Rebel Traders 038 : Popular Delusions of a Technical Trader…

It’s time to step up, step back and take a look at the popular delusions of many technical traders and avoid the madness of crowds that create their own traps, misguided notions and course correct the Rebel Trader way...

In this week's show the Rebel Traders are taking a trip down sanity street to make sure that they help focus you on avoiding the pitfalls of the popular delusions technical traders fall in to and help reset the dial.

Armed with the awareness Sean and Phil cover in this podcast you will be better positioned to protect your portfolio, enter and exit positions smarter and more profitably and fine tune your trading skills.

Time Stamped Show Notes

Read Full Transcript

Sean Donahoe: Are you delusional? Feeling a little madness of the crowd? Let's rock.
Automated: Rebel Traders takes you inside the world of two underground master traders who take an entertaining and contrarian look at the markets to cut through the noise of Wall Street and help you navigate the trading mind 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 in podcasting, Mr. Phil Newton. How are you doing this morning, sir?
Phil Newton: I'm feeling slightly mad today as we break into our popular Queen song.
Sean Donahoe: I was gonna say let's get a little Queen going there. I'm going slightly mad.
Phil Newton: As long as you don't break out the Penny and the Hoover or the vacuum cleaner we're fine.
Sean Donahoe: Well, we'll try not to. That's only on the weekends.
Phil Newton: I was just going to say, it's only on the weekends.
Sean Donahoe: Yes, yes, that's when we become Doris, but we'll keep that one private.
Phil Newton: Well, you know I've got that secret shoe fetish, so why not.
Sean Donahoe: There you go. Freaking Imelda Marcos over here. Anyway, with that being said, what are we doing in this week's show? Well, we're going to step up, step back, and take a look at the popular delusions of many tentacle traders and try and avoid the madness of the crowds that help you create your own traps if you're not careful, along with misguided notions, and we will course correct them with the Rebel Trader way.
Phil Newton: We've also got the usual quick fire round where your trading questions are answered. But of course it's the week. We got the hyperbole, the shenanigans, the nonsense, the crazy, the cuckoo, and certainly all the mad things that markets and people talking about markets do. And as always, we've got the core question of where is the trade somewhere amongst all of our own shenanigans.
Sean Donahoe: There you go, the insanity that we bring every single damn week. So, okay, what the hell is this show about? Where are we going with this? Well, here's the thing: a fellow introduced me to a book a few years back that actually is now one of my favorite and has pride of place on my bookshelf. It's called The Extraordinary Popular Delusions, and there's a second volume, which is The Madness of Crowds.
Phil Newton: That's two books in one, I think.
Sean Donahoe: Two books in one. Yeah. I was gonna say it's kinda hard to separate-
Phil Newton: It was written many years ago. If you can get past the Old English, it's actually quite an interesting read.
Sean Donahoe: Yeah, it was actually an early study in crowd psychology by a Scottish journalist called Charles Mackay, and he said-
Phil Newton: That's why you're in favor of it.
Sean Donahoe: Well, there is a wee bit of bias right there indeed, but it was actually first published in 1841. Now you might think, "Well, that's not exactly Fifty Shades of Grey," or one of these modern thrillers, but no, this is actually a very interesting-
Phil Newton: A page turner.
Sean Donahoe: It is a page turner. Actually when you get into it, and I found it absolutely fascinating. Now the book basically chronicles its subjects in three parts: national delusions, peculiar follies, and philosophical delusions, and it really covered a lot of ground-
Phil Newton: Just to interrupt you again, Sean. Not Phil's delusions, philosophical delusions.
Sean Donahoe: Yeah, 'cause I mean, . Well yeah, there you go. But yeah, if they did an updated version they might have a section for Phil there, but who knows.
At the end of the day though, Mackay was a very accomplished teller of stories.
Phil Newton: Forward thinking for his day, and I think is-
Sean Donahoe: Very much so.
Phil Newton: Very forward thinker, and I suppose for the time. I mean, some of these things we kind of take for granted. The topics that are discussed, and we're gonna skirt around some of them today, but you're absolutely right. It was very forward thinking, and I say it's quite common to broach a lot of these subjects. We've touched on similar things in the past, but they're the popular follies, the delusionals within the context of the market, and this was actually talking about how people basically behave like idiots when they get together in groups. I mean, that is kind of the layman's version of it, and it's things that you probably recognize on a daily basis.
I'm a fan of the book anyway. It is a very interesting read if you can get past the Old English, which is-
Sean Donahoe: Prevalent.
Phil Newton: ... a little bit disjointing to read if it's the first time that you've done it, but it's well worth the effort.
