Rebel Traders 032 : Lost in Translation

Do parts of your trading get lost in translation? Are they things that you you think should be based on your research that may not be quite what you think. Well, the Rebel Traders dive in and uncover some common trading misconceptions and course correct...

In this week's show, Sean and Phil are peeling back the curtains on many misconceptions that have pulled traders off course and are on a mission to turn the rudder and avoid the icebergs. They shatter some of the commonly held ideas and beliefs that are almost staples of trading and shine the light on some areas that could be hurting your trading results.

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Sean Donahoe: Audio:
Are you lost in translation or lost in space? Let's rock and find out.
Automated: Rebel Traders takes you inside the world of two underground master traders. We take an entertaining and contrarian look at the markets, to cut through the noise of Wall Street, and help you navigate the trading mine field. Together, Sean Donahoe and Phil Newton are on a mission to give you the unfair advantage of a rebel trader, and now, here are your hosts, Sean Donahoe and Mr Phil Newton.
Sean Donahoe: Hey, hey, hey. This is Sean Donahoe, and I am joined by my cohort, my partner in podcasting, Mr Phil Newton. Phil, how you doing Sir?
Phil Newton: I'm pretty good thanks, and with that introduction, I'm tempted to go down the road of danger, danger Will Robinson.
Sean Donahoe: I know, that's what I was thinking of. I was trying to remember all the names to the characters and the doctor who's in that whose always the little weasel, but they are making a remake of that for Netflix or something like that-
Phil Newton: A reboot of the reboot?
Sean Donahoe: A reboot of the reboot. I mean, I didn't like the Matt Le Blanc movie, but I certainly was addicted to the original Lost in Space back in the day but Lost in Translation, Lost in Space, we almost have to now put Bill Murray now in this mix somewhere, but we are gonna be looking at which parts of your trading are getting lost in translation? Are there things that you think should be, should exist based on your research but maybe things you've heard? But maybe not quite what you think, we're talking inconceivable from a previous show. I don't think that word means what you think it means. But we are gonna be diving in and uncovering some common trading misconceptions, and course correct your way for potential icebergs in your trading.
Phil Newton: And we also got the usual quick fire round where it's your trading questions are answered. My continued favorite section is the bullshit of the week; we call up all the hyperbole, the shenanigans of the industry. And somewhere in amongst all of our shenanigans, we will ask the core question of where is the trade?
Sean Donahoe: Awesome. So okay getting started, and as I said; getting a little bit Bill Murray versus danger danger Will Robinson, we are talking about what is being lost in translation. Now these are misconceptions, miss ideas; and Phil, you were telling me a story about being lost in translation yesterday with your little trip to the bank.
Phil Newton: Yeah this is what sparked it all off wasn't it really? The kind of what should we talk about this week and just how things can be misconstrued and miscombobulated, but it's starts off with the comments of my mother actually last week when we overheard someone say, "He's a real standup guy." And my immediate, immediate reaction was to say, "What he never sits down?" You know because literally, someone who's a ... but you know what I'm saying. But I think what they meant was he's a nice person. Well why didn't they just say that? But they had to kind of go around it. Or we could appeal away; is he a comedian? Like Phil pretends to be every week? The thing that solidified it for me was I went into the bank, I had the rare occasion of going into the bank. The cash card wasn't working, I had to go in and get a new one and get some cash out while I'm there and the girl's doing her thing, doing the security checks; and she says to me, "How would you like your cash?" And rather flippantly; as you can probably gather, it's not unlike me at all but rather flippantly I said ...
Sean Donahoe: "Somewhere."
Phil Newton: I said, "I'd like my cash in my hand please." And she didn't find it amusing whatsoever.
Sean Donahoe: Yeah the trouble is that obviously there's a difference between literal and figurative. And some people just don't get the sense of humor.
Phil Newton: But that's what I want. I know that's not what she meant but like, "How would you like your cash denominated," would have changed the question completely. So my interpretation of her question was ... the theme of the show is lost in translation. So you know this happens everyday and I've got to admit it is easy to misunderstand when you've got the literal interpretation of what you're talking about versus the figurative interpretation. And most people talk figuratively and you just kind of infer what they're talking about from the context or what is commonly acceptable. But if you had to just listen to the way people talk and stark thinking about the literal interpretation, then it has a very different potential meaning to what most people would usually understand.
You know and when we talk about trading, it becomes an expensive lesson rather than just a humorous anecdote at a cocktail party. Not that I go to cocktail parties. I didn't know cocks had that many tails to hold parties for. But again, another illustration; if you take it literally, there's things that get lost in translation. So what are your thoughts on the subject Sean?
Sean Donahoe: Well I am the most literal person in the world. If you just ask my wife, she will tell you that I take pretty much everything; and this is kind of a very ... people are different in different ways obviously. Everyone has their own ...
Phil Newton: A big boring world if we weren't, yeah we get that. Yeah.
Sean Donahoe: And I am a very literal person. And a lot of it I think is I'm very much an engineer mindset, a scientific mindset. So if you say something, that's what I listen to. If you give me a direction for example, or a suggestion, or you talk about something; I will take the words out of that in the meaning and in the context with the literalness. And where a lot of other people are very figurative. So that for me; and it's funnily enough a personal thing, I am ... and it causes a lot of problems, very literal. Because it can cause a lot of confusion. And this is very very ...
Phil Newton: Well I think it's fun if you're aware of it, because I know I'm the same way Sean; but you know now that you've got the awareness of it, you can have a lot of fun with it. I mean it .
Sean Donahoe: This is very true, and I do.
Phil Newton: It does amuse me no end through the day, the amount of times that, "Should I answer this seriously? Or should I just take the piss out of this person? And have fun at his expense without them knowing it."
Sean Donahoe: Absolutely. But there's a lot of misconceptions that have come out of this. And it's almost like a little bit of mythbusting as well because the problem is that what has been a literal or a figurative translation of a concept gets kind of buried and then messed up and it ends up being the ...
Phil Newton: Misinterpretation, yeah.
Sean Donahoe: Yeah, a complete misinterpretation. Now I'm gonna start with one I think we ... I'm guilty of myself. We'll call this number one; but stop trading is like gambling. Now I've been guilty of this because literally it's an analogy, it's an easy comparison. And again, because of my background I was gonna be a professional gambler; I was going to be a professional blackjack player. But here's the thing, I approached gambling like I approach trading; it's a business. I don't ...
Phil Newton: Brazenly Sean. Like a business.
Sean Donahoe: Indeed. It's money and resources put in and it's profit coming out. And again, I'm looking at odds; playing the odds in my favor. So that is why I make a lot of those comparisons. But in reality, gambling is ...
Phil Newton: It couldn't be further from the truth, yeah.
Sean Donahoe: Yeah, there's a big difference between gambling and trading. The biggest thing ... I mean it is an age old misconception is when gambling, you are unsure of the outcome; but with trading, it's an art, it really is a business, and it's a mind game because it's you versus the market and the people behind the other side of those trades and everything else. And again, with the right mindset, skill, and everything else; you have the odds in your favor. So while there's a lot of legitimate analogies that come from the gambling world, a lot of the comparisons I make are from a business perspective or from a probability and odds. So there's a lot of blurred lines but really it couldn't be further from the truth. What do you think about that?
Phil Newton: I suppose just ... I was just gonna say, I suppose if we think about the way that competitions are ran from the gambling side of things; the casino point of view, it's always the games that do have potentially a statistically favorable outcome for the player on the assumption that you know how to play the game.
Sean Donahoe: Well the closest of that ...
Phil Newton: Poker, black jack for example ...
Sean Donahoe: Yeah, you're counting cards.
Phil Newton: Certain circles might include craps into that. I'm kind of struggling for ... maybe, just because I want to kind of spin it off someway with bonds; maybe bacharach. No it's not that, that's Burt Bacharach isn't it?
Sean Donahoe: You're talking about roulette and stuff like that, which is very ...
Phil Newton: Yeah no, the one that Bond always traditionally played that he ...
Sean Donahoe: Oh that baccarat, yeah it is baccarat.
Phil Newton: Oh baccarat not bacharach.
Sean Donahoe: I was gonna say, we'll have to explain that one to everyone.
Phil Newton: But anyway, the point is is that there's certain games that do have a statistically favorable outcome if you know how to play the game. There's a systematic approach that will allow you an edge over the casino. Whereas all the other games, the roulette; you play that at your own risk, at your own peril. It's stacked in the casino ... Most games are stacked in the casino's favor without you even having to know how to play the game. So even if you do know how to play certain games, the odds are against you before you've even played your first hand or spun the first ball or placed your first bets. So that's where a lot of I suppose comparisons come with gambling because of that uncertain outcome that you were talking about Sean.
Sean Donahoe: Mm-hmm (affirmative).
Phil Newton: Like in certain games, they are favorable if you know the rules and how to play to the advantages that are built into the game. And that's what we're talking about with the stock market. There are advantages that can be built in if you know what you're doing and how to interpret what we're looking at from the outset. I suppose that that kind of leads us on to the next part that the knowledge surrounding the game in the first place that is required to see some type of success, some type of consistent success more specifically. And again, the knowledge that you require; I don't think that you need a deep amount of knowledge, you just need to know small amounts exceptionally well. You know what I'm talking about there Sean; you don't need to know everything about everything, you just need to a small sum of it enough ... well you need to know that what is considered enough to play successfully. You need to know that really well.
Sean Donahoe: Well that's very true. I mean just for a real comparison, if you're looking at ...
Phil Newton: I like to use the driving a car and being a mechanic, I don't need to be a mechanic to drive a car. You know I don't need to know how to fix a car, that's the easy real world example.
Sean Donahoe: Yeah. I mean with black jack, you've got a very small; well the house has a small edge, even if you're playing perfect basic strategy.
Phil Newton: They're playing every hand. They've naturally got a built in edge because they're playing every hand. They are the house.
Sean Donahoe: Usually it's like half a percent or something like that, but with card counting you push those odds in your favor but you've got be in that long term. And the house has an infinite bank roll where the player doesn't. That's where they have the edge. With poker, you're really the players; you're not really playing the cards. It's what a lot of professional poker players consider, although they're obviously not playing stupid hands against great players. They're being very selective about the hands they play, which is a great analogy for trading. However the casino itself has what's called a rake, which means for every round or hand played; they take a certain percentage out of the pot for themselves, that's the rake. That's how the casino makes money in that situation. Bacharat, about fifty-fifty. It's actually very close odds, kind of like black jack played perfectly. And Bacharat .
Phil Newton: Well as I understand it, it's a complex game.
Sean Donahoe: It's actually ... Bacharat is one of the simplest games out there but a lot people have, oddly enough; a misconception of Bacharat because James Bond plays it.
Phil Newton: I've clearly got a misconception. There we go, yeah.
Sean Donahoe: Yeah it's actually one of the simplest games to play, but it also has a very small house edge; fifty-fifty, close enough. You know it's kind of like, as I say; black jack. But at the end of the day, there's a lot of analogies that can be made there but it is a misconception to think that trading is gambling. It's not. It's a business, it's a . But ...
Phil Newton: Well to be fair, you could also argue that you automatically ... to take it into the real world from a business, the shop on the high street example; let's just think about that side of it for a moment. If you've got a business plan and you've got a good idea and you've written out and again, surprisingly; planned your business. Then there's a good chance that you might succeed. There's no guarantee, but there's a good chance because you've thought out what you're gonna do, when you're gonna do it, why you're gonna do it, how you're gonna do it; and all the other stuff.
Sean Donahoe: You're applying a strategy and you've done your homework.
Phil Newton: Exactly, yeah. Yeah. And again, most people are aware of how to possibly run a business and there's this thing called the internet. If you don't, you can go and find out. And there's plenty of people that know how to do it and they can help you. The point is if you tried to start a business without any sort of plan, methodology, or systematic approach; then that could be compared to gambling because you're literally just throwing money down the drain on the hope that you're gonna see some money back. Because you've not thought out what you're doing, you've not got a planned process; you're just gambling by saying, "Let's try this today and see if that works. See if it makes me some money." That could be gambling with a business because you've not got that systematic approach. But people don't think about it like that do they?
Sean Donahoe: No they don't. Generally not. And that's what we're here to correct. So one thing to put into it. Now okay, how about this; trading stocks requires deep financial knowledge. Now I'd love to just kind of put a nail right between the eyes of this one.
Phil Newton: I'm just a poor farm boy that managed to figure out which buttons to press and in what order. You don't need to know a lot. As we touch on before.
Sean Donahoe: Someone played the violin here.
Phil Newton: Yeah. You just need to know a few things very well. As we said earlier. But again, you can say that about anything. Specialize in something. To use the doctor example; the highest paid doctors are the doctors that have specialized and become maybe a surgeon. Or even a specialist surgeon that they've taken their specialty many levels deep. But usually the least paid doctor is the house doctor, the general doctor.
Sean Donahoe: The general practitioner.
Phil Newton: General practitioner, that's the word. The words eluded me for a moment. It's the general practitioner that's not as ... I wouldn't say informed, they know a lot about everything to be able to refer you to the right specialist should that be the case. So in some ways they're an expert at a little bit of everything so that he can pass you on to someone who's more knowledgeable. And it's that specialist who's gonna make more money. So what we're saying is you don't need to know everything and be the general practitioner, because that's not where the big money's made. The big money's made when you focus on something and maybe go several levels deep on that one topic; that one subject.
And it's the same with trading. It's the same with any industry, any specialty. When you specialize in something, you're the expert in that something. That's all you need to do. And it doesn't take a lot of knowledge to be able to be the expert in that one category or subcategory or sub subcategory; but you will know a lot about that. Your very tight, niched down kind of area. Does that kind of make sense? That's my viewpoint.
