Trading cryptocurrency can be a way to build significant wealth, or it can result in unpleasant losses. The difference between winners and losers when trading stocks or crypto often comes down to systems and strategy.
On this episode, Adrian Reid, a full-time trader based in Australia and the Founder/Trading Coach at Enlightened Stock Trading, joins to offer up powerful tips and insights for trading crypto successfully.
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What Is Systematic Trading?: “Systematic trading is for investors who put their faith in a methodical system for success. This is the trading style you’ll find at a hedge fund. It involves using a system of clear-cut directives for investing. For traders to capitalize on a position, it needs to meet all the criteria of the system.” (Investment U)
Today’s Guest: Adrian Reid
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Cryptogic is the show for crypto investors who are focused on long term results. Follow Scott Hawksworth and Andy Hagans as they explore the investable world of blockchain technology, NFTs, Bitcoin, Ethereum, and other cryptocurrencies.
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Scott: Hello, and welcome to another episode of “Cryptogic.” Scott with you once again. And really happy to be bringing you another great episode where today we’re going to be talking all about trading cryptocurrencies. And joining me to offer insights on this is Adrian Reid. And he is a full-time private trader based in Australia and is also the founder and trading coach at Enlightened Stock Trading.
So a lot of experience there to draw on in talking about trading, not only for cryptocurrency but also stocks. So, so really happy to have him here. Adrian, welcome to the show.
Adrian: Scott, thanks so much for having me. Super excited to be here. I’m really thrilled to be on the show. So excited to come.
Scott: Absolutely. So let’s dive in because I think there’s just a lot to cover and I really want to get your insights out there for our listeners. So we want to talk about crypto trading specifically, but let’s start with a question that really speaks to the elephant in the room, why do many crypto traders or investors lose money?
Adrian: Yeah, absolutely. We’re going straight to the heart of it. So that’s good. Let’s just smash that one. The answer to this question is the same question in stocks, right? If you ask me, why do most stock traders lose money? Why do most crypto traders lose money?
More or less the same answers, but the trouble is in crypto it’s magnified. And so let me talk about why. So traders lose money for a whole bunch of reasons. In crypto, one of the biggest things is we don’t know who the winners are yet, right? There have been some winners to date, no doubt, undoubtedly.
But if you buy a selection of coins or tokens or whatever now and hold them forever, most of those are probably going to be worthless. And if you bought a whole bunch of new coins in 2017 when there was a whole big flurry of activity on the ICO front, most of those are now worthless.
And so buy and hold as a strategy, generically in crypto, is kind of bad. And I know a lot of people are going to freak out and say, “Ow no, but if you bought Bitcoin and you held that since the beginning, you’d be a billionaire.” And yes, that’s true, right? You would be a billionaire probably if you put a decent amount of money in. But this is hindsight now for Bitcoin.
And if you try and pick a new coin now and hold it forever, chances are it’s not going to be the Bitcoin, right? We’ve already got one. So buy and hold as a generic strategy is dangerous. If you buy and hold the blue chips, sure maybe you’re going to make money in the very long run.
But there’s another problem. The other problem in crypto is the volatility of the market is so huge. The bull market’s really big. Hooray. That’s fantastic. But the bear markets are extremely brutal. And if anyone’s been trading crypto for a little while, they would’ve seen massive, massive price drops.
And it kind of takes pretty much a superhuman cyborg to sit through one of those drawdowns and do nothing and have no emotional reaction, right? So sitting…
Scott: Right. Not reach for that sell button.
Adrian: Yeah, that’s right. You’re sort of, “Hurry up. Ow, my God. Ow, my God. Ow, my God.” And that’s really tough. So buy and hold is really challenging. The second thing is most traders, if we are really honest, are not doing much more than gambling. If you look in the chat forums and the Facebook groups and the WhatsApp groups and all the discords and whatever, most people are just hyping something up, hoping that that’s going to get them rich.
And gambling in any market doesn’t work. You know, there’s always great stories of, “Ow, I bought this and it went to the moon.” But that’s the one story you hear. You don’t hear about the five other bets that the person took that lost all of their money that went to zero or close to zero. So most traders are gambling. And you need something more than just a hot tip.