Sean Donahoe: The one thing with this book though is it does chronicle a lot of stuff like you say we take for granted, but it breaks it down, and for the period that it was set in, it really is ... We talk about-
Phil Newton: They were ground-breaking thoughts at the time, yeah.
Sean Donahoe: Yeah, we talk a lot about history repeating itself, but it's very, very interesting. Let's just start with the first ... What I did is I've taken some quotes from these two books that I think really have-
Phil Newton: They probably get an idea of the vernacular that's used, the way that it's written hearing the contents of the quotes.
Sean Donahoe: Well, indeed. Indeed. And I think it's a good place to start with this one. Men-
Phil Newton: So we shall break out the monocles just because of the theme. We're gonna put the top hat down, and we're gonna break out the monocle.
Sean Donahoe: Abso-damn-lutely.
Phil Newton: Just to get in the mood of things.
Sean Donahoe: I'm gonna put two monocles on that way I have my glasses. That way I can read the bloody, my notes here. Okay, first quote is, "Men, it has been well said thinking hurts. It will be seen that they go mad in herds while they only recover their senses slowly and one by one."
Now, okay, like you said, Old English, but here's the thing: let's break it down to actually what that means. It basically says it's very easy for men in crowds to basically be dumb as bricks, and this is one thing we talk about quite .
Phil Newton: An extreme example of this would be a riot, a public riot. We saw this in the UK. We've seen it in various spots around the world, but in the last couple of years we saw it in the UK, people went batshit crazy and acting like a crazy crowd because someone was inciting the hate, let's go and throw some bricks through windows. Everyone, or the popular crowd if you like, thought that that was also a good idea, and literally there was a riot through half the country.
Sean Donahoe: Yeah, and what happens is it does become-
Phil Newton: Everyone's delusional.
Sean Donahoe: ... almost like an infection.
Phil Newton: Seemingly rational people start doing all sorts of crazy behavior, and that's an extreme example just to illustrate the points. It happens in a microcosm with two or three people, small groups, or maybe at a local level if everyone, I suppose, a prejudice, just to kind of keep it general. If a group of people is prejudiced against someone's behavior, if they were speaking to those people individually, then you probably wouldn't have a problem with that person's behavior or because the group has that opinion but the individual might not.
And this is what we're talking about. It's that herd mentality that we were just talking about.
Sean Donahoe: Now we also see this, and I bring you to trading, we also see this in bubbles and all sorts of other things happening in the markets that suddenly it kind of aligns with everyone's predisposed biases, beliefs, and everything else. I prime example you could talk about -
Phil Newton: When it goes up.
Sean Donahoe: Well exactly.
Phil Newton: Is an example of components.
Sean Donahoe: Yeah, I mean, we've seen it with ... Yes. We've got to get the hashtag in there somewhere, geez.
Phil Newton: It gives me no end of amusements.
Sean Donahoe: I know. But here's the thing-
Phil Newton: I don't know what it is about it, Sean. I do find that phrase amusing. Again, another example of the example by being stupid is everyone hashtags everything. ETF, buy the dip, whatever, and just because it's a popular phrase everyone uses it. I suppose it's another example of the herd acting stupid. Among my flippancy, we've got another example.
Sean Donahoe: Perfect example.
Phil Newton: It's one of those days already isn't it?
Sean Donahoe: It really is. But if you look at things like ... We've had cryptocurrency. We had the housing bubble. And if you want to go back to Charles Mackay's era, we had the Mississippi Company bubble. We had the tulips, which was in the early 1700s. I mean there was lots and lots of different examples. The South Sea bubble of 1711 and '20. A lot of these, again, brought out the herd mentality, which-
Phil Newton: We see it at Christmas every year.
Sean Donahoe: A prime example.
Phil Newton: Another example that we've used, yeah. When everyone goes crazy over whatever the popular toy is it ramps the Black Market price.
Sean Donahoe: What Phil wants his G.I. Joe with the kung fu grip.
Phil Newton: Yeah. The black market price on eBay is crazy.
Sean Donahoe: Exactly.
Phil Newton: Everyone jacks the price up, you know? Auctions is perhaps another good illustration of this to keep it in that kind of semi-financial realm. I mean, the stock market's technically an auction, but if we had a housing auction or say Sotherby's or something like that, everyone's bidding up the price because if it's a popular item, everyone goes batshit crazy for it.
Sean Donahoe: It's true. Now one of the things that we certainly do as traders is we're very conscious of where the crowds are, where the crowds are moving, and we do that a lot by again studying the charts, the markets, having awareness of what's going on, but we deliberately want to extricate ourselves from the crowd.