Sean Donahoe: Absolutely. I mean ...
Phil Newton: Within the context of trading we could know the , the Elliot, the MACDs, the CCIs, the wizbang widgets and whatever fancy algorithm mathematical formula that we want to use this week, doesn't matter. I personally decide what am I interested in? Because I thought, "Hey, if I'm going to study this I might as well do something that I like the sound of or I like the look of." So when I was going through all these textbooks years ago when I first started out, I was particularly drawn to patterns. So that was kind of ... I'm gonna go into kind of the geometric shapes, the charts develop over periods of time. So that's where I went with my kind of research. So I went levels deep and then I went deeper again and just got a greater understanding of the patterns that unfold and evolve. That was my area of specialty. I ended up pretty much focusing on consolidations and break outs for many many years.
Sean Donahoe: That's it. I mean the same for me. I mean in many ways I'm looking at things like the AI side of things and foster recognition. That's where I go deep, that's my ... But that's my background. Yeah, so ...
Phil Newton: Yeah because you've got that skillset to back you up, yeah. I think that's the point. Whereas I never had that. I didn't have that technical background, and if I did maybe I would have explored that. But for you yourself, that was ... you've had that math, technical background, coding background; so you can draw on your knowledge and your skill base that you already had and you brought it into the trading world. So I think that really highlights work to your strengths. Like with anything, work to your strengths.
Sean Donahoe: Absolutely. But when I first came into this, I had no idea but I still became very successful very rapidly because I had a good fundamental strategy that allowed me to filter through all the crap to get enough of a start many years ago. That then created a foundation to build on to increase my knowledge over time. But if I had waited until I had developed all of that internal knowledge; understanding of global economics, macro economics, micro economics. All the ...
Phil Newton: Oh yawn, eye roll; insert emoji.
Sean Donahoe: Exactly. It really was. Which is like, oh my God if I had to learn all of that before I started trading, I would have just dragged myself outside and beat myself to a ...
Phil Newton: Shoot me now.
Sean Donahoe: Yeah exactly. But you know ...
Phil Newton: But you can understand why it becomes quite difficult. The perception that you have to know a lot of knowledge can mean that you put it off and you don't do it. Or you learn a small amount of something or a little bit of everything and because you've got that generalization that we want to avoid, you can end up misinterpreting; which is the whole philosophy of what we're talking about today. You can end up misinterpreting most things that you're looking at because you're trying to understand everything. And that misinterpretation ... Again, you'll see this in anything. Whether in work, in real life, in sports you know; your level of comprehension is gonna be vastly impaired by trying to understand everything. So knowledge-wise, I'd go with what you're drawn to. Work to your strengths if you've got some type of technical background or if you're like me and you didn't know your ass from your elbow. You know just have a little look 'round, buy one of those technical analysis books; have a flick through it and just see what you're drawn to.
It might be that you're drawn to a particular indicator. And there's no right way or wrong way to trade is what we need to keep in mind. But just work ... I went with what interested me the most. Maybe it's trend lines for you, maybe it's MACD for someone else, maybe it's patterns; which is what I was drawn to. Work to your strengths. Work to the things that you're interested in. Which that kind of links into the next one.
Sean Donahoe: Absolutely.
Phil Newton: Common ... Oh, what's the phrase I'm looking for. Common interpretations, old adages; the things that everyone does that are set in stone.
Sean Donahoe: Absolutely.
Phil Newton: For example ...
Sean Donahoe: Buy the dips. You must buy the dip.
Phil Newton: Buy the dip idiot.
Sean Donahoe: Yes indeed. So, go ahead.
Phil Newton: Or as the kids like to say on social media it's BTFD. Buy the expletive dip.
Sean Donahoe: Indeed. Which again, makes me cringe and laugh at the same time because we do .
Phil Newton: Hashtag BTFD.
Sean Donahoe: Yes hashtag BTFD. But we say this a lot is ... Look, if you're in an uptrend and ...
Phil Newton: Buy the dips.
Sean Donahoe: Buy the dip. But here's the thing though ...
Phil Newton: And on face value ... Yeah. On face value oh that's perfect sense.
Sean Donahoe: It is but there's a ... here's the thing, everyone says buy the dip; but did you notice what I said specifically? If you're in an uptrend buy the dip.
Phil Newton: But now we're start .
Sean Donahoe: I said find the literal right there and the conditions to take that action, versus just the general BTFD. You know whatever the ... I'm not very good with these hashtags, I'm too old for this crap. But we're looking at this and ...
Phil Newton: Alright Mertle.
Sean Donahoe: Yeah exactly. I'm not bloody ... I'm as old as rocks, there you go. So anyway, looking at this; you've got to have the qualifier. You've got to have the understanding. First of all, what is a dip. Now you've got some interesting points in regards to this so I'm gonna let you ... because I know you were ranting about this recently with both myself and with ...
Phil Newton: Many people.
Sean Donahoe: And anyone else that will listen. He's the guy who actually goes into the park, stands on a soap box with a sandwich board going up and down the street on this one. So ...
Phil Newton: Yeah. The end is nigh, buy the dip. That's on my sandwich board. But as you said Sean, you've got to determine your reasons for the decline. You know yes, in an uptrend we want to buy the dip; but buying the dip just because price is selling off is no reason to be a buyer. You know what if like you said, we're in a downtrend? Maybe we don't want to buy the selloff.
Sean Donahoe: Buying the dips might be a bad idea.
Phil Newton: Yeah buying the dip in a downtrend's not a great strategy. Unless guess what, unless you're a counter trend trader and that is actually part of your strategy.
Sean Donahoe: Yes.
Phil Newton: But I think what we're skirting around is you're defining what you're doing further. I mean sure yeah; buy the dip, sell the rallies, and all the other stuff. We need to know exactly the environments that we're doing. And as we can probably allude to, buying the dip means a lot of things to different people. And on face value it is pretty simple to interpret. But it's only simple to interpret right up to the point where you have to go and do it. And then you fall into the trap of how you actually execute. So I mean my first kind of realization of this is again; we've started skirting around the story, when I was reading one of these thousand page tomes of a book on technical analysis I remember it well actually; again, I think I've told this story before Sean.
But when I was working in Blockbuster video many, many moons ago when I was around I don't know, eighteen, nineteen, somewhere around there; sleepy Sunday morning I thought, "I'll take a technical analysis book to work with me, there's no one in." And you're leafing through it for about the millionth time, and as I've already touched on, I was interesting in pattern recognition and all the various names; consolidation patterns and ... All the advice in these textbooks says, "Get long on the breakout or short on the breakdown." So you know bullish by the breakup and bearish on the breakdown of a consolidation. And regardless of the name of the pattern, that's all it says. Buy the breakouts or short the breakdown. And all I can remember is that that was quite profound knowledge I thought, but not in the way that most people perhaps think.
Because I remember looking wistfully off into the distance and thinking to myself, "Bollocks. What does that mean?" Because nowhere had the author of this thousand page tomb described how you actually do that. How do you actually buy the breakout? And it seems pretty simple on face value that you of course should buy the breakout, of course you should sell the breakdown because price is transitioning potentially from consolidation to trend. On the breakouts. That's why we're doing it in the first place. But at no point is that ever explained. This is in years later looking back on that experience. But what on Earth do you ... how do you do that? How do you do it? But the good news was though, it does turn out that it's a lot easier than it initially appeared to be. You know when I started to ask that question, instead of what to do; the what is buy the breakout, short the breakdown? And then I started to think about the context of, "Alright, how do I do that? What would make me happy?"
Because what I wanted to know was specifically, very very specifically where am I gonna get in? How am I gonna manage my risk? Because this was before I was trading options, so I was buying shares or spread betting or whatever I was doing at the time. So I wanted to manage my entry, my stop loss, my targets. And I wanted to know all of those things before I got into the position. And it was quite ... to be fair, it turns out looking back on it it took a bit of pain to get there, but it was very simple as to add a pullback to the breakout. That magic formula, magic secret right there. And that helped me avoid the false breaks and all the other stuff that goes along with that. That's a conversation. I'm sure we can explore that in the future Sean. But the point I'm trying to get to is get specific. Get specific in what you're gonna do.
It was easy for me to buy the breakout or get short the breakdown of a consolidation, but that didn't answer the question of, "Alright well how do I do that? How do I know exactly where to enter?" Or, "How am I going to quantify when I'm gonna get out if I'm going wrong? Or get out if I'm in a profit." So I wanted to define those things, and for me; waiting for that initial push beyond the boundary levels and then maybe dropping down to a lower time frame helped me figure out, "Okay here's a pullback type of pattern." And then I started to define what the pullback was. Entry of the pullback high, stop loss goes passed the lowest point of the retracements and targets can be measured by the height of the consolidation. You know you'll notice that I'm very specific with the wording. Again, I'm giving you the cliff note version there; but that definition, that getting specific to exactly what was needed to execute the plan.
The big picture plan is to buy the breakout. Sell short the breakdown. How do I do that? How do I get in? How do I get out if I'm right? How do I get out if I'm wrong? And that was defined by getting very granular, getting specific on what was needed. So that is how I avoided that getting lost in translation experience of buy the dip or sell the rally. It's the same principles of what we're doing now. We've got very specific definitions for what, when, and how we're going to get involved in all of these market environments whether we're in an uptrend, whether we're in a downtrend, whether we're in a consolidation, whether we're breaking out of such consolidation. There's very specific rules and methodologies that we apply that define what, when, why, and how we're gonna take some action. So that's what I mean by get specific. Does that make sense Sean? Sorry I kind of went of ... I glossed over for a moment there and kind of went on Mr Rantipants.
Sean Donahoe: Mr Rantipants got his sandwich board out, you got on the soapbox; "Give a loud hey." It's all good. But yeah, the other thing to put in ... Mr Rantipants. I love that by the way, that's gonna be your new nickname.
Phil Newton: Mr Rantipants, yeah.
Sean Donahoe: But the thing is also, if you're buying the dip; whichever ... you've got to have the awareness of the environment that you're in, the awareness of what's going on; but you've also got to determine the reason for that dip. Is this a correction in an uptrend?
Phil Newton: "Has something changed," is how we normally refer to it. Yeah.
Sean Donahoe: Exactly. Is there bad news? Has GE for example mentioned that they're going to be splitting up the company? Is that now a correction? Or is that now a major bloody reset that's going to continue for awhile as everyone takes their money out?
Phil Newton: Yeah, on face value that might be seen as bad news; but someone else might see, "Well this could actually be a good thing long term. Sort term, might be a bad thing. Long term, might be a good thing." It's that interpretation.
Sean Donahoe: Well we mentioned that last week, yeah. And that could be an investment opportunity.
Phil Newton: Exactly. How do you quantify that? I think that's what we're coming back to; it's get specific. What does it mean to you? Because it means different things to everyone, but what does it mean to you? Because that's the only person that matters. So if you can define that, the objective. Again, get specific. Get really, really into the nitty gritty as we like to say here and figure out exactly what it means for you and how you're either going to take advantage of it or realize, "Hey you know what, this isn't my opportunity today. Maybe we move on."
Sean Donahoe: Indeed. And moving on, let's talk about the next one; which is kind of a cousin of this last misconception which is stocks that are down will rise again. Now think about this for a moment. I mean you know, Phil was making a joke earlier on; it sounds like something out of Terminator, the rise of the stock.
Phil Newton: Yeah rise of machines.
Sean Donahoe: Yeah. But at the end of the day here, we've seen major markets make major corrections okay? We've seen individual stocks, we've seen it in cryptocurrencies over the last few weeks. And a lot people saying, "Oh this is the opportunity to get in on crypto to buy the dip." "This is a fifty percent dip." That's not a dip.
Phil Newton: What do you mean by that? What does it mean to you? Yeah.
Sean Donahoe: Exactly. It's the automatic assumption.
Phil Newton: GE is a good example.
Sean Donahoe: Yeah it's an automatic assumption that, "Oh we dipped. It's gonna come back up and then it's gonna push past, it's gonna breakout." That's a lot of assumption based on ...
Phil Newton: And you and I both know stocks only ever go up. Yeah.
Sean Donahoe: Indeed, yeah. Stocks and cryptocurrencies only ever go up bro.
Phil Newton: They only go up.
Sean Donahoe: But yeah, at the end of the day you've got to look at again; what is causing that momentum? What is pushing it? I mean with cryptocurrencies, China announced that it's looking to possibly ban cryptocurrency. Not just mining, but trading. And that sent a free fall.
Phil Newton: Well Europe was looking at regulation of crypto type instruments. And I saw in this morning's headlines. So there's that regulation, that tightening of the belt. And maybe this isn't a dip, maybe something's changed. This is a normally what we described. Is the same happening? Which is buy the dip in an uptrend, sell a rally in the downtrend. If price is ranging, get involved in it somewhere or wait for the breakouts. You know my whole philosophy, my whole viewpoint of technical analysis; which is the primary focus of how I trade, is until something new happens the same thing's probably going to continue. So if nothing new is developing, then the same thing's probably gonna continue; which is you buy the dip in an uptrend, notice the qualifier. Sell a rally in a downtrend. Notice the qualifier. Buy range lows, qualifier; sell short range highs, buy the breaks of range highs, short the breaks of range lows. They're the six things that I'm looking to do. The other two, the black sheep cousins are the counter trend opportunities and you can buy the selloff.
Sean Donahoe: Which is short term. Yeah.
Phil Newton: Yeah and I've got it ... I don't do it that often so I've got to think how I do it. So in an uptrend, you would sell the uptrend and in a downtrend you would buy the selloff. And if counter trend trading's your thing, then that's fine. That's perfectly acceptable. I just prefer not to do it. Anyway the point is, what's my point Sean? It's when you've got that qualifier ... so just because a stock is down, again General Electric is the good example of this; something new is happening, something is changing. So yeah sure, price is being in an uptrend at some points; but just because it's selling off, it doesn't mean that it's the buy the dip opportunity. You know, what has changed? That was my point, yeah. I knew I'd get there if I rambled on long enough Sean. But it was ... oh, I've lost it again. Oh my God, where am I? It's just squirrels everywhere today for me Sean.