And we’ll get into what that is I think in the course of this discussion. Third one we already touched on, emotion. When price swings are so big we can’t help but get emotional. And when something is pumping, we get the feeling of greed. When something is collapsing, we have the feeling of fear.
Now, if you have the feeling of greed, what do you want to do? Throw more money at it, because I’m going to get rich. But the trouble is a lot of things in crypto pump and then dump. Not everything continues to go to the moon forever. And so if you throw more money in it, chances are, you are getting close to the top and the dump is going to get you hurt.
And then with fear, again, very powerful, powerful emotion. When things are falling, we’re driven to either hold on because we don’t want to take that loss, and we hold on for too long we end up with a bigger loss and eventually, we go, “Ah, can’t take it anymore.” And we capitulate and hit the sell button, or you just make completely irrational decisions because you’re scared.
As soon as you get into fear, the brain goes into fight or flight mode. You’ve heard about that. And in fight or flight mode, the blood gets diverted away from the brain into the muscles, you get ready to fight or run away from the tiger or lion or the bear in this case. And in that mode, you’re not thinking clearly. You don’t make intelligent decisions.
All you have to do is think about the last time you had a fight with someone, your spouse or your, you know, a friend or whatever, you don’t say the most sensible things, right? Because you’re in fight or flight. Emotion. Next one, position size. Position size is a killer. “Ow, this one is going to change the world. It’s going to change… This is the future. This is going to go to the moon. I’m going all in.”
It’s like all in is the stupidest thing I have ever heard coming out of a trader’s mouth, okay? You should never be all in because we don’t have a crystal ball. It might go to the moon, but it might go to zero or it might just go nowhere. So all in is just…it is the dumbest thing ever. So position size is really critical. You’ve got to place lots of small evenly sized trades because some of them will be successful, some of them will be unsuccessful.
We can’t go all-in on one because if we happen to get the unsuccessful one, and let’s face it, you know, we’re not all geniuses, I’m certainly not, I have lots of losing trades, we can’t risk having a big bet on a losing trade. Bad outcome. And then the last one is leverage. Because this is the most volatile market on the planet. I don’t know what makes traders think they also need 100 to 1 leverage.
And that just makes no sense. You’ve already got an asset class which is moving, you know, huge amounts, hour by hour, let alone day by day or week by week. And what happens is traders think about the profit potential of the leverage first. It’s like, “Ow, if I buy this and it goes to the moon and I leverage this much and then I’ll make that much.”
But that’s the last thing you should be thinking about. The first thing you got to think about is the downside potential. If I buy this much and I put on that much leverage and it drops, what will happen to my account? Will I survive trading that way? And you’ll get a pretty different outcome if you think about it like that.
Scott: Wow. Adrian, you broke down so many really fantastic concepts there, and I love that you were touching on the emotion as well. That’s something that on this show we’ve harped on before because there’s that importance of, “Well, what’s your investment thesis?” Do you still believe your investment thesis? Do you still have, you know, those kind of sound ideas to hold you?
And if you don’t, or if you’re just going to allow yourself to be ruled by the swings of the market and what’s going on in that fight or flight mode, then you’re going to have some problems. So I’m glad you mentioned that. And then you also brought up another bunch of great points. And we’re going to talk a bit more about what traders can do to have more success. But first, I would love if you could just share a bit more about Enlightened Stock Trading, the story behind it, and sort of what you guys bring to the table.
Adrian: Sure. It probably starts way before Enlightened Stock Trading. I started trading 20-odd years ago. And it took me a long while to figure it out, three years of a lot of work. I was working full-time when I first started trading. I spent four hours a night kind of studying the markets, trying to figure out what trades I was going to place the next day.
And after three years of losing money, I was sort of at the point of, “Do I throw it all in and go buy a property instead?” Which made me nauseous. I hate property. I much prefer the markets. Or do I go all in and actually figure this out? And I decided to go all in. And over the next couple of months, I read a few hundred books on trading, and I spent even more time, I took three months off work.
I just threw myself into this. I took the three months off work unpaid to understand what I was doing, develop some rules that worked, and so on. So after that, I was profitable. And you can tell, the moment that I got profitable was the moment I implemented my first trading system.
And we’re going to talk about trading systems later on today. But you can see in my equity curve, my account was going down, down, down, down. And I implemented, and all of a sudden started making money from there. Fast forward a whole bunch of years, and in 2012, I made more money trading, 20 or 30 minutes a day, because that’s all I do, than I did in my day job. And I had a pretty good day job.