Now while we in some instances may be with the crowd in sentiment, we don't want to be in the crowd and dramatically reduce our IQ because that's one thing that a lot of crowd psychology you'll see.
Phil Newton: Might be worth pausing here and actually showing and putting a very distinct separation between not us as individual traders, but certainly the consistently successful trader versus the rest of the traders, the herders as you were describing them because perhaps a lot of traders are trying to trade ... As we've said many times, Sean, both here on the podcast and in private conversation, the general public are the last to know anything, and therefore they're the last to react on something, but what we don't want to do is be the last persons to react, which is predominantly what the herd is doing. They finally decided to make as some sort of decision when it comes to in this case the financial markets, and they're gonna be left holding the parcel as it were when the music stops. They're the last to know anything.
What we want to do as traders is be ahead of that, but while we typically advocate a lot of the, I would say, common outlier. Buy the dip is a good example. I mean, yes I advocate buying the dip on a regular basis, but no one actually says how to actually do that. Most people are not actually buying the dip in a rally when they think they're buying a dip in a rally because they're the last to know anything, that they're getting out when the turn is already starting.
The herd is kind of late to the party. What we want to do is use the technical tools as they're intended to help you evaluate an opportunity.
Sean Donahoe: Very much so. I mean, now, this kind of tips into where we're looking at the markets, and there's a lot of indicator traders who use them as signal, and they cluster around common values. Yeah, very much so, and it creates its own self-fulfilling prophecy.
Now, Phil has this story about Woodie's CCI. I'm gonna let him take over from there about self-fulfilling prophecies 'cause it's something we've mentioned before but I think it's worth reiterating as a prime example.
Phil Newton: Well, we've talked about it from the point of view of the talking heads talking about price has reacted off say the 200 period moving average, but there's a good example of ... I remember the guy's name; his surname was Woodie, hence the name Woodie's, and a common indicator he liked to use was CCI, so hence the name Woodie's CCI. He basically developed a group, a following, of how to use CCI to interpret trading or identifying trading opportunities, and in fairness, very successful trader, and he developed such a following with this methodology because it was quite simple to use; it was quite easy to interpret. It was very rule defined, which is what we're striving for when we're using any type of methodology for trading. We want to be able to replicate what we did previously, and that's why it was very attractive.
Now, it gained essentially a global audience of users, and as such, it often became a self-fulfilling prophecy because so many people were using the indicators and that methodology behind the tools, and they're all looking at the same instruments that the markets in the popular timeframes. It often became a self-fulfilling prophecy. They were kind of creating the setups and the moves for themselves, and that's when the setup started to fail because there was really no bang power beyond what they were creating or selling power.
Because of this, and so the story goes, is that the people who can move and influence the markets were in the short-term manipulating some of the setups so that it created this frenzy of traders buying or selling whatever instrument was being manipulated, and they were getting in a position while the professional traders were getting out, and basically they were using this crowd, this herd of influx of buying and selling ... Liquidity would be another way of saying it.
You know there's a group of traders that had to take some sort of action, and that creates small movements, and some of the bigger players were taking advantage of this because they were scalping off the retail traders, blindly taking every signal and not using the heads to evaluate the opportunity, and they were just trading the, and I use the term very loosely, signal that was generated from the tools and methodology, and as such, the methodology, for a short period of time anyway, broke down because there was no follow through on the movements they were expecting, and they're basically just buying and selling to each other.
Surprisingly, Sean, we could take Woodie's CCI out of the equation and put cryptocurrency in its place because that's what's essentially manipulating the bubble that we've just seen in many of the popular cryptocurrencies. It's just people buying and selling between themselves creating and generating, I'm choking on the word again, signals, but with no real movement behind the markets; no emphasis on any follow through.
Sean Donahoe: Very true. Very true. So, the next quote I want to discuss, which I thought is actually one of my favorites, however it is very Old English, so bear with me. "Of all of the offspring of time, error is the most ancient, and it is so old and familiar in acquaintance that truth, when discovered, comes upon us like an intruder and meets the intruder's welcome." In other words-
Phil Newton: Much like poem isn't it, that? When you read it, it's almost like poetry
Sean Donahoe: It really is. He's very ... it kind of is, and you know you'd never catch me reading poetry in a million years, but-
Phil Newton: There's nothing wrong with it .
Sean Donahoe: ... some of this Old English stuff, the way it's constructed ... Abso-damn-lutely.
So, what does this basically mean? It means we have our own biases, and we all make mistakes. The problem is that when those mistakes override the strategies, the common sense, and the pure math of what we should be doing that when those elements come into what we're doing, we just disregard them completely. We basically take those errors as truth and then ignore the truth because we've redefined where we stand.