Sean Donahoe: Basically it's awareness. What is going on, what's driving it. Yeah.
Phil Newton: Something new happens. That was what we were kind of getting to. Until something new happens, so is something new happening? Because if nothing new is developing, whether it be a change in what you perceive as the trend; or is it something news driven, as you were talking about earlier Sean. What has changed if anything? Because until something new happens, the same thing's probably gonna continue. So as we started off this section, it's just because a stock is down low doesn't necessarily mean it's dipping and provides a buying opportunity. Again, the qualifier we've got to say is unless your strategy dictates that that is so.
Sean Donahoe: Indeed. The other thing is, if you keep ... a lot of people have this generalized attitude that, "Oh if a stock dipped," or, "It's on a downtrend, it's gonna rise again." And that's a sure way to fall into a bull trap. A lot of that is what we're seeing in different markets right now. And certainly, I hate to bring it back to the crypto space; but something I was talking with a student about this morning is looking at ...
Phil Newton: It's topical.
Sean Donahoe: It's topical, not bashing; but right now, again, a lot of people are looking to buy into ... like at the ten thousand level on Bitcoin. It's a kind of logical stopping point right now, psychological point for a lot of people and Bitcoin's been hovering around with that with a lack of momentum. People are kind of hesitant to get back in on the bandwagon, but again it's just that, "Okay a lot of people are selling, a lot of people buy in around that." But right now it's in an established downtrend right now. It's an established downtrend. And again, it's a sure way to fall into a possible bull trap. We've seen a couple of bull traps on the way down. Again, awareness is you don't know it's a bull trap until it emerges; but now we've got enough data of the decline to kind of isolate and say, "That's in a downtrend right now." Okay so with that information, where's our confirmation, where's our ... And again, with the strategies that we talk about a lot, it's now giving you an awareness and a level of foundation to say, "Okay, now that this is evolving; what is happening? Why? And what can I do to profit from this?"
Phil Newton: Absolutely.
Sean Donahoe: So again, it's a lot of awareness. A lot of these are awareness and definition, and being literal. Now the counter of this; in these last two that we've talked about, is another misconception is you've got to sell the high. Now first of all, what defines where the highs are? And why?
Phil Newton: Why are you doing that in the first place?
Sean Donahoe: Indeed. This is something that a lot of actual pro traders, hedge fund managers all laugh at because okay, just because it's at a high what's stopping it going higher? Where are you confirming that there's a turn around? I bet I could ...
Phil Newton: Someone's strategies do look at fifty-two week highs for various activities either to buy into fifty-two week new highs or to fade it and to get short on fifty-two week highs. You there are equal and opposite arguments for doing both of those things. But I suppose it comes down to what's your strategy? What are you trying to do? And what's the overall environment? I mean just because we're making a new fifty-two week high doesn't mean that the market's trending.
Sean Donahoe: That's exactly it. And if you look at a lot of these different strategies that are out there, a lot of times they'll tell you ... or a lot of people say, "Oh it's at a high, now it's time to sell to cap in that maximum profit." And I'm sure ... I know I've done this and I'm sure Phil has as well; is where we get out of a position because we think it's at a high and then it pushes like ten or twenty percent higher. And you're looking at it and it's like, "You bastard."
Phil Newton: Dang. What's going on there?
Sean Donahoe: You've capped down your profits. And you know I've learned that one of the things I'll do is I will just wait ... I mean one of the things we do is we hit a target, we're out, done.
Phil Newton: I set a target, done. And if it's set up again I'll re enter but you know I think holding on for ... I suppose the other danger is not selling when we're at perhaps a target zone. I mean, sure a price might go higher; but kind of that fear hope grid. Kind of the emotional trifecta will start to potentially influence what you do or what you don't do in this case. You know you might hope on for more profits. Again, keyword there is hope on and maybe you get scared. You know going the other way, as price makes new highs; you've got a little bit of profit and you cash out early. But it's nowhere near where you thought it would go to. So as you said earlier, I want to know where I'm getting in if I'm right and where I'm getting out if I'm wrong. Sort of out if I'm wrong and out if I'm right.
So I'm setting up a target. I always have a target of where I think price will get to. When price is close to that, that's when you're gonna cash out. But between where you're getting out if you're wrong and where you're getting out if you're right; for me there's nothing to do ... just because price is at new highs is no reason to either take action or not take action.
Sean Donahoe: Absolutely. And you know it's never ... I mean, it depends on your strategy. If your strategy is hold and maximize your profits, understand where the turn around is; able to read the chart and say, "Okay we've confirmed now that this movement is over, okay now the time to take my chips off the table." Me personally, when I'm doing stock ... actual trading stocks rather than what I do with options, which is to find targets; I will look for the confirmation. I don't want to get out early, I look for the confirmation that the move has finished. Which means if you're thinking about it as a rise and an arc, I wait until it's curved down a little bit; that's my confirmation. It's like, "Oh okay you know what, I'll take my chips off the table." That's fine. Rather than trying to do it too early in case I've missed .
Phil Newton: It's funny you mention that Sean because I kind of dipped my toes ... As you know, I dipped my toes last week into day trading. I had more time than I liked, it wasn't doing it with it. So I thought I'll do a little bit of day trading. And I used to ... I still like scalping the open on stocks and funnily enough, with stock options with my main style of trading; I set targets, when I'm there I'm out. Clinical. End of story. But then when I was scalping stocks, I found I reverted to my old strategy; which is I'm trying to ride the way, the opening bell. The influx of momentum. And just like you were describing, I'm looking for more of a trailing stop type of strategy. You know when the momentum has kind of exhausted, I'm out. So from that point of view it's more of a trailing ... I'm bringing in the mental stop so when price turns around, that's when I'm gonna get out. Rather than set any specific targets. And just trying to wide that wave of the opening bell.
You know and that's very profitable. I'll also add that it is very stressful and I decided why I stopped doing it in the first place. But honestly, I'll tell you what my blood pressure was through the roof for a week. It's profitable but again you've got to come back to what are your preferences? I've realized why I stopped doing it. But yeah, trailing stop. So maybe that's your strategy and that's okay. Again we keep coming back to this default of you've got to do what's right for you as an individual trader. You know if you're strategy, part of it is trailing stops then yeah, do that. If your strategy is targets, which is like what I do; then very clinically get out at target and don't worry about what might happen next. You'll never go poor taking profits as I like to say.
Sean Donahoe: That's very true. And it's funny because when I was ill with pneumonia, which is funny it's the most ill I've ever been. I was almost down for almost but I gained the opportunity ... And I thought while I've got more time on my hands while I'm recouping; and I'm sat there basically in bed scalping as well. And I'm like ...
Phil Newton: While my body's not at a hundred percent, I'll see if I can scramble my brains while I'm here and I'll day trade.
Sean Donahoe: Yeah basically, in a way. And I'm thinking, "Okay I'm sat here, bored." I'm itching to do something. "What shall I do?"
Phil Newton: That is the danger. Yeah. That is the danger.
Sean Donahoe: I'll go scalp some cryptocurrencies and made a lot of money, don't get me wrong. I made a lot of money, especially with all the volatility and all the big moves that I'm watching. It's like, "Okay I'll scalp that. I'll scalp that." And I'm realizing I'm stressing myself out. Now I can't sleep. And I'm doing this on top of a weakened immune system where I'm coughing and hacking my brains out. And I was like, "This is really a stupid bloody thing to do. This is what they say about idle hands."
Phil Newton: I can imagine that scene ... what is the ... the scene at the ... the cartoon, the Disney cartoon version of Alice in Wonderland, where you've got the Cheshire Cat just enters the scene and is like smiling faces and psychedelic swirls going through the air. And animals appearing and reappearing. You know what I mean? I can imagine that's you, you're hallucinating. "I know, I'll trade crypto. Just for a laugh."
Sean Donahoe: I'll do that, yeah. With the amount of medication I'm on, I'm scalping crypto; which is like just everything counter to a lot of the .
Phil Newton: It's insane at the best of times. I mean the volatility. I mean if you can handle the rollercoaster, I mean I keep looking at it and I think you should have a little dabble there but you know what; I just like my stress free lifestyle. I do like to put my trades on and then go and have a coffee and go and do something. I do practice what I preach. Most of the time, I'll add; I do like to go and do something. But as you said, idle hands. What's the full phrase on that? Idle hands make light work. In this case, maybe idle hands should not be kept busy when it comes to day trading.
Sean Donahoe: Yeah. Obviously, idle hands are the devil's tools .
Phil Newton: I suppose we found a new ... kind of an extra bonus thing that we were just talking about. Just by accident with our musings. Trade within your ability and capabilities. I don't want to day trade. I can, and you can; we can do it very well but it doesn't suit our personality. I mean don't get me wrong, I did it for many years. But these days it doesn't suit my personality. I'd rather be doing something else with my time than trying to see what score I can get called blood pressure. And I do not want ...
Sean Donahoe: Oh look, new high score. I'm in the top ten.
Phil Newton: I don't want a new high score on my blood pressure. I'm of an age now where that starts to become important.
Sean Donahoe: Two hundred over one eighty. There's the name, AAA on the . Dear me. Terrible, terrible.
Phil Newton: Trade within your means. Interpret what's right for you as a trader. And just because someone else is talking about day trading and how much money they're making in the first open and bell; and again, there's plenty of people ... I know some very good traders that do that, but if that's not right for you or you don't have the time, the ability, the capability, or the desire to do that; then don't do it. Just don't do it. Find something that suits your personality. What I'm really focused on more than anything these days is having a lifestyle. And do all of my business activities around the lifestyle that I want. Rather than most people do the other way around. They think, "Hustle, hustle. Work, work, work. Grind, grind, grind. And life? That's for other people."
I would rather have the life and the means to enjoy that rather than just trading for twelve, fourteen, sixteen hours a day. Which when I was twelve years a country trader, it's a twenty-four hour market. You can literally sit there all day, everyday, twenty-four hours a day, five days a week should you wish to. I suppose with Bitcoin these days, seven days a week it's open twenty-four seven. It's easy to sit there like a zombie.
Sean Donahoe: It is. And you know that was my thinking because I wanted ... I had an idea. And this is how all this stuff kind of stuck. Because I'm sat on my hands, loaded up with every ... like NyQuil and ...
Phil Newton: Red pill, blue pill. Yellow pills, pills. Uppers, downers, lefters, righters.
Sean Donahoe: Indeed. No and I had this idea that I wanted ... "Let's see if this will apply to the crypto market. It's an interesting little strategy I came up with for scalping." And then it just led to three or four days of that and I'm realizing, "Oh my God. What am I doing?" It's executing an idea and ...
Phil Newton: We all do it.
Sean Donahoe: Get into it. Everyone's been there but we're always testing ideas and things like that. Phil's actually ...
Phil Newton: You've got to validate it.
Sean Donahoe: ... on a case study he's running right now.
Phil Newton: I'm blasting futures at the moment aren't I? I mean trying to find the blend of trading ... which is why I was scalping stocks last week. I just found it was too intense for what I want so I'm scalping stocks and I was semi swing trading; short term swing trading on index futures. And I want that low maintenance experience so it's not time intensive. And the scalping the open and bell I found it was too much time invested. But yeah, the index futures are doing exceptionally well in the current market environment Sean because guess what? The markets only go up. And I'm on it all the way.
Sean Donahoe: Funny stuff, isn't it?
Phil Newton: Ring that bell. Ding dong.
Sean Donahoe: We might actually put a course together of what Phil's doing right now just as a beta.
Phil Newton: Yeah. It's simple, it's low maintenance. I can do it from my mobile phone if I have to pop a trade on, I know what I'm doing at the beginning of the day. Before the day starts. It's low maintenance, that's what I want. And it's perfect. It's making money, that's all that matters.
Sean Donahoe: That's true.
Phil Newton: That's all that matters with any business.
Sean Donahoe: That's awesome. That's awesome. So okay. What we're gonna do now is move onto the next one, which is market pundits making forecasts are always right. My lord. This could be bullshit of the week.
Phil Newton: Because Krammer's famous for getting everything he says right isn't he?
Sean Donahoe: Oh Kramer, yes. Jim Kramer, yes. Krammer.
Phil Newton: Jim Kramer, Krammer. I like Krammer. I like spelling the word double m.
Sean Donahoe: Yeah there you go. That's funny. But yes, so many market pundits ... now here's the ... a lot of market pundits, they have expertise.
Phil Newton: Hey nothing against Jim Krammer. Nothing against that at all.
Sean Donahoe: Exactly. They've got experience, they've got knowledge. They might be specialists.
Phil Newton: And they're good TV personalities. They're entertaining. I mean Jim Krammer, when he goes off on rant; my, that's a rant and a half.
Sean Donahoe: He's got his soundboard, he's got his baseball bat. He's got all the other ...
Phil Newton: Secretly, I'm a little bit jealous. I've got to admit.
Sean Donahoe: He's a good personality. He's a great person on TV .
Phil Newton: He is very entertaining. But he's not always right, I think is the point. Yeah.
Sean Donahoe: Yeah. Thing is, do your own research. Have your own awareness. It doesn't matter what the expert says, they have their specific way of trading; their ideas that they're espousing. It doesn't necessarily mean whatever they're talking about, even if they're right or wrong; it's gonna suit your particular trading. Okay? Or ...
Phil Newton: Suit you sir. Suit you.
Sean Donahoe: Indeed. Suit you sir, suit you. But ... what the hell was that from? That was Harry Enfield wasn't it?
Phil Newton: It was ... quite possibly. We've actually left the eighties and got into the nineties now with our Harry Enfield thing.
Sean Donahoe: Yes. A British comedian.
Phil Newton: British comedy at it's finest.
Sean Donahoe: Absolutely. But yeah at the end of the day, a lot of these guys might be espousing ideas that are actually counter to what they're doing. Maybe they've got the other side of it.
Phil Newton: They're passing opinion.
Sean Donahoe: They've got a platform where they want everyone ... whatever their idea is. And this is kind of nefarious, but it has happened where people have espoused a certain idea publicly with a big platform that has thousands or millions of viewers.
Phil Newton: Millions. Millions of viewers in some cases.
Sean Donahoe: That are trading these ideas that are coming out. And they're actually on the other side of it counter to what they're espousing. There's actually a very good, famous example and I'm gonna be careful what I say. There was a former pundit .
Phil Newton: Well I can talk on it if you want.