I was making a few hundred thousand a year, and working 12 to 14 hours a day, 6 to 7 days a week. And it was awful in my day job. But trading was just like, just following the process. And, you know, as I explain my process, which I’ll do later, it’ll become clear why that is. And because I made so much money trading and work was so stressful, it became a pretty easy decision to go quit.
So I left the corporate world, focused on full-time trading, decided I’m going to be a full-time trader. Took me about six months, and I realized I was bored out of my brain and lonely because all my friends were at work, my wife was still at work, and I had no one to talk to. I didn’t know any traders. So it’s me and a laptop and that’s it. And I had all these people trying to ask me, “How did you do it? How do you make money trading? And can you show me?”
So I started going into the city. I lived in the suburbs. Going into the city to meet people just to talk about trading. And that was great. That gave me a little bit of social contact. But when someone was just wanting to chat about trading, it wasn’t really enough. Like they never did what I said they should do.
I didn’t have a structure. And pretty soon I realized what I wanted was people who did it like me. People who traded systematically, who took it seriously, who understood the concepts, who could test their rules and actually know that they were profitable. And in order to find those people, I decided I had to teach them. So I started Enlightened Stock Trading, started teaching traders.
And since then, basically, I’ve been trading constantly, obviously. But I spend a lot of my day teaching and sharing with students and helping others get to the point where they’ve got freedom to make choices in their life. And that’s why I do Enlightened Stock Trading because I was bored and lonely, and I love talking about trading, and I didn’t know any traders. Now I know a whole lot of traders, so it’s great.
Scott: That’s fantastic. And I love that story. And you really illustrate too all the effort that went into really learning your process and honing it in. And we want to now, I guess, shift things and let’s talk about success, and how to find that.
So, why, you know, we outlined why crypto traders lose money, what’s the real way to then achieve success specifically when we’re talking about crypto?
Adrian: Yeah, good. I believe the best way for most people to achieve success in trading, and in crypto trading especially is to adopt a systematic approach. A systematic approach means you have absolute objective rules that tell you when to get in, how much to buy, and when to get out.
So if A and B and C happen, you buy, if D or E happen, you sell. This is important for a couple of reasons. The first one is when you have objective rules that tell you exactly, not [vocalization] maybe it’s a buy, exactly when to get in, the emotion doesn’t come into the decision. So the biggest problem is…
Well, one of the biggest problems is emotion. We’ve got to get that out of the way. So we have to know when to buy and know when to sell even if we’re scared, even if we’re feeling greedy. The systematic approach helps do that because you know exactly when to get in and when to get out. The second thing that is really powerful about having a systematic approach is if you can write your rules down in if-then statements like they’re purely objective like a formula, then you can test them.
And if you can test them, then you can build confidence that they’re actually profitable. Now, if you’ve looked at some trading books or you’ve read some trading blogs or whatever, you’ve probably seen some ideas about what you should do, when you should buy, when you should sell, you know.
Ow, if this crossover happens, or if this indicator does that, you should buy. And the funny thing is, most of the rules don’t really work very well, but you don’t know that unless you know how to test the rules. So having objective rules is great, gets rid of the emotion, but you have to be able to test the rules to satisfy yourself that they’re profitable. And so I’ve tested thousands of different trading ideas over the years.
And in crypto, probably, well, hundreds, not thousands yet, but soon. And a lot of things that you would think work, based on your experience outside of trading, just don’t. You know, we’ve got to almost do the opposite of what our human nature drives us or compels us to do.
And so things like buying tokens that have rallied strongly is a good idea even though it feels expensive. Because they’ve got momentum in the right direction and momentum tends to persist, particularly in this market. And selling them when they’re falling is a good idea, typically, because the trend is over.
But most people want to buy something when it’s cheap, and then when it keeps falling they want to hold on to get back to even, which is almost the exact opposite of what you’ve got to do to make money. Now, there’s different strategies that work, you can buy things that are going up, hold them till they go up further, and when they turn around and go down, sell them, you’ll make a lot of money.
You can also buy things that are going up, but then have a sudden dip against the trend. And if you buy it, chances are they’ll be a rally. But you’ve got to define what is the dip? How big is that? And that has to be objective. So anyway, let me step back. The key thing is have a system, a set of rules.