I'll give an example, a blackjack example if you've ever played the game. It's like hitting a 16 against a six with a dealer, which, again, is one of the cardinal rules is if you've got a six or less against a dealer then you're quite likely gonna stand on it and 12 or more. So, 16 is you've got a high probability of going broke if you go ahead. It's a bad strategy. But if you win, even though it's a mistake to make that move, you're more inclined in the future to hit 16s because hey, that one time where you won against a dealer, it kind of sets that new boundary of, "Hey, I won that time, so I should win every time." It's a bias.
Phil Newton: But it's that recency type bias that we were talking about in the previous show.
Sean Donahoe: Exactly, so the problem is that when you make a mistake or that you have some sort of error, but whether it works out or not, we tend to have that little bit of bias against it, but whenever our strategy should be saying one thing or the probabilities should be saying one thing or whatever our rules and our plans are, we tend to ignore them, especially when those mistakes become profitable or they actually work out, and that is a big thing.
Phil Newton: Yeah, you ignore it because you have the favorable outcome, which in this case was from the stock market to be or you made some money. This is quite a serious thing actually. When it comes to the markets, that kind of error blindness ... I made a mistake or I didn't execute myself how I should've, but it made me money anyway. Therefore, I must've done something right. That's essentially what you're saying.
One way to perhaps overcome this is reevaluate what you call a successful trade. And again, we've spoken about this a few times in the past, and this is gonna keep me in the game; not just today, tomorrow, next week, but you know, in 20 years time, in 20 years down the line, this mindset attitude of reevaluating how you determine a successful trade, you can avoid this error bias that you were just describing, Sean.
The way that I do that is to ... Oh, I completely lost my train of thought there, Sean. A squirrel! Look at the squirrel over there.
Sean Donahoe: Funny stuff. No, I think you've gotta lean into taking a trader's log and looking at the different things.
Phil Newton: Yes, it was essentially ... I was gonna suggest first of all that we reevaluate what we call a successful trade because making money doesn't mean it was a successful trade as you were just illustrating, and so perhaps reevaluating what we call a successful trade is gonna help me to evaluate whether I did make an error or didn't make an error because some of the most profitable trades that I've had have been some of the most stressful because of this error. They were placed in error, but they turned out profitable, and it's just a stressful rollercoaster.
So, what is a successful trade? A successful trade is one where I followed my plan through the letter. I planned the trade, I executed the trade how I planned for it, and after the trade is being closed, I'm asking myself, "Did I do everything I said I was gonna do before, during, and after the trade? Yes, I did." Okay, that's a successful trade 'cause I did everything I said I was gonna do, AKA I followed my strategy that I've spent many years crafting whereas the monetary outcome is secondary to that evaluation of is this a successful trade. Okay, yes, I did everything I said I was gonna do, only this time, it just produced a monetary loss or a monetary gain.
The monetary outcome is, to be fair, it's not really consequential to me considering a successful trade, so as such, I can turn round and say, "I've been a successful trader for many, many years." I very infrequently have a losing trade. It doesn't mean that I don't have monetary losses. It just means that I've executed my plan to the letter, and because of that, it gives me this psychological benefit if you like of being able to put the net trade on without following the mistakes of, say, previous traders.
What you were suggesting was that if you placed a trade and made money, therefore that must've been a successful trade. I'm gonna deviate from my plan again in the hopes ... Notice the wording here. In the hope that I will see something similar happen whereas that's not a strategy. That's just, you know, putting the money on black, spin the wheel, and hope for the best.
Sean Donahoe: Yeah. And as you know guys, that's not what we ... We don't want to throw anything to fate, and that is one of the things that's going to lead into our next one, which is: "How flattering to the pride of man to think that the stars on their courses watch over him, and typify, by their movements and aspects, the joys or the sorrows that await him."
Now it's a very ... You're very accurate in saying this is very poetic. What does it basically mean? It basically means that, hey, you know, throw everything to fate. That the stars of the universe and the Lords of the stock market will look over you, they care about you, whatever you're doing because you're so important to the market.
So, okay, listen, swinging to the fence-
Phil Newton: I read about ego in this as well.
Sean Donahoe: Very much so.
Phil Newton: The pride of man. You know, suck it up and check your ego. It's not a case of being right on every trade. It's a case of being ... It's a business, which we said many times before, it's about being right on average, and I think if people can push that to one side, then they'll get past this hurdle of the pride or the ego; you've got to be right on every position.
The reality is, and you can have, say, 30, 35% of your positions are making money, and if you had that, there's lots of people round the world that would bite your arm off with that success rate. If you're overall still making money on average, even with a 35% success rate, that's a good strategy. You're making money.