Sean Donahoe: Well I'll go through this one but I'm gonna be careful about what I'm saying. The waves were changing and people who can translate that without me being literal, I'm gonna have to be figurative here; a little bit cryptic. There was a guy who was on Fox News who was espousing a certain company and bigging them up. And here's the thing, he was actually paid by that company to espouse that company to boost the stock.
Phil Newton: a dark alley was involved. Shocking.
Sean Donahoe: How unusual is that?
Phil Newton: Shocking.
Sean Donahoe: But again, got found out and they kicked him off the show. That was ... allegedly. And I'm gonna put that in air quotes. Allegedly, this was what happened. And it's happened several times over several years with different pundits.
Phil Newton: It has indeed. It happened in the UK.
Sean Donahoe: Yeah, you've got a story.
Phil Newton: Yeah the Daily Mirror in the UK something similar happened, which is a newspaper. And they had literally just two guys were touting stocks over the weekend on the ... they were buying stock on the Friday, they were touting it over the weekend in the Sunday edition; and then when everyone jumped in on the Monday, the public as the markets opened; they were on the other end. Or maybe a few days later after the initial surge of buying or selling it happened. They were exiting because they were basically what's known as front running and giving false tips. But again, not unsurprisingly; that's illegal.
Sean Donahoe: Not unsurprisingly. But it happens.
Phil Newton: From what I can only imagine is very obvious reasons.
Sean Donahoe: Yeah, yeah. Dear me.
Phil Newton: But yeah it's the same thing. They're doing something very different from what they're talking about. So yeah, market pundits; making forecasts that are always I think ... just to bring it back to circle. I think we've got to ... don't take what people say literally I think is the broad advice here.
Sean Donahoe: Do your own homework.
Phil Newton: Because we can't give advice. The suggestion is don't take things people say literally. I mean we constantly talk about ... and even the things we're doing, don't take our word as verbatim. Maybe we talk about a particular stock or an idea or an opportunity; use that just as a way that your awareness has been raised. "Well if they're looking at it, maybe I should have a look at it." It doesn't mean that you should jump in both feet first blindfolded and close your eyes and hope for the best. It means that, "Hey, maybe I can investigate it too." Note the wording. Again we're being very fussy here. Investigate it so you can see if it's right for you. Because not every trade is right for everyone. Maybe your awareness has been raised and, "You know what I actually like the look of this." Maybe you're gonna do something different because you're trading style is different to my trading style, which is also different to Sean's trading style.
I mean sure, there's lots of overlap and it's very similar; but we might approach the same trading opportunity slightly differently because we've got a different viewpoint or a different expectation or a different target or something slightly different. It doesn't mean that one's right and one's wrong, it just means that we want to do different things. So I think the best way to use the TV commentators and the pundits is to think about them like your outsourced research and development department. They've made you aware of an opportunity, it's now you and you alone that has the opportunity to kind of put the seal of approval on it or disregard it and look for something else.
Sean Donahoe: A ping on the radar is the way I use it.
Phil Newton: Bing.
Sean Donahoe: There you go.
Phil Newton: Periscope up.
Sean Donahoe: Hey if you need those blue pills you were talking about earlier on, that's absolutely ...
Phil Newton: I knew you were gonna go there. I knew it.
Sean Donahoe: Anyway with that being said .
Phil Newton: ... put the pressure in, don't you forget it.
Sean Donahoe: And there you go. Dear me. Okay, let's rock on before this gets even worse our of hand.
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Sean Donahoe: So rebel trader tip of the week. Okay. And kind of inline with what we were just talking about .
Phil Newton: Don't mistake blue pills for smarties.
Sean Donahoe: Yeah there you go.
Phil Newton: They've not got the answer.
Sean Donahoe: Dear me. I'm gonna leave that alone. I could take that way further than it's probably allowed, but anyway; what are your main stresses with trading? We were talking about where we had time on our hands and we started a little bit of day trading myself and with Phil. And again, we talked about how it raised our stress levels. How it's because you're committing big chunks for those small moves. And again, we're used to it and we still get stressed out.
Phil Newton: It's still stressful, yeah. It's still very stressful, yeah.
Sean Donahoe: So what are you doing right now that has a detrimental effect on your health? And like I said, I was doing something really stupid. I was exercising .
Phil Newton: While you were already ill I might add. Yeah.
Sean Donahoe: Yeah, exactly. I was already very much immune compromised, I was ill. I was loaded up on every narcotic I could get my hands on legally. And at the end of the day ...
Phil Newton: So you're trying to tell me that your impairment was judged? Your judgment was impaired even?
Sean Donahoe: Okay.
Phil Newton: I think I've had too much of the whiskey today.
Sean Donahoe: You've had some of my pills. But at the end of the day, again; this is raising my stress. Even though I was, like I said; trying to do and develop some strategies for our students here . But it's still very, very stressful. Added even worse detriment to my health, I wasn't sleeping. And I'm like, "Well this is bloody ... okay no. Cancel this right now." I had the logic and the wherewithal to say, "You know what? This is causing more stress." Not that ... and it's funnily enough, it's very strange because again, both Phil ... I mean Phil was twelve years a day trader; he was stressed doing day trading again. I was stressed doing it.
Phil Newton: I've been very used to day trading, yeah.
Sean Donahoe: I can't say anyone's more immune or should be immune to this than Phil but again, it was just enough of, "You know what? This is so counter to what we want as a trader." And your brain doesn't stop. Your brain doesn't stop questioning your positions, your decisions, the amount you've put on. Is that right? You know, you're continuously analyzing. And while you're continuously analyzing, it creates stress. That releases all the hormones in your body that allow ... that keep ... it's everything from adrenaline ...
Phil Newton: Not pleasant to say the least.
Sean Donahoe: Dopamine, oxytocin. You know oxytocin levels.
Phil Newton: The extra screen time was what I was bothered about. There was one or two days where it was like, I'm now locked into his trade and I felt the need to sit in front of the computer; which is ... could be antithesis to everything that I'm about these days with trading. I do not want to be in front of these . I can find many other things to do than be in front of the computer. What I found was that I ... on one day in particular, I was there all day from market open to close. I mean don't get me wrong, I stepped away and I was doing other things; but I couldn't stop checking the price. And it's like I just don't want to do that. And that's when the ... it was a horrible experience.
Sean Donahoe: I had to break myself off. I bought myself a VR headset and what I did is I deliberately with the time that I had on my hands ...
Phil Newton: Like the minority report's trading look like you're ...
Sean Donahoe: Well actually I had tried to trade in VR.
Phil Newton: That would be cool, that would be awesome.
Sean Donahoe: There's a thing called Virtual Desktop, which allows you to bring your desktop into virtual reality. And I actually did place a couple of trades with that. It's bloody ridiculous .
Phil Newton: I think you've got to do it ... If you've got that equipment, you've got to have a little go at it. It'd be rude not to.
Sean Donahoe: But my main was to distract myself so I'm not doing extra trading that I shouldn't be doing. I put myself in VR and then I got addicted to that for a little while because I was, again; something that caught my interest and .
Phil Newton: It's new and shiny, yeah.
Sean Donahoe: It distracted me away from being ... sitting in front of the computer and doing the actual trading side of things more than I should be. But again, I recognized that it had a detrimental effect on my health and my stress levels like you said. But a lot of traders out there are still glued to screens while the markets are open and they've put trading too high, too big of positions outside of their comfort zones or ... I mean like a lot of crypto traders; they're putting everything in one bundle.
Phil Newton: And like you Sean, you were trading when you were high by the sounds of it.
Sean Donahoe: Yeah pretty much. Yes, yes. A little bit.
Phil Newton: Which is a double no no.
Sean Donahoe: A double no no. Don't do that. Don't do that. Yes. But loaded up on every bloody pill and pain pill ...
Phil Newton: Uppers, downers, lefters, righters.
Sean Donahoe: Yes indeed. Yeah don't do that as well.
Phil Newton: I think to bring it full circle that, I think what we should just acknowledge here is that just because we've been doing it a little bit longer than the next person; it doesn't mean that we don't go through the same experiences. Now our tolerance level is probably higher than a new trader but we still have the same experiences as everyone else. So how do we get over it? Firstly we've got probably the experience to recognize that, "Hey I'm not enjoying this. This isn't a good thing." So what we did is because we don't normally do it, we stopped doing it. That was the first thing that we did was recognize that we are doing something out of our normal routine and then we stopped doing it.
Now if it is part of your normal routine and you're still having these experiences, how can we recognize that we perhaps got a little bit of a problem and how can we fix it? As the question said, if you're unable to sleep at night; that's the first thing. If you're tossing and turning, you've got sweaty palms; feeling the need to check the prices constantly through the day. And all those kind of emotional reactions. The easiest and quickest thing to do regardless of the emotional response that's causing those sleepless nights is reduce your position size. That's the single biggest thing that you can do that will ... it won't eliminate. I can't say that it will. But it will reduce the impact.
Think about it like the volume dial on those emotional responses. Right now the volume dial might be all the way up, you've got the noisy neighbor type syndrome and you've got the bass "Boom, boom, boom, boom." You know, pumping through the walls if you like. Now just imagine reducing your position size is like turning the volume down. Yeah there's gonna be ... the noise is still there but you're gonna turn it down to the point where you probably don't notice it as much or at all. And that's how I like to think about the position size. So if you reduce that position size, you reduce that emotional response and reaction down to tolerable, manageable, or even ignorable levels. Just like you might have the noisy neighbor, if they turn the volume down; suddenly it's just a dull noise in the background that you can tune out. But most people, most times; that's the easiest, simplest, quickest thing that can be done to enable you to get past the emotional response. And more importantly, to get sleep at night because as we all know; having a good night's sleep is an important thing.
It really is important. So that's the easiest thing you can do. For the most part, that has a knock on effect on a lot of other issues, side issues, related issues around the emotional reaction and responses for trading. For me personally, that was the single biggest thing that contributed to starting to see consistent and scalable success was to reduce my position size.
Sean Donahoe: Love it.
Phil Newton: Ironically, trading more frequently has helped. We've talked about this before in the past, reduce your position size and trade more frequently. And when I say more frequently, have a greater number of a currencies and start using a portfolio type of approach; which is what I advocate. And, by doing that you're not stressing over the one position and hoping that that one position is gonna be the one that makes you all the money. Now you're focused on managing the portfolio, by trading more occurrences and more frequently.
You don't have to be getting glued to the screen. I advocate one a day, and at the end of the month you've got 20 positions, you've got a rolling portfolio of 20 to 30 positions every month. That's a fairly manageable experience. For most people it doesn't take that long to do it. But then the whole point is that you're looking at the portfolio as a whole and managing the business profits like you would do in the real world, rather than hoping that you sell that expensive line of shoes that you bought, you bought all the stock and piled it all into one product. And you're hoping that you're gonna get a rush on that product. You don't expect that to happen in the real world, so why do we expect to happen in trading? So yes, reduce your position size and ironically trade more frequently.
Sean Donahoe: Love it. Okay so with that being said, move on.
Automated: If you've got questions, they've got answers. Sean and Phil dive into the virtual mailbag for this week's rebel traders quick fire round.
Sean Donahoe: So rummaging around in the mailbag, this is the quick fire round. I'm gonna fire this first one at you here Phil. Do 80 percent of options really expire worthless? I heard this phrase the other day.
Phil Newton: I was just gonna jump in quickly there. To stay in theme and context with the name of the show, yes.
Sean Donahoe: There you go!
Phil Newton: That's the literal answer. The literal answer to the question is yes.
Sean Donahoe: I was actually gonna add the qualifier on here so .
Phil Newton: That's why I was trying to join in quickly.
Sean Donahoe: Cheeky bugger. But basically he heard that said recently and wanted to know why that is, if it's true.
Phil Newton: Well the market makers ... as I understand such things, the market makers have to provide ... if you imagine around the current stock price, there's like a ladder. Up and down from the current stock price. The market makers have to provide ... exactly, the availability. So you set the strike prices, maybe let's just say that there's ten strikes above the current stock price and ten strikes below the current stock price. And every time that the stock moves, say it goes up five points, then you've got to make available another ten strikes above the current stock price and there's now already 10 strikes available below the current stock price.
'Cause they were already there. So as the stock ebbs and flows back and forth, new strikes have to be available. Again, very simplistic example just to illustrate the points. So the point is we've got more than we actually need, so ergo ... a lot of options will expire worthless because we just need them available. That's my very simple ... there's more to it than that, but I think that's the easy answer if I'm gonna be honest Sean.
Sean Donahoe: Yeah, no that's pretty much the simplest answer I've heard in regards to that. And also, a lot of people are buying these options and they're wrong about the position. Remember we say a lot of people going into the markets are gambling. And they're gambling with bad information. So a lot of them are worthless. They're looking to get a certain strike price and it's not got there. A lot of options sellers in the market who are right, they're taking a lot of risk or selling those options but depending on their strategy, the position and the strike price .
Phil Newton: Hey that might be a good thing.
Sean Donahoe: Yeah. They profit, they get their premiums when ... you know say .
Phil Newton: When they expire worthless, yeah.
Sean Donahoe: When they expire worthless.
Phil Newton: And now as the buyer, that's your disadvantage; just thinking of what you were saying, but as the seller of the options that's an opportunity. If eighty percent of options actually expire worthless, then that is ... that's the whole argument for being an options seller. Or one of them anyway.
Sean Donahoe: It's one of them. And it's one of the things that I do. I sell a lot of options as well.
Phil Newton: Yeah it's part. . It's a part of our calorie controls trading strategy.
Sean Donahoe: Indeed. But again, one of the advantages; yeah, most options do expire worthless. Now, for those twenty percent that don't; that's what we teach a lot of people to take advantage of is to maximize the probability of that success based on a very powerful and time tested, rigid strategy that allows you to capitalize on that twenty percent margin that do expire and are profitable. That's what we look for the most part. But again, eighty percent do expire worthless yes. And the simple answer is yes. So with that being said, what's the next question in there?