Be able to test it on past data so you know it’s profitable. And then once you know it’s profitable, diversify, hold lots of positions with those rules. So that if you’re wrong in one of them, it doesn’t matter. If you’re wrong on two of them, it doesn’t matter. You’ve got to be prepared or you’re going to have a lot of losing trades. In fact, most successful traders have 40, 50, 60, 70% losing trades, but the key is your wins have got to be big.
Scott: Right. I mean, there’s so much to unpack there. I’m curious as, you know, you’ve developed your systems, do you find it, maybe even now or at least as you were developing, hard to take that emotion out? Because even if you have this objective rule, you can have this like, “Yeah, but my gut says that’s going to keep…”
Adrian: That’s so true. Yeah, absolutely. It really is. I mean, I’ve been doing this for 20 years, so much less so now, but still, right? Even still. And what’s great again about systematic trading is you can constantly build that confidence using those emotions. This is really important.
This is something that I teach my students all the time. When you’ve got a set of rules and you follow them, you’re going to have emotions. You’re going to say, “Ow, no, I don’t want to buy that one.” Or, “Ow, you know, I really want to load up on this one.” And what you’ve got to ask yourself is, “What is it about this situation that makes me not want to buy it or makes me want to load up?”
And typically, it’s something in the nature of the price movement. You know, it’s moving so nice and beautifully and smooth. Or it’s really jumpy and gappy. Or the tails on the candles are really big. Whatever it is, identify what that behavior is that caused the emotion. Then you can codify that and add it to your rules, and see if that emotional reaction would’ve helped if you’d traded it objectively.
And what you find is the vast majority of the time, probably 95, 98% of the time, it destroys value. It makes the system worse. And when you see, “Ow, the thing that I had an emotional reaction to, if I’d have followed through on that consistently over years, my profitability would’ve been negative.”
It’s like, “Ow, okay, I better ignore that emotion.” And the more you do this, the more you test these reactions, the more confident you get, the calmer your mind, the easier it is to just follow the rules.
Scott: When you’re testing things and you’re trying to develop your system and you’re, you know, working on that, is the actual function of testing is it, okay, I’ve got sort of my main holdings here and I’m comfortable, you know, whatever, taking this aside and, and testing this out, and if it doesn’t work out, I can lose all that and I’m okay.
Is that kind of the, I guess, philosophy when you are approaching testing, or is there more to it when you’re coming up with something that you want to explore more?
Adrian: Yeah, no, There’s a little more. The way I think about it is this, I’ve got my capital, I don’t have core holdings because I’m a trader. So I will trade anything and everything. So I’ve got my capital and I’ll divide my capital between different systems, different sets of rules.
But I won’t allocate capital to a set of rules until I’m confident that that set of rules work. And so I’ll design a set of rules, and in my courses and whatever I provide these, traders don’t have to do it for themself because actually, the creation of the rules is tough. It’s not a beginner step, it’s more of an advanced step.
Scott: Right. It’s pretty advanced.
Adrian: Right. So I’ll create a set of rules and I’ll test it. And testing it means you take the rules and you put them into some trading software. I use software called AmiBroker. AmiBroker allows you to take the rules and apply them to all of the price history for all of the tickers that you’re trading. So I might get data from BraveNewCoin for instance, which is a data provider that gives daily bars, way back.
You know, you can get good data back to 2016, 2015 across a very broad range of tokens. So I’ll take the rules, put them into AmiBroker, apply them to this data history. A broad range of tokens, as much history as I can get, and say, “Okay, if I’d have traded these rules over the last X number of years, how would my portfolio have looked? Would it have been profitable? Would the growth have been nice and consistent, or would there have been massive dips that I would’ve been uncomfortable with?”
And you get the statistics of the portfolio. I say, “Okay, my compound annual return would’ve been this. My maximum drawdown would’ve been that. My percentage of winners would’ve been this.” You get all of those statistics across hundreds or thousands of trades. And that gives you the insight into whether or not those rules were profitable in the past. Doesn’t guarantee they’re going to be profitable in the future, but let me ask you this, if I gave you a set of rules and told you, “Well, they’ve never made money before,” do you think they’re likely to make money in the future?
Scott: Right. I would say, well I’d question those rules.