All right, it's difficult to execute because the other 65% of the time you're losing money, but if you're making more than you're losing, it's a good strategy. That's a good business. I think that's what people forget, but people want to be right every time because it's egotistical of them. "Hey, look at me, I was right." And you see it all the time in my newsfeed. I see many people go, "Look how great I am. I've made money again. Look how right I am."
Not just in the trading world, in all walks of life. "Look how great I am." Flakebook's full of it where, you know, "Look how wonderful my life is." And the reality is you're only seeing the surface area, so check that pride. It's got nothing to do with ego, nothing to do with being right. It's about executing a business plan that has a positive expectancy outcome, which is just the posh way of saying on average we make money.
That's what it's all about, and that's the thing that people forget. Hit your pride, check your ego, and ... It's nothing to do with fate. It's all about probabilities, as you keep hammering home when I deviate and ramble amongst my musings.
Sean Donahoe: Absolutely, I mean, play the probabilities and not the long shots is a more stable way to make consistent profits. See a lot of people swinging for the fence relying on fate, and it's a fast way to go broke. It really is. It will destroy you-
Phil Newton: Their head's between their legs, and they're hoping for the best.
Sean Donahoe: Well, absolutely. We see a lot of market players and traders who have their heads very firmly buried very ... I'm trying to be polite, but let's just say buried in the sand.
Phil Newton: Yeah, just say it. We all know what you mean.
Sean Donahoe: They've got their heads up their butts.
Phil Newton: Well that's what I was gonna go with, you know that. If I can bring the tone down, I always will.
Sean Donahoe: Abso-bloody-lutely.
Phil Newton: I'm glad I actually forced that out of you. Arm was twisted up the back. They've got their heads up their ass.
Sean Donahoe: Absolutely.
Phil Newton: But you put your ego to one side, and you've said it before, if you can control the emotional elements, and this is essentially what we're talking about. Don't be sucked into the popular delusions of the crowd. Be your own thinking man, your own thinking person or woman, whatever. Trans or whatever the politically correct thing to say is these days. Be your own person. Have your own mind.
As we both keep saying, Sean, now that you've got this awareness of an opportunity, yes there might be a crowd of people who are saying, "Oh, yeah, you should do this." Whatever the flavor of the month is. Make your own mind up. Do your own ... Now you're aware of it. Investigate it yourself. Is this the right opportunity for you considering the way you like to trade or invest?
I think that's the best way. It's got nothing to do with ego and joining the party. Check it to one side. Is it the right thing for your business? And if you control yourself with that simple asking of question, then you're not gonna fall into these traps we're making you aware of. Now you're aware of it; you can avoid them.
Sean Donahoe: Perfect. So that leads on to the next one, and this a weird one to read, so bear with me again. "We go out of our course to make ourselves uncomfortable. The cup of life is not bitter enough to our palette, and we distill superfluous poison onto it or conjure up hideous things to frighten ourselves, at which we would never exist if we did not make them.
Now this one is kind of a weird one, but I wanted to kind of step back as we make life difficult for ourselves, and then what we do is we take something that is difficult and make it even worse and kind of scare ourselves. This is especially true with crowd think. Now think about this for a moment.
Phil Newton: I think Henry Ford kind of summarized that 100 years later. Bear in mind, this was 1840. A hundred years ... 90 or 100 years. Whatever. Whether you think you can or whether ... Was it Henry Ford? Whether you think you can or whether you think you can't, you're right.
Sean Donahoe: You're right. Yes .
Phil Newton: It's another way of saying the same thing that's kind of taken out the Old English. If you've got a negative mindset, and you think that you're going to bugger up in some way, then you probably will because you've got this preconceived notion that you won't succeed whereas if you've got a preconceived notion of success, then you probably will see success.
It's this mindset that is described in that phrase there.
Sean Donahoe: Absolutely, and the thing is, traders do tend to add too many complications to their trading and make their lives more difficult. They also ... We see this time and time again, you know, and-
Phil Newton: I never would've thought that actually if you hadn't have pointed it out to me.
Sean Donahoe: I know.
Phil Newton: But we see this all the time. Look at the people who are posting perhaps chance. "Look how great my new system is." And they've got 50 indicators, 20 moving averages, a couple of oscillators, a little bit of this, a little bit of that. It's like, where's the chance? It's just all the colored auto trend lines on there or something or else like that. It's overcomplicated.
Sean Donahoe: Yeah, and it really is. And the thing is that when you ... We see this all the time. We joke about it, but when you see something like that that's got 20 indicators and all sorts of ribbon freaking-
Phil Newton: I can only succeed because I'm using all these indicators. No, actually it's probably the opposite that that's gonna happen next, but you're just oblivious to the fact that you've set yourself up for failure from the first moment. It's really-
Sean Donahoe: Well the problem is.