Phil Newton: Well Sean the next question that I've got on my little notepad, which I was taking notes earlier while we were discussing this; is with the Dow crossing twenty-six thousands, what's really driving this trend? And I've got to admit I kind of want to know the answer to this myself because I was asking myself this very question this morning. So with the Dow ...
Sean Donahoe: There could be a lot of ... you could point to a lot of things. You can point to a lot of stuff and there's a lot of momentum. A lot of optimism right now. We were talking in the happening now report about the economy, the tax breaks, the government shutdowns, the economic policy of this current administration.
Phil Newton: Take your pick.
Sean Donahoe: The fact that the breaks have come off. There's a lot of things driving this momentum. You could talk about the ... again, tax, the trade deals that are being put in place. You can talk about how now that money's is flowing and coming back into the country a lot of companies are telegraphing that they're giving bonuses. I mean Disney just announced yesterday ... actually at the time of recording yesterday it was Tuesday; that they're giving all their staff big bonuses as well and raises.
Phil Newton: We're also in the midst of another positive earnings season, which seems to be as good if not slightly better than the last earnings. And ...
Sean Donahoe: Yep, so there's a lot of exuberance.
Phil Newton: Yeah. I mean there's ... I personally ... sorry Sean I cut you off there. I lastly, I was gonna apologize for it; then I thought, "Well, why break the habit of a lifetime?" I don't care. It's going up.
Sean Donahoe: That's what I was gonna say. It really doesn't matter .
Phil Newton: As we keep saying Sean, we go back to the only and true version of Ghostbusters from the eighties with Dan Aykroyd as ... I can't remember what his character's name was now. But Dan Aykroyd's at the top of the tower near .
Sean Donahoe: Ray.
Phil Newton: Yeah Ray's at the top of the tower, and they've just found the secret staircase in Dana's apartment. And he goes, "Hey, hey, hey; where do these stairs go?" And the response is, "They go up." But that's it. The stock market's going up dude, buy the dips. That's all we need to do. I don't ... the fact that it's gone through 2016, who cares? It's going up. Get on that freight train. It's undeniable that at the moment the indexes are going up, which is just an average representation of a basket of stocks. And at the moment, that basket of stocks is going up. Now individual stocks, some of them are going down, some of them are going sideways. There's many, many stocks that are not in the index. Some of them again are going up, down, or sideways. Some of them are doing all of the above.
I don't think it matters. I think if you can stop asking unnecessary questions that ... knowing why the market's are going up is not gonna make me a better trader for my style of trading. And arguably, for any style of trading. Unless you're a fundamental trader. So if you're doing any type of technical analysis, then why does it matter? It really doesn't matter. And for the most part, knowing after something has happened will never matter because the stock market is going up. Why has it been going up? Notice the wording; past tense. It really doesn't matter why it has been going up, what you should be focused on is will it continue to go up? That's how we're gonna make money as a trader.
So trying to ... predict's a wrong word but forecast, analyze; have the viewpoint that the market's or the stock or the opportunity will continue to do what you expect it to do. Either go up, down, or sideways. And you can profit from any of those three ways. That for me is more important than why something happened yesterday. I don't care what happened yesterday, I'm focused on what's gonna happen tomorrow. And Mr Rantipants has now left the building.
Sean Donahoe: Okay well hold on because I've got one more question for you. And why do traders care about implied volatility rather than historical volatility? Now I need to put a qualifier in here because I need to add to this question.
Phil Newton: Because you know I'm gonna go with the flipping answer first. No one cares.
Sean Donahoe: Exactly.
Phil Newton: No one really cares.
Sean Donahoe: But the thing is, why do option traders concern themselves with implied volatility rather than historical volatility? And the reason I'm putting this question to you is because I know you have a really great answer regarding the difference between the two. So I'm gonna let you take this one.
Phil Newton: Yeah it's linked to your answer to the first question actually. If eighty percent of options expire worthless, again just generally speaking; then as the option's seller, that's potentially an advantage. So what's an added advantage is trying to sell something that has a higher value. So a lot of option traders will look at implied volatility to try and gage where the implied volatility is high or low relative to itself because implied volatility is a large factor in how the options are priced. So if the implied volatility is as high as it's ever been in the last twelve months, then those options might be priced expensively. Therefor it might be advantageous to sell them because you can sell them at the high price.
Conversely . Yeah conversely, if price is as low as it's ever been in the last twelve months it doesn't necessarily mean you're gonna be a buyer but they're inexpensively priced compared to the last twelve months of their pricing history. So that's the nerdy version of that answer. So it begs the question, "Why is implied volatility important compared to historical volatility?" Now history, as we already suggest; history has already happened. What implied volatility suggests what might happen in the future. And the one thing that we know about implied volatility and the possibility that something might happen in the future, is that it's mean reverting. Meaning that it's usually exaggerated. Compare it to the ghost of Christmas past, where it look backwards; versus the ghost of Christmas future in a Christmas Carol, which looks to tomorrow. And looks at the possibility that things might happen.
And trying to explain this, I usually like to say, "If I was to say that my wife's got a fat bum." She says to me, "Phil does my bum look big in this?" And you can probably gather, my knee jerk response is to always to go with the comedy answer. Well let's just say that I say, "Yes darling. Your bum looks particularly large in those jeans." From the outside looking in, you'd be probably nudging the person next to you with your elbow to say ...
Sean Donahoe: Hold on, what's gonna happen now?
Phil Newton: He's gonna get it now. If I have to say that to my wife, there's a significant possibility that I'm gonna get a slap in the face. Cheeky so and so. Slap. So that's high implied volatility, so that's a rather stupid example; but it's a high implied volatility situation. I've just caused an argument unnecessarily so with my wife that might just result in me getting slapped in the face. An undesirable outcome for me I might add.
Sean Donahoe: Well you never know, you might like that kind of thing. We don't know.
Phil Newton: It depends on what you're into.
Sean Donahoe: Yeah.
Phil Newton: But you see my point. So the situation ... what we know is it's not happened yet. I've not yet been slapped in the face have I Sean? At this point in our story.
Sean Donahoe: Indeed.
Phil Newton: All that's happened is I've said that my wife's got a fat ass. And she might just look at me and give me a knowing ... 'cause you don't know the relationship that I have with my wife. So it could be that it's just something that we have between ourselves. And she goes, "Oh you silly so and so." And the implication that I might get slapped in the face poof, disappears. It reverts back to normal, which is I'm not going to get slapped in the face at any point in the immediate future.
Sean Donahoe: Until you open your mouth next time.
Phil Newton: Until I open my mouth next time, yes. But that's what implied volatility is. It's the suggestion that something might happen. And when that suggestion, that possibility disappears; because it's always over exaggerated. It will revert back to normal. So that's why option traders are usually interested in implied volatility. And usually when it's exaggerated; again, a real world example might be Apple is releasing a new ... the iPhone Zed or whatever the comment out. You've just had X, whatever's gonna be the next one. But the excitement, the possibility, the anticipation that the new product of Apple is coming out puts the pricing of the options higher. The expectation that something could happen on the announcement of the new product is exaggerated.
So when the announcement happens that, "Yes we've released the new iPhone Zed and it's pink." "Oh was that it?" "Yes." And the camera's got an extra ten mega pixels on it. "Oh great. So it's slightly better but mostly the same."
Sean Donahoe: There's a brand new poop emoji. That's it.
Phil Newton: Yes, exactly. But the point is is the excitement, the anticipation that something could happen will revert back ... "Oh it's just a new iPhone. It's got a slight modification. It's slightly better but it's mostly the same." So everything goes back to business as usual and that implied volatility reverts back to normal. And as the seller of the option, that means that you've sold at the high price and you can close for a profit at the slightly lower price because the implied volatility has contracted without the stock ever moving. Well it might move, but you know what I'm saying. Usually, that's what you trading in in this situation. So that's why it's important. That's the opportunity there.
Sean Donahoe: I love it. That's perfect. That's a great answer.
Phil Newton: That was a little mini master class in options selling and how we can do it.
Sean Donahoe: Abso-damn-lutely. Giving the away the farm there, but that's what we do on this show. So with that being said, let's rock on.
Automated: Don't forget, if you have a question you want to ask Sean and Phil just go to TradeCanyon.com/rtquestions and your question may be featured on a future show. Uh oh, what's that smell? It's time to call out the wall street shenanigans, mainstream confusion, and outright hi jinks and hokum of so called experts. Yep, it's time for bullshit of the week.
Sean Donahoe: So I'm trawling the news yesterday and just looking at end of day, seeing what's going on, who said what, who did what, who tweeted what; and I stumble across this gem.
Phil Newton: Who spot what ; I know the news sites that you're frequenting. You want to know what handbags is the latest on vogue fashion. You're looking to see if you can get your size twelves into those latest stiletto high heels that you've seen your eyes on. I know what you get up to in the weekend Sean. But what caught your eye?
Sean Donahoe: My secret is out, there you go.
Phil Newton: Hey there's nothing wrong with it, nothing wrong with it.
Sean Donahoe: But anyway, at the end of the day I came across this one. This one is kind of one that's been on my radar. Again, I'm a sci fi nerd and Google had the X Prize. Basically putting up a giant cash windfall and support of private companies who want to go to the moon. Basically there's a lot of projects out there, private space companies that have the intent to go put something on the moon. That's part how you claim the X Prize, if you land something on the moon. And it's been like a decade long thing and the deadline was March 31st. Basically, one of these teams had to be launched and land on the moon by then. So here's what ... So sounds great, fantastic. Lots of companies are doing this and everything else in their ... lots of projects are doing this.
Phil Newton: I was gonna say just for reference, there's other prize that have got you into space. And that's happened. I think SpaceX and Richard Branson bought the ... I'm just trying to show off my little snippet of knowledge. I think Richard Branson got involved so space flight is now possible. So these are past prizes. But what you're talking about is to actually get something on the moon.
Sean Donahoe: Yeah.
Phil Newton: And not just into space.
Sean Donahoe: Absolutely. And here's the thing. They canceled this ten year competition. Now you might be asking, "Why did they cancel a ten year competition?"
Phil Newton: That's a funny thing that Sean, why did they cancel?
Sean Donahoe: Well here's the thing, no project is ready to go and because getting to the moon is hard.
Phil Newton: Is that what they said?
Sean Donahoe: And I just want to underscore that line. I mean, getting to the moon is hard.
Phil Newton: Really? You're gonna send a shuttle to the moon and you've decided to cancel it because it was too difficult?
Sean Donahoe: Yes.
Phil Newton: Right.
Sean Donahoe: Now here's the thing, imagine '69 with the computers that were as basically powerful as a Commodore Vic 20. If you're that old to remember that.
Phil Newton: It might as well have been a blue project. For all British listeners.
Sean Donahoe: It might as well have been. Compared to the technology that we have now, they did it with nothing but a few very smart people with ... if you haven't watched them ...
Phil Newton: And some paper. Some very clever people, lots of mathematics, and blowtorch, welding mats; you know the ... yeah.
Sean Donahoe: Yeah. They had an IBM super computer but it was back in 1969 ... or in the mid sixties. So how powerful really was that computer? Not really that powerful compared to what we have now. But anyway, at the end of the bloody day; yeah, okay none of the projects were quite ready for launching before the deadline. Google has said, "Okay, you know what? We're scrapping this. And we'll see how we can continue supporting these projects." In other words, all these companies now left in the lurch with whatever project they've got; whatever they were trying to do and now like, "Well bugger." Because getting to the moon is hard. I had ... I mean that's got absolutely bugger all to do with trading. It was under finance .
Phil Newton: That's like throwing your teddy bears out the pram or picking a ball up and, "Alright that's it, I'm going home."
Sean Donahoe: Pretty much.
Phil Newton: And I took the ball. Go home
Sean Donahoe: Exactly. So anyway it was on a finance site, it crossed my radar and I had to laugh at that so yeah, it was getting to the moon is hard. Yes that's why we've been for ten damn years. But there you go. Anyway, so there you go that is the bullshit of the week and that is the end of the show. Now please remember, this show is not free; it will cost you a five star review on whatever platform you're listening. Go to tradecanyon.com/rebeltraders, select your method of listening and please leave us a review. This is really ... it really helps us get this message and our content out to as many traders and investors just like you as possible. And we're already a top ten podcast in the business category.
Phil Newton: Thanks to everyone that's helped us so far, yeah.
Sean Donahoe: Absolutely. We are often times number one in the investing category, but help us stay there and help us maintain our dominance. So with that being said, anything else Phil?
Phil Newton: Yeah. I just want to interject Sean, I've thoroughly enjoyed today's show on a personal level, it's been absolutely amazing. I think we covered a lot of ground, we've had a little bit of a giggle; which as you know, is my number one priority in life is to enjoy myself. But we've also managed to impart some pearls of wisdom. Maybe just a different perspective on some potentially ... well not potentially, they were interesting topics. So yeah, I've had a great time Sean. Thanks for joining me today. But if you'd like to join us on Facebook or Twitter, you can get to us on tradecanyon.com/rebeltraders or the social media things are there as well. And to be fair, I'm excited for what we've got coming up in next week's show Sean.
Sean Donahoe: Well in this case we're gonna put on some long black trench coats, our shades; and we're gonna go a little bit of Matrix with a show called there is no spoon. So if you haven't ... that probably makes absolutely no sense, but if you tune in next week; we'll show you exactly what the hell we're talking about.
Phil Newton: Perfect.
Sean Donahoe: So there you go, rock on; and we'll see you next time.
Phil Newton: See you next time. Bye for now.
Sean Donahoe: Take care.
Automated: For more cutting edge trading advice and a free trader workshop to help you build a personalized trading plan, and to make smarter trading decisions go to tradecanyon.com now.
Automated: Futures, options on futures, stock and stock options trading involves a substantial degree of risk. It may not be suitable for all investors. Past performance is not necessarily indicative of future results. Trade Canyon incorporated provides only training and educational information. If you actually understood and listened to this, then that means you are awesome. Congratulations and well done. Notice, this product may contain nuts.

