Top 1% Of Traders

In the previous video, we talked about how you should not go about finding an edge.

We talked about trading psychology and risk management not being the solution.

Because you can have the best risk management and the best trading psychology out there, but without an edge, you’re still going to lose money in the long run.

Then we talked about fundamental analysis. Why a trader like you shouldn’t be focusing on fundamental analysis to tell you whether to buy or sell.

Because, when good news comes out, the price can go down. When bad news comes up, the price can go up. So, there’s this discrepancy here.

The good news doesn’t mean the price will go up for sure, because we talked about expectations. The price goes up because of their expectations towards the news, not whether the news is good or bad.

Trust me, I do not know of anyone who can predict people’s expectations towards the news. You would be a god if you can do that. Fundamental analysis isn’t a solution.

Finally, we talk about, using the same tools the same way. If you’re going to use the tools like how 99% of traders use them, then you’re asking for trouble. Because you know, most traders, lose money in the long run.

So now the question is…

What does the 1% do differently?

What do the 1% of winning traders do differently? Here’s the secret. They trade with a proven trading system consistently.

Now you might be wondering…

What’s a proven trading system and how do I get there?

So, there are a few ways to it. In my opinion, the best way to go about it is to be a system trader or get involved in systems trading.

With systems trading, you don’t have to spend all day watching the markets. You just need to follow the rules, which I’ll talk about later.

And that’s how you can find your edge in the market.

Our systems trading is simply trading with a fixed set of rules without discretion or subjectivity.

For example, in system trading, whenever the price breaks out of the 200-day high, you go long.

That’s an example of entry based on systems trading because the rules are very clear cut.

Unlike drawing support and resistance on your chart which is more subjective because how do you draw support resistance? From one person to the other, the levels might be different. It depends on how you interpret the charts.

Whereas systems trading is black and white. If the price breaks above the 200-day high, you buy. No subjectivity. You can get 200 traders to do this and they all going to get similar entry points.

But if you ask 200 traders to draw their support resistance on their charts, you’re going to get very different levels.

So, we can see that one is subjective, one is discretionary. The best way forward is to trade with a proven trading system is to go with the systems trading approach.

Let me share with you a few secrets about systems trading…

Secret #1: You don’t need to code to be a systems trader

I know most of you are thinking:

“Rayner, I don’t have any programming knowledge. I can’t code, how can I be a system trader?’’

Maybe in the eighties and nineties, you need to learn how to code to program your system.

But in today’s day and age, with the technology we have right now, you don’t need to know how to code to be a systems trader.

Let me share with you an analogy. When you switch on the light. Do you need to know where electricity comes from? Do you need to know what is a filament? Do you need to know who is Thomas Edison? Probably not.

You just go through the light switch and switch it on.

The light is on and it’s the same for systems trading. All you need to do is follow the rules and let your edge play out in the long run.

The first secret is you don’t need to know how to code to be a systems trader. If you know how to, then that’s good for you. But if you don’t, you are not losing out, trust me. I’ll share with you later on how this is possible.

Secret #2: Saves you thousands of dollars and years of trial and error

You can validate your trading strategy in minutes or even seconds if it’s a simple strategy. This would help you save thousands of dollars and years of trial and error. Unlike someone who is going with a discretionary approach, how would they validate their trading system?

They need to backtest and how do they backtest? They need to manually look through their charts. For example, let’s say they are trading a breakout, then they’ll look through all the past breakouts and identify times that they would buy the breakout.

And if they buy the breakout, they need to calculate what is the result of that trade. Is it a winner or a loser and they need to write it down on a paper or excel the result of their simulated test.

You can do this for one market, depending on how much data the market has. Maybe let’s say 10 years of data. It would take 5 hours just for one market across 10 years of data. But what if you are trading 50 markets across 10 years of data?

You can see how manual backtesting is going to cost you a lot of time and effort. That’s not all when you do manual backtesting, there is always this bias in you. You’re more prone to making a decision that would make you have good backtesting results.

Imagine you spend so much time backtesting a strategy, but subconsciously, you want a strategy to work because if it doesn’t work, you are wasting all your time and effort on this backtesting procedure.

How does this bias come in?

For example, as you scroll through the chart, if the market is in an uptrend, your mind tells you to let’s buy breakouts because you know what’s going to happen next.

It’s going to be an uptrend so let’s look to buy and let’s avoid shorts’ signals because the market is going to be in an uptrend. Whatever we short are going to lose money. You can see that this bias in your head would skew your backtest results to be better than reality.

This is why if you’re going to do manual backtesting, you will be prone to biases and errors which is going to cost you hundreds of hours to just backtest 10 years of data across 40-50 markets.

But if you go down with the systems trading approach, you can just backtest a strategy in minutes.

Secret #3: You can beat the markets with less than 30 minutes a day

You may be wondering,

“Hey Rayner, how is that possible? 30 minutes a day isn’t systems trading, trading on a lower timeframe isn’t it high-frequency trading?’’

No. High-frequency trading and systems trading are two different things. High-frequency trading refers to trading on the lower timeframe, maybe the 1-minute, 5-minute charts.