Phil Newton: ... well, here's the word: delusional.
Sean Donahoe: There you go, and the problem is that when you have so many different things and indicators, you're gonna pick out your own biases for your own moves by one of those or two of those indicators that now have given you your wonderful signal because, hey, that's your bias based on ... and everything else might be contradicting, but you're gonna pull out what you see anyway when you have that much stuff going on, and it gets a little bit crazy.
Phil Newton: 'Cause you've got so much going on there, you're absolutely right, you'll see what you want to see. You'll have that ... Again, it's almost like that confirmation bias because you've got so many different ways you can interpret the chance on the chance with a multitude of indicators, then of course you're gonna find something to confirm whatever delusion you've convinced yourself in to either be a buyer or a seller. You can find the evidence for that or not as the case may be.
As we keep saying, just pick one tool. Just pick your favorite. It doesn't really matter which one, and all they are are a way to help you interpret the price drop, the data. If you can do that, then you only need one tool. Arguably, when you get used to trading and you've got some experience, you will remove indicators off the chance in the first place 'cause you'll just know what to trade because you're always comparing what the price is doing, but you're looking at it from the lens of whatever your favorite tool is to help you interpret the price drop, and eventually you won't need them.
Sean Donahoe: They're filters. At the end of the day they are filters, and it just helps you raise awareness, and then you do your increase analysis from there. But it's to raise your awareness. That's really it.
But funnily enough, we also see a lot of this superfluous poisons, as I call it, which is the news, the financial networks, and traders who want to make their lives difficult, they go to find more information from these interpretive sources and add more noise to the mix, and then just make ... One of these talking heads, they've got one on one side, one on the other arguing about who's right, which jus then works into your confirmation bias that we were talking about, but at the end of the day it's just noise and noise and noise, and you're just making your life more difficult.
This is why ... They play to the herd. You need to be the lion on the rock looking at the wildebeest thinking, "Hmm, what a juicy steak." That's what we really position ourselves as.
Phil Newton: 'Cause you raise the point with the news network ... What we mentioned earlier is the news is representative of the general public because they are, again I use the word very, very loosely, educating and informing the general public en masse. Again, that may be a quick way to describe it, but that's what they're allegedly doing.
Sean Donahoe: Bullshit.
Phil Newton: Exactly, yeah. It's entertainment as far as I'm concerned. It's not really providing any value in the world, but the news and the media stations, they're representatives of the general public, as we've already established. The general public are the last to know anything. This herd we keep talking about, and they're the last to know anything. When the music stops, they're gonna be the last ones holding the parcel, and it's a ticking bomb inside. They're not gonna be early on the opportunity most of the time, but they're ... Why would you want to follow the crowd if you're the last to know a piece of information?
That information arguably is not gonna make you a better trader, as we've mentioned many times, but having a systematic approach to find filters and sort opportunities and be ahead of that announcement. When those announcements come out, they're gonna be your reasons to get out because the crowd wants to get in, and that's your reason to get out.
A good example might be, say, an earnings announcement. Very often, I'm in before a known news announcement, and you know, most of the time I'm right, some say. But if the trend's gone up, I'm buying the dip in an uptrend. Just because there's earnings on the horizon doesn't mean I'm not gonna place that trade. But when that announcement comes out, it's usually favorable in line with the overall trends that we keep talking about.
For most people, the herd, the crowd, that's their reason to get in and be interested in a trade opportunity, but for us, the majority of informed, consistently profitable traders, that's a reason to get out because that herd is gonna be the other side. It's sad to say, the herd is gonna be on the other side of your position, more fooled then because they're not making their own decisions.
Sean Donahoe: Abso-bloody-lutely. Now here's another one, which I think ties in very nicely to what Phil was just talking about there. "We find that whole communities suddenly fix their mind upon one object and go mad in its pursuit. That millions of people become simultaneously impressed with one delusion and run after it till their attention is caught by some new folly more captivating than the first." You .
Phil Newton: Wow, you see this in pop culture all the time. You know, who's bought the latest handbag, who's shagging who, what ... Kanye and whatever the other one is. You see this in, again, we're looking to use popular culture. You know, trash culture as far as I'm concerned, but you see it all the time. Everyone goes crazy for whatever the latest blue dress that the royals are wearing. Who cares? Make your own mind up. Beatle mania, perhaps an historic example of pop culture. Everyone went batshit crazy over the Beatles music.