(Click the time stamp to jump directly to that point in the episode.)
[00:00:10] Show Introduction

[02:05]Sean: Okay, getting started and getting Bill Murray vs. Danger Danger Will Robinson, we are talking about what is being lost in translation. These are misconceptions, mis-ideas. Phil, you were telling me a story about being lost in translation with your little trip to the bank.

[02:28]Phil: This is what sparked it all off, wasn't it really? How things can be misconstrued and discombobulated. It started off with a comment from my mother last week. We overhead someone say he's a real stand-up guy. My immediate reaction was to say well, he never sits down? What they meant was he's a nice person. But why didn't they just say that? Or, is he a comedian, like Phil pretends to be every week? The thing that solidified it for me, I went into the bank to order a new cash card and get some cash. The girl says to me, how would you like your cash, and rather flippantly, I said I'd like my cash in my hand please. And she didn't find it amusing whatsoever.

[03:42]Sean: There's a difference between literal and figurative, and some people just don't get the sense of humor.

[03:45]Phil: I know that's not what she meant, but if she asked how would you like your cash denominated, it would have changed the question completely. My interpretation of her question was the theme of the show, lost in translation. This happens everyday. It is easy to misunderstand. Most people talk figuratively and you just infer what they're talking about from the context or what is commonly acceptable. But if you had to think about the literal interpretation, it has a very different potential meaning. In trading, it becomes an expensive lesson, rather than a humorous anecdote. What are your thoughts?

[04:51]Sean: I am the most literal person in the world. Just ask my wife and she will tell you. A lot of it, I think, is I'm very much an engineer, a scientific mindset. If you say something, that's what I listen to. If you give me a direction or a suggestion, I will take the words out of that with literalness, where a lot of others are figurative. I am very literal and it can cause a lot of confusion.

[05:47]Phil: But I think it's fun if you're aware of it. I know I'm the same way. But now you've got the awareness, you can have a lot of fun with it. It does amuse me. Should I answer this seriously? Or should I just take the piss out of this person?

[06:09]Sean: But there's a lot of misconceptions. What has been a literal or figurative translation of a concept gets buried and messed up and becomes a misinterpretation. Stock trading is like gambles. I've been guilty of this because it's an analogy, an easy comparison. I was gonna be a professional gambler in blackjack. I approach gambling like I approach trading. It's a business. It's money and resources put in and profit coming out. I'm looking at playing the odds in my favor. That is why I make a lot of those comparisons. In reality, there's a big difference between gambling and trading. The biggest thing, is when gambling, you are unsure of the outcome, but with trading, it's an art, it really is a business, and it's a mind game. It's you vs the markets and the people behind the other side of those trades. With the right mindset, skill, and everything else, you have the odds in your favor. While there's a lot of legitimate analogies from the gambling world, a lot of the comparisons I make are from a business perspective or probability of odds.

[08:17]Phil: If we think about how competitions are ran in gambling, it's always the games that do have potentially a statistically favorable outcome for the player on the assumption that you know how to play the game. Poker, blackjack, maybe craps, maybe baccarat.

[08:55]Sean: You're talking about Roulette and stuff like that.

[08:58]Phil: The one Bond always played.

[09:01]Sean: Oh that's baccarat.

[09:08]Phil: The point is, there are certain games with a statistically favorable outcome if you know how to play and give you an edge over the casino. Whereas all the other games, like Roulette, you play at your own risk. Most games are stacked in the casino's favor, even if you do know how to play. With the stock market, there are advantages that can be built in if you know what you're doing and how to interpret what we're looking at. That leads us onto the next part - the knowledge surrounding the game that's required to see some consistent success. You don't need a deep amount of knowledge, you just need to know small amounts exceptionally well.

[10:47]Sean: That's very true.

[10:53]Phil: I don't need to be a mechanic to drive a car.

[11:02]Sean: Yeah. With blackjack, the house has a very small edge. Usually it's about 0.5%, but with card counting you can push those odds in your favor, but you've gotta be in there long-term and the house has an infinite bankroll where the player doesn't. With poker, you're not really playing the cards, although they're not playing stupid hands against great players, which is a great analogy for trading. The casino itself has a rake, for every round or hand, they take a percentage out for themselves. That's how the casino makes money in that situation. Baccarat, it's about 50/50, like blackjack.

[12:04]Phil: As I understand it, it's a complex game.

[12:06]Sean: Baccarat is actually one of the simplest games out there. A lot of people have the misconception that baccarat - because James Bond plays it - it's complex. But it does have a very small house edge. 50/50, close enough. There's a lot of analogies that can be made there but it is a misconception that trading is gambling. It's not. It's a business, it's an art.

[12:37]Phil: You could also argue that if you've got a good idea, a business plan you've written out, there's a good plan you'll succeed. There's no guarantee, but a good chance because you've thought it out.

[13:04]Sean: You're applying a strategy. You've done your homework.

[13:11]Phil: Most people are aware of how to possibly run a business and there's this thing called the Internet if you don't. If you tried to start a business without a systematic approach, that could be compared to gambling. You're literally throwing money down the drain because you've not thought out what you're doing, you're just gambling.

[13:50]Sean: Trading stocks requires deep financial knowledge. I'd love to just put a nail right between the eyes of this one.

[14:01]Phil: I'm just a poor farm boy that managed to figure out which buttons to press and in what order. You don't need to know a lot. You just need to know a few things very well. You can say that about anything. Specialize in something. The highest paid doctors are the ones that have specialized. The least paid doctor is the house doctor, or the general practitioner. In some ways they're an expert at a little bit of everything so they can pass you onto someone who's more knowledgeable. But the big money's made when you focus on something and maybe go several levels deep. It's the same with trading. When you specialize in something, you're the expert in that something. It doesn't take a lot of knowledge. When I was going through all these textbooks when I first started out, I was particularly drawn to patterns. I'm gonna go into the geometric shapes, the charts. That's where I went with my research. I ended up focusing on consolidations and breakouts.

[16:33]Sean: Same for me. I'm looking at things like the AI side of things. That's where I go deep, but that's my background.

[16:43]Phil: You've got that skill set to back you up, whereas I never had that technical background. With your math/coding background, you can draw on your skill base you already had. Work to your strengths.

[17:12]Sean: Absolutely, but when I first came into this I had no idea, but I still became very successful rapidly because I had a good fundamental strategy that allowed me to filter through all the crap the get enough of a start many years ago. That then created a foundation to build on to increase my knowledge over time. If I had waited until I had developed an understanding of macroeconomics, microeconomics...

[17:39]Phil: Oh, yawn! Eye roll! Insert emoji!

[17:45]Sean: Exactly! If I had to learn all that before I started trading, I would have just dragged myself outside and-

[17:54]Phil: Shoot me now. But you can understand why it becomes quite difficult. The perception that you have to have a lot of knowledge can mean you put it off and you don't do it. Or you learn a small amount of something or a little bit of everything, and because you've got that generalization that we want to avoid, you can end up misinterpreting most things you're looking at because you're trying to understand everything. Whether in life or work or in sport, your level of comprehension is going to be vastly impaired by trying to understand everything. Knowledge-wise, go with what you're drawn to. Work to your strengths. Maybe it's trend lines for you and mac-d's for someone else. It was patterns for me. This links into the next one. Common interpretations, old adages, the things that everyone does that are set in stone.

[19:22]Sean: Buy the dips. You must buy the dip.

[19:32]Phil: As the kids like to say on social media, BTFD.