Adrian: Right. But if I gave you a set of rules and say, “Look, I’ve tested them, and they have worked in the past. This is what they produced. It’s nice and smooth. Those rules work whether I use a 50-day moving average or a 200-day moving average, it doesn’t really matter. It’s really stable. And up until today, they’re still working.” Do you think you’d have a little more confidence they’ll work in the future?
Scott: Well, absolutely.
Adrian: Of course, right. So the way you test it builds that confidence. And then you’ve got a set of rules that you can allocate capital to. So I’ll allocate capital to many different sets of rules and how I’ve got a portfolio of systems. And each system has a portfolio of tickers, of coins. So I’m quite diversified. So if one of those goes to zero, okay, it’s annoying, but it’s not going to hurt me financially.
Scott: Right. Because you’ve got everything spread out and you’ve spread out your risk.
Adrian: Yeah. Exactly right. And we don’t know who the winners are going to be. And we don’t know who the catastrophic losers are going to be. So we’ve got to spread that risk. The flip side of that is if one of those goes to the moon, okay, I’m not going to get rich tomorrow, but I don’t want a small chance of getting rich tomorrow, I want a very high probability of building my wealth fast over the next several years.
It’s a different mindset. I’m not trying to get rich quick, I’m trying to get rich with certainty. And I’ve done very, very well with trading over the years. I’m just trying to continue to build. And that’s the difference, having a hope lottery ticket, a gamble on token going to the moon.
That’s one thing. Having a set of rules or a portfolio of systems that you have good certainty will make you money over the next several years and a high probability of building massive wealth over the next several years is a completely different thing. That’s the one I want.
Scott: A hundred percent. And I think too, especially since we are talking about crypto, you know, kind of goes back to what you were saying at the top about the emotion, and because cryptocurrency, even more than maybe anything we’ve ever seen is just so volatile and subject to these hype cycles, as you were saying that I’m just thinking Dogecoin, Dogecoin. What happened to that?
And you have folks that maybe don’t even have all the knowledge, they’re new to crypto, they just figured out what a wallet was yesterday. But then they saw Elon Musk talking about Dogecoin on SNL and they go and buy a bunch and they go all in. You’re just taking such a huge risk there and you have no real plan. And I think that really hits home for me.
And something that I think all folks investing in crypto, trading in crypto should keep in mind is what is that risk profile that you have, and are you operating on a solid investment thesis or a solid strategy or a system as we’re talking about here, or are you just, “Ow, man, I just love Dogecoin?”
Adrian: Yeah, that’s right. And look, unless you are a systematic trader, the answer is mostly going to be, “Well, my investment thesis is probably pretty shaky.” If you’re truly honest with yourself. If you’ve just bought Bitcoin and you’re a Bitcoin believer and you’re holding forever, okay, maybe that’s a little different.
But if you’re going to do that, you’ve got to be ready for your account to swing by 60, 70% down before it continues up. And that’s really hard. That’s hard for people. I can imagine you had $100,000 and it dropped to $30,000, like, well, you’ve got to be a real believer.
Imagine you had a million dollars.
Scott: That’s just miserable, right? Yeah.
Adrian: Yeah. Imagine you had a million and it dropped to $300,000. I mean, that’s real stomach ulcer type stuff.
Scott: And, you know, Adrian, to jump in here kind of my whole strategy because I do not have a specific trading system that I follow. So a lot of my investment thesis has been really informed by, you know, the boggle heads, right?
And where I, you know, buy the market and I set it and forget it. And I may have a few stocks or individual coins, certainly blue chips that I have a thesis about and I believe in. And then what I do is I’ll buy and then just let it ride because I actually don’t want to look. I don’t want to see it drop.
I don’t even want to expose myself to that. I just set and forget because I have the long-term view. And so I think that it’s a really interesting kind of difference there because then if you try to, I guess, split the difference and you try to say, “Well, I’m going to do this and just by hope, but then I’m also going to play over here.” Then you can kind of run into trouble, right?
Adrian: I think you’re right. This is really important. You can’t half do something. Now, your approach is really great if you’ve got the discipline to not look at the price as it’s declining and freak out, which clearly you do. Others may not, right? So you’ve got to know what your approach is and what the rules are for your approach. Your rules are, have a decent kind of thesis about a coin and buy a sensible amount of it, not loading up, buying, you know, betting the house on it, and then riding it out.