Although I'm a born and bred Liverpoolian, and home of the Beatles is Liverpool, it's ... I never really saw, even all these years later, why even still people were going crazy over the Beatles. It's okay music. I quite enjoy it, but not all of it's fantastic. But at the time, people literally lost their minds over their music, and it's this crowd, this herd, this because my neighbor enjoys it, therefore I must enjoy it, and that psychology, that crowd behavior, that Keeping Up with the Joneses is for many people infectious because they can't make their mind up.
Was I a little bit too critical there, Sean?
Sean Donahoe: No, I think you're dead on, and I'm not a ... Funnily enough I'm not a Beatles fan at all. Yeah.
Phil Newton: Make your mind up. If you happened to like the latest handbag that some popular celebrity's bought, then that's fine, but don't be excited because that celebrity or just to keep it pop culture for a moment ... You know, just because that celebrity's gone and done something doesn't mean that you should go and do it, and most of the time you probably shouldn't do what the latest celebrity's done that's been published in the news 'cause it's idiotic behavior most of the time.
Sean Donahoe: Yeah, well, don't even get me started on that, but what I will do-
Phil Newton: Anyway, but let's bring it back to the markets.
Sean Donahoe: I'll bring it back to the markets. So you can point at any bubble, and you'll see the same hoards running to their own destruction. I mean, prime example-
Phil Newton: Lemmings. Lemmings off the cliff. I had a vision when you said that of lemmings jumping off a cliff.
Sean Donahoe: It really ... That's exactly why when I made that note is you'll see this all the time. They do run to their own destruction. I mean, look at what's happened with the recent crypto bubble as an example. People's mortgaging their houses-
Phil Newton: People are scratching their heads on why it's not ... now it's ... We're the third of March just to put a timestamp on it, but people are wondering why it's not 25, 30, $50,000 on Bitcoin, or whatever the current price is, probably around $12,000 or something at the moment, right around-
Sean Donahoe: It was $10,000 this morning, but the thing is-
Phil Newton: Yeah, somewhere around there.
Sean Donahoe: ... it's also at the-
Phil Newton: People are scratching their heads of why it's not doing it 'cause they've believed what the crowd has been saying.
Sean Donahoe: Yeah.
Phil Newton: Popular delusion.
Sean Donahoe: It really is, and a prime example without, I mean, just using it as an example rather than bashing on Bitcoin, it's just one of the, well a recent example, but yeah, right now it's trading at a two year low in terms of volume. I mean, people are backing away from Bitcoin like crazy, but just a few months ago, it was at $20,000, and people were selling ... When your taxi driver or your barista is talking about Bitcoin as a viable investment they've never looked at investments before, it is the magnet that pulls them in.
And I mean, you can apply this to ... I mean, we mentioned this was written in 1841. Well it has references to the tulip-
Phil Newton: Behavior.
Sean Donahoe: ... mania. Exactly the tulip mania of the early 17th century where a particular type of tulip, a bulb, would be the most expensive object in the world because of this tulip mania, and that is a prime example. The same as it's right now.
Phil Newton: I think it's funny that what baits the time for tulip mania is that people ... and it only happened over a few short months, which is kind of crazy, but just to give you an idea, the tops, the people who had the money ... because there was very ... Back then if you had money you had it. If you didn't have money, then you didn't have money. There was two extremes. But the people who had some money, they were sending their butlers to go and buy and sell tulips on the market, and same with the South Sea bubble. They would sent their butler to go and buy, but what they didn't know is that the butler was taking the silverware, selling the silverware on the way to the market or the exchange or wherever they were collectively exchanging these things, and then buying some for themselves, and then on the way home, were buying the silverware back with the profits and then handing in their resignation and becoming the lord of their own manor.
I think if you read the history of it, some of the stories are ... the .
Sean Donahoe: They are amazing.
Phil Newton: They're absolutely phenomenal. The butler is suddenly a millionaire because these he sold the lord of the manor's silverware to kind of finance their own trading.
Sean Donahoe: It is insane, but yeah, even back then-
Phil Newton: Front-running their masters' orders.
Sean Donahoe: I love it. I love it.
Phil Newton: Historically speaking, it's fabulous, but nothing's changed in 150 years. That's what's crazy about all this.
Sean Donahoe: Yeah, even in the time this was written, there were three bubbles in the early 17th century, which were the tulip mania, the south sea bubble, which lasted from 1711 to 1720, the Mississippi bubble, which was 1719 to 1720. Again, very short-run, short-lived bubbles, but they all hold the same delusion, and that is making it irresistible to the masses.
So what's the solution here? Well, it's discipline. It's discipline, awareness, and the fortitude to withstand the magnetic draw of the crowd, and that'll help you make some smarter decisions.