[19:40]Sean: Indeed, which makes me cringe and laugh at the same time, because we say this a lot. If you're in an uptrend, buy the dip. Here's the thing - everyone says buy the dip, but did you notice what I said? If you're in an uptrend, buy the dip. I defined the literal right there and the conditions to take that action versus just the general BTFD. Looking at this, you've got the have the understanding. What is a dip? You've got some interesting points in regards to this.

[21:13]Phil: You've got to determine your reasons. Buying the dip just because price is selling off is no reason to be a buyer. What if we're in a downtrend? Maybe we don't want to buy the sell-off.

[21:31]Sean: Buying the dips might be a bad idea!

[21:33]Phil: Buying the dip in a downtrend is not a great strategy unless you're a counter-trend trader and that is part of your strategy. But define what you're doing further. Buying the dip means a lot of different things to different people, and on face value it is pretty simple to interpret. But only right up to the point where you have to go and do it. And then you fall into the trap of how to execute. My first realization of this was when I was reading one of these thousand-paged tombs of a book on technical analysis. When I was working at Blockbuster Video at 18 or 19, sleepy Sunday morning, I thought, I'll take a technical analysis book with me, leafing through it for about the millionth time. All the advice in these textbooks says get long on the breakout or short on the breakdown. Bullish - buy the break up, bearish, on the breakdown of the consolidation. Regardless of the name of the pattern, that's all it says. All I can remember is that that was quite profound knowledge and thinking bollocks, what does that mean? No where had the author described how to do that. It seems simple on face value. The good news was though, it's a lot easier than it appeared to be. I asked the question how do I do that? What would make me happy? I wanted to know where I was gonna get in, how I was gonna manage my risk, my entry, my stop loss, my targets, and I wanted to know all of those things before I got into the position. Looking back, it took a bit of pain to get there, but it was very simple to add a pullback to the breakout. Magic formula. That helped me avoid the false breaks. The point I'm trying to get to is get specific in what you're gonna do. It was easy for me to buy the breakout or short the breakdown, but that didn't answer the question of how do I do that? How do I know exactly where to enter? Or when to get out if I'm gone wrong? Or get out if I made a profit? For me, waiting for that initial push beyond the boundary levels and then maybe dropping down to a lower time frame helped me figure out here's a pullback type of pattern. Then I started to define what the pullback was. Entry above the pullback high, stop loss goes past the lowest point of the retracements, and targets can be measured by the height of the consolidation. You'll notice I'm very specific with my definitions, which is what was needed to execute the big picture plan of buy the breakout, sell short the breakdown. That is how I avoided that getting lost in translation experience of buy the dip or sell the rally. We've got very specific requirements for every type of environment - uptrend, downtrend, consolidation, whether we're breaking out of a consolidation. Does that make sense, Sean? I kind of went Mr. Ranty Pants.

[26:39]Sean: Mr. Ranty Pants got his sandwich board out and got on his soapbox. It's all good. The other thing to put in - when you're buying the dip, you've got to have the awareness of your environment, but you've also got to determine the reason for that dip. Is this a correction in an uptrend?

[27:10]Phil: Has something changed? That's how we normally refer to it.

[27:14]Sean: Exactly. Is there bad news? Has GE, for example, mentioned they're going to be splitting up the company? Is that now a correction or a major bloody reset that's gonna continue for a while?

[27:26]Phil: On face value, that might be seen as a bad thing but someone else might think it's a good thing, long-term or short-term. It's that interpretation.

[27:37]Sean: We mentioned that last week. That could be an investment opportunity.

[27:40]Phil: How do you quantify that? What does it mean to you? That's the only person that matters. If you can define the objective and figure out how you're gonna take advantage of that. Maybe you see this isn't my opportunity today, how do we move on?

[28:09]Sean: And moving on, the next one is a cousin of this last misconception. Stocks that are down will rise again. Think about this. Sounds like something out of Terminator. At the end of the day here, we've seen major markets take major corrections. We've seen individual stocks and in cryptocurrencies over the last few weeks and a lot of people saying this is the opportunity to get in or buy the dip. It's an automatic assumption that it dipped and it's gonna come back up and push past it and breakout. That's a lot of assumption.

[29:05]Phil: You and I both know stocks only every go up!

[29:10]Sean: Indeed, yeah. Stocks and cryptocurrencies only ever go up, bro. But you've got to look at what is causing that momentum. With cryptocurrencies, China announced it's looking to ban both mining and trading of cryptocurrencies. That sent a freefall.

[29:29]Phil: Europe was looking at regulation of crypto-type instruments, I saw in this morning's headlines. There's that regulation, that tightening of the belt. Maybe this isn't a dip. Maybe something's changed. My whole viewpoint of technical analysis is until something new happens, the same thing's probably gonna continue. Buy the dip in an uptrend, sell the rally in a downtrend. Notice the qualifiers. Buy range lows. Qualifier. Short range highs. Buy the breaks of range highs. Short the breaks of range lows. There are the six things they're looking to do. The other two, the black sheep cousins, are the counter-trend opportunities. You can buy the sell-off.

[30:28] Sean: Which is short-term...

[30:28]Phil: I don't do it that often so I've gotta think how to do it. In an uptrend, you would sell the uptrend. In a downtrend you would buy the sell-off. If counter-trend trading is your thing, that's perfectly acceptable. I just prefer not to do it. Anyway the point is, when you've got that qualifier... GE is a great example. Things are changing. Yeah, sure, price has been in an uptrend at some points, just because it's selling off, it doesn't mean it's the buy the dip opportunity. What has changed?

[31:16]Sean: Basically it's awareness. What is going on? What is driving it.

[31:23]Phil: If nothing new is developing, whether it be a change in what you perceive as the trend, or is it something news driven as you were talking about earlier, Sean? What has changed, if anything? Just because a stock is down low doesn't mean it's dipping.

[31:54]Sean: The other thing is, a lot of people think this attitude that if a stock is on the downtrend, it's gonna rise again. That's a sure way to fall into a bull trap. We're seeing that with crypto. Something I was talking to a student with about this morning, it's topical. Right now, a lot of people are looking to buy into. The 10,000 level on Bitcoin, it's a logical stopping point. Bitcoin has been hovering around that and people are hesitant to get back in on the bandwagon. A lot of people are selling. A lot of people are buying in and around that, but right now it's in an established downtrend. You don't know it's a bull trap until it emerges, but now we've got enough data. With that information, where's our confirmation? It's giving you an awareness so you can say, now that this is evolving, what is happening and why and what can I do to profit from this? Now the counter of this, another misconception, is you've got to sell the high. What defines what the highs are and why? This is something a lot of pro traders laugh at, because just because it's at a high, what's stopping it from going higher? Where are you confirming there's a turnaround?

[34:08]Phil: Common strategies do look at 52 week highs, either to buy into 52 week new highs, or to fade it and get short. It comes down to your strategy and what are you trying to do? What's the environment? Just because we're making a new 52 week high, doesn't mean the market's trending.

[34:36]Sean: Exactly. If you look at a lot of these strategies, they'll tell you it's at a high, now it's time to sell to cap that in maximum profit. I know I've done this and I'm sure Phil has as well. We get out of a position because we think it's at a high and then it pushes like 10, 20% higher. You're looking at it like you bastard! I've learnt that one of the things I'll do is just wait. We hit a target, get out.

[35:16]Phil: If it sets up again, I'll re-enter. But I think the other danger is not selling in a target zone. Sure, price might go higher, but that fear/hope/greed, the emotional trifecta, will influence what you do or don't do. You might hope on for more profits. Keyword- hope on. Maybe you get scared. Going the other way, price makes new highs. You've got a little bit of profit and you cash out early. It's nowhere near where you thought it would go to. I want to know where I'm getting out if I'm right and where I'm getting out if I'm wrong. I always have a target of where I think price will get to. When price is close to that, that's where you cash out. Between where you're getting out if you're wrong or if you're right, for me, there's nothing to do. Just because price is at new highs, there's no reason to take action or no take action.

[36:17]Sean: It depends on your strategy. Understand where the turnaround is. Me personally, when I'm trading stocks, I will look for the confirmation. I don't want to get out early, I look for the confirmation that the move has finished. If you're thinking about it as a rise and an arc, I wait until it's curved down a little bit. I'm like, okay, I'll take my chips off the table, rather than trying to do it too early.

[37:04]Phil: It's funny you mention that, Sean. I dipped my toes into day trading last week. I still like scalping the open on stocks. Funnily enough, with stock options, with my main style of trading, when I set targets when I'm there I'm out. Clinical. End of story. But when I was scalping stocks, I found I reverted to my old strategy, which is I'm trying to ride the wave, the influx of momentum. I'm looking for more a trailing stop type of strategy. When price turns around, that's when I'm gonna get around. I'm just gonna ride that wave. It's also very stressful which is why I stopped doing it in the first place. Honestly, I'll tell you my blood pressure was through the roof for a week. It's profitable. I've realized why I stopped doing it. We keep coming back to this default of doing what's right for you. If part of your strategy is trailing stops, then do that. If your strategy is targets, very clinically, get out at target. Don't worry about what might happen next. You'll never go poor taking profits.

[38:45] Sean: That's very true. When I was very ill with pneumonia, it gave me an opportunity. I sat there in bed scalping. I'm thinking I sat here bored. I'll go scalp some cryptocurrencies and made a lot of money, don't get me wrong. I'm realizing, I'm stressing myself out on top of a weakened immune system. It was a stupid thing to do.

[39:48]Phil: I can imagine that scene out of Alice and Wonderland with the Cheshire Cat and psychedelic swirls going through the air, animals appearing and reappearing. I can imagine that's you hallucinating. I know, I'll trade crypto!

[40:15]Sean: I'll do that, yeah. With the amount of medication I'm on, I'm scalping crypto.

[40:19]Phil: It's insane at the best of times. If you can handle the volatility, the rollercoaster... I keep looking at it. But I just like my stress-free lifestyle. I like to put my trades on and then go and have a coffee or go do something. But idle hands make light work. In this case, maybe idle hands should not be kept busy when it comes to day trading.

[40:51]Sean: Idle hands are the devil's tools.

[40:55]Phil: I suppose we found a new bonus thing by accidents. Trade within your capabilities. I don't want to day trade. I can, you can, but it doesn't suit our personalities. I don't want a new high score on my blood pressure. I'm at an age where that starts to become important. Interpret what's right for you as a trader. Just because someone else is talking about day trading and how much money they're making in the opening bell, but if that's not right for you, don't do it. Find something that suits your personality. What I'm focused on these days is having a lifestyle, and doing all of my business activities around the lifestyle that I want. Most people do it the other way around. Work, work, work, grind, grind, grind, and life - that's for other people. I would rather have the life and the means to enjoy that rather than just trading for 12, 14, 16 hours a day. When I was 12 years a currency trader, it's a 24 hour market. You can sit there all day every day if you wish to. Bitcoin is open 24/7. It's easy to sit there like a zombie.

[43:01]Sean: It is. I had an idea. I sat on my hands, loaded up with all the pills. I wanted to see if my idea could apply to the crypto market, and it just lead to three or four days of that and I'm realizing what am I doing? Everyone's been there.

[43:49]Phil: I'm blasting futures at the moment. I'm trying to find the blend of trading, which is why I was scalping stocks last week. I just found it was too intense for what I want. I was semi-short-term swing trading. I want that low maintenance experience so it's not time intensive. But yeah the index futures are doing exceptionally well in the current market environment. Guess what? The markets only go up and I'm on all the way. It's simple, low maintenance. I can do it from my mobile phone if I have to pop a trade on. That's what I want and it's making money. That's all that matters.

[44:44]Sean: That's awesome. So, we're gonna move onto the next one - market pundits making forecasts are always right. This could be the Bullshit of the Week.

[44:56]Phil: Kramer's famous for getting everything he says right, isn't he?

[45:00]Sean: Oh Kramer. Jim Cramer. A lot of market pundits have expertise.

[45:16]Phil: Nothing against Jim Cramer.

[45:19]Sean: Exactly. They've got experience, knowledge. They might be specialists.

[45:25]Phil: And they're good TV personalities. I mean, Jim Cramer. When he goes off on a rant, that's a rant and a half!

[45:32]Sean: He's got his soundboard. He's got his baseball bat.

[45:36]Phil: Secretly, I'm a little bit jealous, I've got to admit. He's very entertaining. He's not always right, I think is the point.

[45:48]Sean: Do your own research. Have your own awareness. It doesn't matter what the expert says. They have their specific way of trading their ideas that they're espousing. It doesn't mean whatever they're talking about even if they're right or wrong will suit your particular trading, okay? At the end of the day, a lot of these guys might be espousing ideas that might be contrary to what they're doing. They've got a platform, and this is sort of nefarious but it has happened, where people have espoused an idea publicly with a big platform that has millions of viewers, and they're actually on the other side of it. A famous example - a former pundit, the waves were changing. There was a guy on Fox News espousing a certain company, and he was paid by that company to espouse that company to boost the stop.

[47:37]Phil: Shocking!