Now, you have to know that some of those are going to be big winners but some are going to be big losers, and you’ve got to be okay with it, and you’ve got to stick to the rules about that, which is just ride it out. Now with the systematic approach, you’ve got rules that tell you when to buy and rules that tell you when to sell.
And you have to stick to those rules. You can’t say, “Okay, it says buy, but, you know, I really don’t like this token right now so, you know, I’m going to skip that.”
Scott: I’m actually going to sell it or whatever.
Adrian: I’m going to sell it instead of buying it, or I’m going to buy a small amount instead of the normal amount. Or I’m going to go big because I really love this one. You can’t do that, you’ve got to operate according to the rules of the strategy. But what you can do is say I’ve got my forever portfolio, like what you were describing, and I’ve got my systematic portfolio.
There’s one approach, one set of rules for this, and a certain amount of capital. And there’s another approach, the systematic approach with a certain amount of capital for that. And you can operate two separate portfolios according to two separate strategies provided you keep them separate. Don’t try and overlay this on that, or overlay this on that because you tend to get the worst of both.
You don’t want to kill a great strategy with something that’s incompatible. I think that’s an important message.
Scott: Absolutely. Absolutely. We’ve been talking exclusively about crypto and many folks who come into crypto trading or investing, you know, they’re coming from the traditional investment world, they’re coming from stocks. I guess, what are the real key differences whether you’re using a systematic approach or not, but when you look at it, what are the key differences when we’re talking stocks versus crypto?
Is it just a matter of difference in volatility or is there more there when you look at it?
Adrian: Yeah, a good question. There are a couple of things. Volatility is a big one. And I sort of explain it like this. If you took the S&P 500 index and we’ve got decades of history, right? But you can press that by a factor of about seven because the cycles are much quicker in crypto. And we go through bulls and bears and bulls and bears like they’re going out of fashion.
Right? So you take the S&P and you compress it by a factor of seven so that the cycles happen more quickly. And then you take it and you stretch it to make the cycles bigger by about five times. Then you’ve probably got crypto. So the market is kind of the same but on speed.
And that’s the first thing. So the cycles are much bigger, much faster. And that translates to the volatility of the individual tokens. Crypto now, and particularly the smaller caps, are kind of like penny stocks. There’s often not a lot of real fundamentals behind them.
Not necessarily. Maybe there’s a bit of the makings of a business, but they’re not really well-established. They’re certainly not the Apples and the Facebooks of the world. And what that means is there’s a huge amount of uncertainty about the future value of them. And a lot of that price is driven by the perception of what the value might be.
And so, you know, someone might hype up and have a really great story and the price might rock it up, but then it becomes clear that there’s actually nothing there and it collapses. So it’s really like the wild west of stocks. So compress the cycles, expand the amplitude, and add the uncertainty of, we don’t know which ones of these are going to succeed.
So there’s a lot of emotion, story, news, and rumor driving it. Now, what’s interesting is that doesn’t mean you can’t make money. In fact, for the systematic trader that’s amazing news because for an emotionally-driven market, a systematic approach absolutely kills it.
Because what you’re doing is you’re standing aside from the emotion, you are identifying the price patterns that the emotion is creating, and you’re profiting from those. So when I take a set of rules and apply it to stocks, I might hope to get 20, 30% return per year.
But if I take the same set of rules and tune it just a little bit for crypto, I could get hundreds of a percent return per year because of these differences. One thing which is the same is there’s a lot of correlation within the market between tokens. There’s a lot of correlation between stocks as well.
So you don’t want to fool yourself that I’m hugely diversified because I’ve got five different tokens. Chances are if there’s a bear market, they’re all going down. If there’s a bull market, they’re all going up. So you need to trade realizing that you’ve got a lot of correlation. And what that means is instead of having one set of rules and 20 trades in that set of rules, that’s good, but it’s better to have several different sets of rules that are diversified from each other.
So it’s the rules that give you the diversification as much as the portfolio of holdings.
Adrian: That was a lot. Sorry.
Scott: That was a really, really good point. I’m just sitting here, I’m excited to rewatch this because I’m going to just…
Adrian: Yeah. It’s probably a good opportunity to take questions somehow. I don’t know, people can email me or whatever, but there’s definitely… There’s a lot in this and I’m sort of… I’m probably doing a little bit of a disservice by trying to cram so much in, but the real key is it’s a volatile market.