Systems trading on the other hand simply means that you are trading systematically with a very clearly defined, fixed set of rules. And the system trading that I advocate is trading on a higher timeframe, daily timeframe, and the weekly timeframe, or even a monthly timeframe frame.

If you think about this when you’re trading on a daily timeframe. How much time do you need to run a system? All you need to do is check the charts once per day. If there’s a valid trading setup, you take it. If there isn’t, you move on.

Let’s say your portfolio of markets is 20 markets. How long does it take for you to look through 20 charts on a daily timeframe to know whether there’s a valid trading setup?

I don’t know about you, but for me, if I were to do it, I can do it in 10 minutes. Maybe if you’re entirely new to trading, then 20 minutes.

But you can see that if you trade off the higher timeframe, like the daily or weekly timeframe, you can beat the market in less than 30 minutes a day.

If it’s the weekly timeframe or the monthly timeframe, you just need to check the charts once per week or even once per month. So this gives you the freedom to do the things you love.

This is the power of systems trading. You can beat the markets and still have time to do the things you love. You don’t have to stare at a screen all day long monitoring the markets, whether your position hit stop loss or not.

You can instead just put on your trades, move on, get a life, come back and see whether you’ve made money or not.

I just want to share with you this system over here. This is the daily system trading across a portfolio of about 40 markets. It doesn’t take much time.

It’s a daily timeframe system. If you do it manually, I would say no less than 30 minutes a day, you can run this system over here.

This is just to share with you, how a daily system work, what kind of results you can expect. It’s based on a backtest from 2002-2018 which is about 19 years of backtesting on this system.

Secret #4: You become a consistently profitable trader in record-breaking time

Let me explain why. When most traders get into trading, they have the mindset of:

“Let me go all in. Let me quit my job and trade full-time.”

The problem with that is most traders tend to fail when they go with the all-in approach, the all-in mentality. Why is that? Because when you go all-in trading you leave all the safety net behind you. Trading becomes your only source of income.

Let’s say maybe you do have a strategy that has an edge in a market but you’re relying on trading to put food on the table.

Maybe in April, your trading strategy is losing money. You’re having losses, and you know you need profits to put food on the table, to pay the bills, etc. Imagine when you have losses in your trading account, what will you do?

Chances are you will widen your stop loss because you don’t want to take the loss. If you take the loss, then there are no profits. So, you might widen your stop loss or you might double down.

These actions lead to destruction. You can get away with it once or twice, but if you do it in the long run, your account is going burst.

Why is that?

It’s because you went all in and you have the need-to-make-money syndrome. And if you do go all in and trading with no safety net, you are putting yourself in an unfavourable environment.

If you want to be consistently profitable in record-breaking time, go with a systematic trading approach. You need less than 30 minutes a day, if you are slow you take an hour there.

And if you have a full-time job you’re no longer relying on trading because your full-time job can pay the bills. This means you can focus solely on executing your edge in the markets with no distraction, bias or negative emotions that cause you to break your rules, etc.

All you need to do is focus on your trading because you know that the bills are taken care of by your full-time job. As a system trader, you can become consistently profitable in record-breaking time because you are not 100% reliant on your trading profits.

Trading is to supplement your lifestyle, not become your lifestyle – a big difference.

Secret #5: The richest traders in the world are systematic traders

Let me share this with you. David Harding, he’s a founder of Winton capital, he has a personal fortune of $1.5 billion at the age of 55.

John Henry bought the Boston Red Sox for $700 million.

Jim Simons, founder of Renaissance technologies has a net worth of about $20 billion as of 2018.

The secret is that the richest traders in a world are not discretionary traders, but systematic traders. There’re not day traders or scalpers, they are all systems traders.

This should give you a signal that the best in this business use systems to extract profits from the market consistently. The best traders, the most profitable traders in a world, the fund managers, they are all systems traders.

Secret #6: You can build massive wealth even if you have a small trading capital

How is this possible?

Remember, in systems trading, you don’t need much time. You only need less than an hour a day. And after we have time to do our full-time job.

Let’s say you have a starting account of $5,000. You have a full-time job and have some savings, you can afford to put in another $5,000 to your trading account every year. That’s like $400 monthly savings.

Let’s say you take 20 years to grow, with a 20% annual return. With systems trading, you can make anywhere from your 10-30% per year consistently, depending on your risk management, but 20% is doable.

Let’s say you compound it once per year, after 20 years, with all these factors accounted for, you would end up with about $1.3 million. Is it enough for you to live on? I don’t know.

It depends on your expenditure, but you can see that with a small trading account, adding funds consistently to trade your system with an edge, you can snowball that money into something substantial, even seven figures over here.

The secret here is that you can achieve massive wealth even if you have a small trading account.

Systems trading allows it because you have the flexibility, the time to get a full-time job to supplement your trading and let that account grew consistently over time.

Recap

• You don’t need to code to be a system trader
• You can validate your strategy in minutes
• You can beat the markets with less than 30 minutes a day
• You can become a consistently profitable trader in record-breaking time
• The richest traders of the world are systems trader
• You can build massive wealth even if you have a small trading capital

For now, here’s what I would like to know:

What does successful trading mean to you?

Leave a comment below, share your thoughts with me because I’ll read every single comment.