a 15-year study following 300,000 traders in Taiwan showed that only 1% were profitable after 5 years a long-term Brazilian study showed that only 1% of traders made profits greater than minimum wage and a University of California study also concluded a success rate of only 1% after 3 years users in forums typically state that 90% of Traders fail but the real stats prove it's much worse than that you have a better chance of becoming a brain Sur than a profitable Trader welcome back everyone I'm not trying to dishearten you but if you want to be among
the 1% of traders who achieve trading success you do need to face facts the next and the final lesson in this course is going to show you some strategies that will help you develop better trading skills but for those strategies to make proper sense in this video I just want to explain why your decision systems developed the way they have if you understand what's really going on behind the scenes you've got a much better chance of joining the 1% who succeed your greatest enemy in trading should actually be your greatest Ally our brains are designed
for a very different world than we currently live in you all certainly woke up this morning without any imminent fear of starving to death freezing to death being eaten to death or dying from disease or infection and the neighboring suburb across town is very un likely to carry out a deadly raid on your part of town you absolutely expect to survive until bedtime but that's a very modern luxury but we take for granted for most of human existence famine was commonplace exposure to bad weather would kill us we lived side by side with nature and
becoming lunch for a predator was a real possibility simple cuts and grazes could kill us thanks to infection and hostile neighboring tribes within War distance were a constant threat our brains and specifically the part called the amydala was on constant alert always looking for any sign of danger and preparing our body to react to the slightest risk you can understand as we discussed in the last lesson why our defense systems are so over sensitive for most of our existence they needed to be and when danger is perceived and our defense system Springs into action it
can summon up seemingly superhuman strength and speed and reaction times Focus coordination and planning abilities it is a truly remarkable system the problem is modern society is entirely different and unbelievably safe by comparison the evolution of civilization is so rapid our brains haven't even begun to adapt and catch up our defense system is over sensitive because it's anticipating and expecting risks and dangers that for the most part are no longer there for us so here's a simple example we all own far more possessions than we need most of our belongings are luxuries not necessities and
almost everything is manufactured in bulk so even something relatively valuable like a smartphone if we break or lose it we just claim on insurance and it's replaced within 24 hours in the past however the small number of things we did own were critical to our survival and keeping hold of them was a priority they were hard to make or acquire they broke easily or could easily be taken from us as a result we formed strong bombs to our possessions and when facing the choice over whether to protect what we already had or risk them to
acquire even more possessions keeping a few things that we had turned out to be a much more successful strategy so having a second Flint knife may be a benefit but do I really want to risk smashing up pieces of Flint that I could cut myself on and bleed to death in order to make that second one well it's much safer literally to just play it safe and hold on to what I've already got and not take any chances and we've retained that same decision-making process and unconsciously apply it in our trading you've just made a
new Equity High you don't really want to risk giving that back to you every fiable of your body will be telling you to take profit and play it safe but on the other hand in the past when we were in real d it turned out that taking risks was a better strategy jumping over a ravine to escape a predator discarding all our possessions to make the hike back to Camp more manageable when we were exhausted or taking a risk with an unknown plant when we were completely malnourished when you're already behind and you have little
left to lose you may as well take the chance and that's what we see when we're in a loss or have taken a string of losses in trading we begin to take bigger risks such as moving our stop loss wider taking big position sizes doubling down with our money management or entering lower probability trades all of our trading behaviors are directly tied to the historical development of our defensive Survival Systems and you can see they are two opposite forces staying safe and protecting what we have on the one hand and taking risks to gag of
a sticky situation on the other and by cleverly knowing when to play it safe and when to take abnormal risks we've managed to thrive but as I've said before capitalism and trading didn't exist when those decision systems were developing the best way to understand this in trading is by looking at something more familiar like our relationship with food and this isn't an analogy it's a direct relationship the vast majority of us on the planet have easy and plentiful access to a wide range of food and we eat several meals and snacks every day just missing
breakfast puts some people in a panic but that certainly isn't how our body bodies were designed or evolved in the past our bodies expected to go without food periods of fasting were the norm and the majority of food we did eat was low in calories and nutrients some leafy vegetables occasional fruits and Grains and of course it all varied by season so as such on the rare occasions there was a surplus of food or we were lucky enough to have a calorie against meal of protein in fact our Survival Systems motivated us to consume as
much of it as we could as quickly as we could so our bodies could store the Surplus to get us through thean times but now there's an almost Limitless availability of food most of which is packed with calories it's not a coincidence that food manufacturers deliberately make products filled with sugar because they know our automated judgment and decision systems haven't caught up with the modern environment where supermarkets exist and we'll shovel that food down our faces like there's no tomorrow the technical term for this is Mal adaptive meaning that your judgment and decision systems around
food haven't adapted to the modern world the same is true of trading the defensive and intuitive decision systems you possess are maladaptive for the trading environment and there's three things that really contribute most to how Mal adaptive our decision systems are for trading first the world our brains developed in were far simpler in terms of the complexity and the amount of information that we needed to process before making a decision there's a lion should I fight it or run away fairly simple but the volume of data and information coming at you from your trading platform
and news feeds is off the scale compared to the past and it can easily overwhelm your defense systems without careful retraining specifically for trading those systems will be overwhelmed and they will default to their simplest setting which is the very worst for trading second secondly it was more physical the risks we faced usually meant bodily harm and the solutions to problems usually involved hard work persistence and aggression that's why you often want to do more and sometimes punch the computer screen after a loss the threats coming out of the screen are subjective and have never
been experienced before and therefore cannot be accurately interpreted without retraining and recalibrating and thirdly the Environ our defense systems developed in was much more spatial we used to physically interact with the landscape and physically experience the cause and effect of our actions but trading is largely conducted in a virtual two-dimensional environment we can't see or feel the data in its entirety we're not getting three-dimensional feedback so you can see how the trading environment is worlds away from the environment that our defensive decision and judgment systems developed in the good news is maladaptive does not mean
incompatible it just means we need to recalibrate things your intuitive defense and decision systems are formidable allies to have on your side the very last thing you want to do is turn them off you want to retrain them and use them they're amazing the best Traders understand that there are four components to trade in there's the trading system which is your documented process with the rules and your statistical Edge then there's your defense mechanisms which if retrained will govern your risk management and ensure your long-term trading survival third your intuitive decision system which you gain
if retrained will allow you to see unteachable patterns in the market and you can act on them profitably and then lastly your logical decision system which acts in an oversight capacity to manage and orchestrate the other three systems in unison being a good Trader means using all of those components cohesively to your advantage and so the next video to Rand off this introductory series will give you some simple strategies to help you retrain develop and strengthen your decision systems so you can finally move towards joining the 1% of traders who defy the odds and succeed
I hope you've enjoyed this video guys as always if you find it interesting please like comment and share and consider subscribing if this type of content is of value to you look out for the final lesson in the series and maybe revisit the earlier lessons just to help cement your understanding and your knowledge thanks for watching I'll see you next time