The moves are huge, it’s very uncertain. Overlaying rules on top of it to stand aside from the emotion really gives you an advantage. And being able to test those rules objectively over the past data gives you confidence, which means you can follow them consistently and make money.
Scott: Absolutely. Absolutely. I always like to, as we wind down conversations, look to the future, and obviously, none of us have crystal balls in front of us, but I’m just curious, what’s your view on the future of cryptocurrency trading in general? How might the landscape change in the months and years to come?
Whether it be regulatory changes, whether it be just more sophisticated traders entering the market? What’s your view there?
Adrian: Yeah. Really good question. There’s a couple of things that will undoubtedly change. The first one is more and more institutional money is going to come in, which means very different styles of participants. Right now a lot of the participants are people on their iPhone with a thousand bucks in their account going, you know?
With leverage. And that creates a certain price behavior in the market. But if you bring in institutional fund managers, hedge funds, and that sort of thing with tens of millions or billions under management, they’re not trading like that. It’s quite different. So what I think will happen is over time as institutions come in and it becomes more of part of everyday life, the volatility and the frequency of price swings in the market will get muted.
It’ll become more like stocks. Not exactly like stocks, but more in that direction. So I would expect to see the magnitude of these moves drop eventually. But in order for that to happen, it’s got to be professionalized a little bit more. Yeah.
There’s probably going to be more oversight in some form. I don’t know what that looks like. But, you know, if you think about the stock market way back, you know, way back when, there was a lot more kind of crazy behavior, you know, fraud sort of listings and dodgy things going on and the brokers and all of that. And then it sort of got regulated away and it became a more stable market and it was more trustworthy.
Crypto will go the same way. It already is. I mean, I’m much more confident having money in the market on an exchange now than I would’ve been, you know, five years ago, you know, with all the hackings and all that.
Scott: Absolutely. And I think we’re even seeing even now, you know, there is much more institutional interest.
Adrian: Ow, sure. Absolutely.
Scott: With it. And so that’s also… This process has started, I think you’re spot on there.
Adrian: Yeah, no doubt. And what’s important to realize then as a result of that is if someone’s sitting on the sidelines thinking, “Ow, yeah, crypto’s interesting, but, you know, I’m just going to wait until…” You are missing a huge opportunity because right now it is still a bit wild west-ish and you can profit very, very handsomely with these price moves if you’ve got a good set of rules.
But if you wait five years, the market will have matured and you’ll still be at a profit but you won’t have these massive outsized profits that you can get today by standing out from the crowd with a systematic approach. So I’m kicking myself that I didn’t get into crypto years earlier.
I’m a bit of a slow adopter generally in life. And I would say to someone who’s on the sidelines now, don’t keep waiting. There’s a great opportunity and it’s going to gradually disappear as more and more and more institutional money comes in and it gets more and more regulated and professionalized. So get in, get systematic, make good money, and then, you know, over time that’ll just sort of revert to being just another market, just another asset class.
Scott: Absolutely. Adrian, thank you so, so much for joining me on the show today, sharing so many fantastic insights. Again, I’m excited to look at this and watch this back because there’s just so much there. And if folks want to find out more, connect with you, find out more about Enlightened Stock Trading, where can they do that?
Where should they go?
Adrian: Yeah. Great. I’d love to hear from anyone who wants to learn more about trading crypto successfully. And in order to help you with that, help the audience with that, I’ve put together a page and some freebies, free course, and some articles and cheat sheets that are really helpful. So if you go to enlightenedstocktrading.com/cryptogic, and hopefully, we can put the link in the show notes or something like that.
Scott: Ow, absolutely.
Adrian: Enter your detail, your name, email there, and you’ll get a bunch of resources that’ll really help you out. And there’ll be a way on that page or on the page after that, we can have a chat so you can ask questions, get answers, and figure out what the right way forward is for you. So I think that will really help, you know. It’ll give a big shortcut to getting started in systematically.
Scott: Fantastic. And we will, of course, have those links in our show notes. Adrian, Thanks again so much.
Adrian: Absolute pleasure. Thanks so much for having me, and hope to see you again.