possible go and

me the data if it was that consistent then all you would

about trading are balanced, realistic and empowering, you

skepticism and naivety in trading for a minute. So

bringing your stuff into the market. Now if your beliefs

will naturally have the greatest probability of

reward ratio will be much near in the middle around 50% and

percent. So, the true distribution of winners and

the previous lesson you learned about the two trading profidity

success. However, if these beliefs sway towards naivety

slight edge and trade it as consistently as a casino spins

you will compare that to a naive fantasy where you're

going to win but in truth it doesn't happen, it never has

point by now, you would be completely forgiven for

work. It's a scam. You know, they're completely the other

definitely going to turn my 5K account into a million pounds

success, right? Now, when you're trading a market like

trading. It doesn't work. I tried this and this doesn't

know you're coming along in naivety thinking you're always

supposed to win all the time or even most of the time. So

reality because they are naive you will bang your head against

performance which in reality with a one to one you know risk

the wall of truth until it flips around to resentment. So

than you are right and still be highly profitable and then in

parts of the human mind, the higher mind and the lower

quite familiar by now with this diagram representing the two

towards naivety and they tend to think that they can win very

thinking, if all I have to do is find a good strategy with a

numbers and realize that the underlying profit expectancy of

on a scale of how naive they are about training but what do

masters of the world at exploiting their slight

any event will play out over a large number of trials. We've

calculate probability and profit expectancy. You should

to use the to develop a trading strategy that has a positive

mathematical edge is and hopefully now understand how to

four core elements that make up the edge of a strategy and how

have the number of trade setups per month right and it's in the

also be familiar with the concept of the law of large

of doing this exercise remember is to find out where someone's

outcome of each individual game. You've also learned the

you will lower your probability of success the more balanced

between those two polarities of skepticism and naivety within

entry even if you have no thought that goes into the

isn't everyone making money this way? And that's when we

positive edge and how futile it is trying to predict the

animal mind. So let's talk about the polarities of

we must first understand how the majority of traders, the

masses, the losing 90%, we must and how they think and then

expectancy and we've seen how you can be wrong far more often

models high strike rate and high reward to risk so At this

discussed how the casinos make money over time as they are the

By now, you should have a clear understanding on what a

light. That is how you become a photon trader.