[47:38]Sean: But again, got found out, and they kicked him off the show. Allegedly. And it's happened several times over the years.

[47:57]Phil: The Daily Mirror in the UK - a newspaper - they had two guys touting stocks over the weekend. They were buying stock on the Friday, touting it over the weekend, and when everyone jumped in on the Monday as the markets opened, they were on the other end, or maybe a few days later after the initial surge or selling had happened. They were exiting. They were front running and giving false tips. Unsurprisingly, that's illegal! So yeah, market pundits making forecasts that are always right - we've got to not take what people say literally.

[48:57]Sean: Do your own homework.

[49:00]Phil: Don't even take our word as verbatim. Just take it as a way for your awareness being raised. Maybe I can investigate it too. Everyone has a different trading strategy and not every trade is right for everyone. It doesn't mean one's right and one's wrong. I think the best way to use the TV commentators is to think about them like your outsourced research and development department. They've made you aware of an opportunity. It's now you and you alone that can put the seal of approval on it or disregard it.

[50:24]Sean: A ping on the radar.

[50:29]Phil: Periscope up!

[50:31]Sean: With that being said, let's rock on.

[00:50:50] Rebel Trader Tip of the Week

[51:05]Sean: So, Rebel Trader Tip of the Week, and kind of in line with what we were just talking about. What are your main stresses with trading? We talked about day trading and how it raised our stress levels. What are you doing right now that has a detrimental effect on your health? I was already immune compromised. I had the logic and the wherewithal to say this is not good. Phil was 12 years a day trader. He was stressed doing it again. I was stressed doing it. But it was just so counter to what we want as a trader. Your brain doesn't stop questioning your decisions, your trades, the amount you put on... You're continuously analyzing which creates stress and releases all the hormones in your body - everything from adrenaline to oxytocin.

[53:41]Phil: The extra screen time was what I was bothered about. There was one or two days where I was locked into a trade and I felt the need to sit in front of a computer. I couldn't stop checking the price. It was a horrible experience.

[54:19]Sean: I had to break myself. I bought myself a VR headset to distract myself. But I recognized it had a detrimental effect on my health. A lot of traders out there are glued to screens while the markets are open. They're trading too high, too big of positions, outside of their comfort zones.

[55:37]Phil: And like you, Sean, you were trading when you were high by the sound of it.

[55:40]Sean: Pretty much. A little bit. A double no-no. Loaded up on every bloody pain pill.

[55:57]Phil: I think what we should acknowledge here is that just because we've been doing it a little longer than the next person, it doesn't mean we don't go through the same experiences. Our tolerance levels are higher than a new trader, but we still go through the same experience. How do we get over it? We first of all recognize we're not enjoying it. So we stopped doing it. If it is part of your normal routine, how can we recognize we've got a little bit of a problem and how can we fix it? If you're unable to sleep at night, have sweaty palms, feel the need to check the price through the day. The easiest and quickest thing you can do is reduce your position size. It won't eliminate, but it will reduce the impact. Turn down the volume dial on those emotional responses. For me personally, that was the single biggest thing that helped me see scalable and consistent success. And ironically, trading more frequently has helped - more occurrences in a portfolio-type of approach. By doing that, you're not stressing over that one position and hoping it will be the one that makes you all the money. Now you're focused on managing the portfolio. I advocate 1 a day and at the end of the month you've got 20 positions. You've got a rolling portfolio of 20-30 positions every month. That's a fairly manageable experience. The whole point is you're looking at it as a whole, and managing the business profits, rather than hoping you sell that expensive line of shoes that you bought.

[59:55]Sean: Love it. With that being said, let's move on.

[01:00:00] Quickfire Round

[1:00:11]Sean: Rummaging around in the mailbag, I'm gonna fire this first one here at you, Sean. Do 80% of options really expire options? I heard this phrase the other day.

[1:00:27]Phil: I was just gonna jump in quickly there. I was - to stay in theme and context with the name of the show - yes. The literal answer is yes.

[1:00:42]Sean: I was gonna add the qualifier here, but basically he heard that phrase and wanted to know why that is if it's true.

[1:00:53]Phil: Imagine around the current stock price there's like a ladder up and down. As I understand, the market makers have to provide the availability. You set the strike prices. There's ten strikes above the current stock price and ten strikes below. Every time the stock moves, if it goes up five points, they've got to make available another ten strikes above. There's now already ten strikes available below the current stock price. They were already there. As the stock ebbs and flows back and forth, new strikes have to be available. Very simplistic example. The point is, we've got more than we actually need. Ergo, a lot of options will expire worthless because we just need them available.

[1:01:52]Sean: That's pretty much the simplest answer I've heard in regards to that. Also, a lot of people are buying these options and they're wrong about the position. Remember we say, a lot of people going into the markets are gambling with bad information. A lot of them are worthless. They're looking to get a certain strike price and it's not got there, a lot of options sellers in the markets who are right, taking a lot of risk selling those options. They profit, get their premiums, when they expire worthless.

[1:02:36]Phil: And that was the buyer, that's your disadvantage, and as the seller of the option, that's your opportunity. If 80% of options actually expire worthless, then that's the whole argument for being an options seller, or one of them anyway.

[1:02:53]Sean: It's one of them. I sell a lot of options.

[1:02:54]Phil: It's part of our calorie-controlled trading strategy.

[1:03:01]Sean: Indeed. It's one of the advantages. For those 20% that don't, that's what we teach a lot of people to take advantage of - to maximize the probability of that success based on a very powerful and time-tested, rigid strategy. That's what we look at for the most part. 80% do expire worthless. With that being said, what's the next question?

[1:03:41]Phil: With the DOW crossing 26,000, what's really driving this trend? I've got to admit, I kind of want to know the answer to this myself.

[1:03:55]Sean: You could point to a lot of things. There's a lot of momentum. A lot of optimism right now. We were talking in the Happening Now report about the economy, the tax breaks, the government shutdowns, the economic policy of this administration, the fact that the breaks have come off. There's a lot of things driving this momentum. You can talk about how money is flowing back into the country. A lot of companies are telegraphing that they're giving bonuses.

[1:04:54]Phil: We're also in the midst of another positive earnings season.

[1:05:03]Sean: There's a lot of exuberance.

[1:05:09]Phil: I don't care. It's going up. We keep saying, we go back to the only and true version of Ghostbusters from the 80's with Dan Aykroyd as Ray at the top of the tower and they've just found the secret staircase in Dana's apartment. And he says where do these stairs go? And the response is they go up. But that's it. Buy the dip, dude. The fact that it's gone through 26,000, who cares? It's going up? Get on that freight train. It's undeniable that the indexes are going up. Individual stocks, some are going up and some are going sideways. I think if you can stop asking unnecessary questions, knowing why the markets are going up is not going to make me a better trader for my style of trading and arguably for any style of trading, unless you're a fundamental trader. If you're doing any type of technical analysis, why does it matter? For the most part, knowing after something has happened will never matter, because the stock market is going up. Why has it been going up? Notice the wording. Past tense. What you should be focused on is will it continue to go up? That's how we're going to make money as a trader. Mr. Ranty Pants has now left the building.

[1:07:25]Sean: Well, hold on, because I've got one more question for you. Why do traders care about implied volatility rather than historical probability? Now I need to put a qualifier in here. Why do option traders concern themselves with implied volatility, rather than historical volatility? I know you have a really great answer regarding the difference between the two.

[1:07:57]Phil: It's linked to the first question. If 80% of options expire worthless, as the options seller, that's potentially an advantage. What's an added advantage is trying to sell something that has a higher value. A lot of options traders will look at implied volatility to try to engage whether the implied volatility is high or low relative to itself. If the implied volatility is as high as it's ever been in the last 12 months, then those options might be priced expensively. Therefore, it might be advantageous to sell them because you can sell them at the high price. Conversely, if price is as low as it's ever been in the last 12 months, it doesn't mean you're gonna be a buyer, but they're inexpensively priced compared to our last 12 months of their pricing history. That's the nerdy version of that answer. It begs the question, why is implied volatility important compared to historical volatility. History has already happened. Implied volatility suggests what might happen in the future. The one thing we know about implied volatility is that it's mean reverting, meaning it's exaggerated. Compare that to the Ghost of Christmas Past, where it looks backwards versus the Ghost of Christmas Future in a Christmas Carol, which looks to tomorrow and the possibility things might happen. To try and explain this, if my wife was to say, Phil, does my bum look big in this? But if I say yes darling, your bum looks particularly large in those jeans... From the outside looking in, you'd be nudging the next person with your elbow. But if I was to say that to my wife, there's a significant possibility that I'm gonna get a slap in the face. Cheeky. That's high implied volatility. But you see my point. It's not happened yet. I've not yet been slapped in the face at this point in our story. Or what's happened is, I've said that my wife's got a fat ass and she might just look at me. You don't know the relationship between us. She could go oh you silly. The implication that I might get slapped disappears. It reverts back to normal. Implied volatility is the suggestion that something might happen. When that possibility disappears - it's always over exaggerated - it will revert back to normal. That's why options traders are usually interested in implied volatility. A real-world example might be, Apple is replacing the next iPhone. The excitement and anticipation puts the pricing of the options higher. But when the announcement happens and we find out it's slightly better but mostly the same, everything goes back to business as usual. As the seller of the option, you've sold at the high price and you can close for a profit at a slightly lower price because the implied volatility had contracted without the stock ever moving. That's the opportunity there.

[1:13:14]Sean: I love it.

[1:13:16]Phil: That was a little mini masterclass in options selling.

[1:13:21]Sean: Giving away the farm there, but that's what we do on this show.

[01:13:35] Bulls**t of the Week

[1:13:55]Sean: So I'm trolling through the news there, just looking at who said what, who did what, who tweeted what and I stumble across this gem. It's been on my radar because I'm a sci-fi nerd. Google had the x prize - basically putting up a giant cash prize for private companies who want to go to the moon. A lot of projects out there - private space companies, that have the intent to go put something on the moon. It's been like a decade-long thing. The deadline was March 31st. Basically, one of these teams had to be launched and land on the moon. Sounds great. Lots of projects doing this.

[1:14:49]Phil: With Spacex and Richard Branson, space flight is now possible. But you're talking about getting something on the moon.

[1:15:03]Sean: Yes. They canceled this ten-year competition. Why? No project is ready to go because getting to the moon is hard.

[1:15:24]Phil: You're gonna send a shuttle to the moon and you decided to cancel it because it was too difficult.

[1:15:28]In 1969, compared to the technology that we have now, they did it with nothing but a few smart people.

[1:15:45]Phil: Pens and paper, clever people, lots of mathematics, blow torch, welding mask...

[1:15:52]Sean: They had an IBM super computer but it was the mid-60s, so how powerful could it have been? But anyway, none of the projects were ready before the deadline. Google has said, we're scrapping this. All these companies are left in the lurch with whatever project they've got and they're like bugger! Because 'getting to the moon is hard'. It's got bugger all to do with trading.

[1:16:17]Phil: It's like throwing your teddy bears out and saying that's it, I'm going home!

[1:16:23]Sean: Exactly. Anyway it was on a finance site and I had to laugh. Anyway, that is the Bullshit of the Week and that is the end of the show. Please remember this show is not free. It will cost you a five-star review on whatever platform you're listening. Just go tohttps://tradecanyon.com/rebeltraders/, select your method of listening and please leave us a review. This really helps us get our message out to as many traders and investors as possible. We're already a Top 10 Podcast in the business category.

[1:16:53]Phil: Thanks to everyone who's helped us so far.

[1:16:54]Sean: We are often times number one in the investing category, but help us stay there and help us maintain our dominance. With that being said, anything else, Phil?

[1:17:02]Phil: I've thoroughly enjoyed today's show on a personal level. It's been amazing. We've covered lots of ground. We've had a little bit a giggle which is my number one priority in life is to enjoy myself. We've also managed to impart some pills of wisdom. Maybe just a different perspective on some interesting topics. I've had a great time, Sean. Thanks for joining me today. But if you'd like to join us on Facebook or Twitter, you can get to us onhttps://tradecanyon.com/rebeltraders/. All the social media things are there as well. What do we have next week?

[1:17:26]Sean: In this case, we're gonna pop on some long black trench coats and go a little matrix with a show called there is no spoon. If you tune in next week, we'll show you exactly what we're talking about. There you go, rock on and we'll see you next time.

[1:17:42]Phil: See you next time! Bye for now.

[1:17:43]Sean: Take care.

Resources & Links Mentioned in This Week's Show

3 Key Takeaways From This Show

  • There are over 5000 ETFs globally with around 1800 based in the US alone and more cropping up every day it seems (not including ETNs which add almost 2k more!)
  • Think of conventional ETFs as recipes - I may like mine with a little extra spice, a little more salt or a few different ingredients to match my palate. So, Virtualizing an ETF gives me just what I want in my portfolio.
  • You can create your own universe of stocks based on this principal of uncovering just what makes up the ETFs you specifically are interested in.

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