Phil Newton: Interesting. Just a broad observation, my first experience is I read this book in my late teens, so I was still going out with friends, you know, bars and whatnot, and because I'd had this awareness very early on of essentially crowd behavior, crowd psychology and the stupidity and the follies that people do, you would see this in bars quite regularly where you'd go in, maybe say, the main entrance, and usually in most bars there's a giant bar area with several potential servers behind the bar. But people will go in, and if it's busy, they will go from the door that they've walked in to the nearest section of the bar, and what they don't realize is that there's only one person on that section. Surprisingly, "Oh, it's busy here. We best get to the bar people, get the drinks in." And what they don't do is they don't take a step to the left for example or a step to the right, but they don't look around the crowd and see that there's five other servers in the rest of building in an empty bar because that's their section that they're serving in.
But if they'd just use their head and not follow the crowd and make your own mind up, make your own observations, and this is what the point I'm trying to get to with, again, just a real life example, you can just evaluate not just the bar area by the entrance of the doorway. Look at the whole venue. Oh, there's lots of servers that are not doing anything.
What I would frequently do was go to one of these servers, get my drink, and then go back to my other idiot friends who are still queuing at the back of the queue, and the crowd's waiting for their turn to be served, and I'm standing there sipping my drink, and it was only on a regular basis they would say, "Where'd you get that?" It's like, "I went to the server that wasn't serving anyone round the corner." They're still in queue, and I'm just standing there having my drink and maybe going for a second drink while they're waiting for their turn in the crowd.
And you see this all the time, so not, again ... What we want to do here, our objective primarily, is to make you aware of what's going on. These things happen everywhere in everyday life, and all we're saying is just don't rush in to anything whether it be financial training, whether it be going to the bar for a drink, but just notice the crowds.
You know, okay, the hot dog vendor at the ball game. I don't know, whatever it is. You'll see the situation in lots of areas of your life. Now that you're aware of it, you can open your eyes, take a step back or a step to the side and evaluate the situation, and you can be the smart person in the room because you've got this awareness, and you'd be surprised at how it impacts your life on a day to day basis, as well as in financial markets.
Sean Donahoe: Absolutely. I love it. Love it, love it, love it. Now here's the thing. The last one we're going to discuss here is the obnoxious hat was often snatched.
Phil Newton: I hate those obnoxious hats, Sean. I don't know about you. obnoxious hats.
Sean Donahoe: I certainly see with you around that's for sure, but the obnoxious hat was often snatched from his head and thrown to the gutter by some practical joker, and then raised covered in mud upon the end of a stick for the admiration of the spectators who held their sides in laughter and exclaimed, and in the pauses of their mirth, "Oh, what a shocking bad hat. What a shocking bad hat."
Now again, this is written in 1841.
Phil Newton: 1840.
Sean Donahoe: There's no-
Phil Newton: People did wear hats on a regular basis, and it was rude not to wear a hat in some circles.
Sean Donahoe: It actually was, but again the-
Phil Newton: What would be your hat of choice? Would you be a top hat and monocle person?
Sean Donahoe: Oh, I am a top hat and monocle person. There you go. Definitely.
Phil Newton: Very good. Spiffing .
Sean Donahoe: Absolutely. Or then again I have my flat cap days, as well, which is my northern influence.
Phil Newton: When you're out surveying the peasants.
Sean Donahoe: Absolutely. Absolutely. So anyway, here's the thing, and this is what it really means is if you stand outside of the crowd, the crowd will often deride and scorn those who they feel stand alone because again, they're not part of the group.
Phil Newton: Might we consider this, and just to try and draw a real life example for a moment, and just for the poor farm boy, might this be an example of peer pressure?
Sean Donahoe: Oh, abso-damn-lutely. Abso-damn-lutely. This is the peer pressure of the group.
Phil Newton: So, but the crowd acting frivolously and stupidly because they don't like-
Sean Donahoe: You stand out.
Phil Newton: Because you're being different. Because you're your own thinking person, which is what we're trying to advocate. Because you're thinking for yourself rather than the low crass attitude of the crowd 'cause they're not the best thinkers most of the time. That's what we're saying.
The crowd is usually dictated by the lowest common denominator in my experience.
Sean Donahoe: Very much so.
Phil Newton: That's an example of what we're talking about. So if you stand out, you're gonna be derided for having a flat cap instead of the top hat and monocle. "Oh my God, look at him, how silly he looks."
Sean Donahoe: Indeed.
Phil Newton: "Alfred, go and fetch his hat."
Sean Donahoe: Absolutely. So, listen, let your results determine your stance and never mind what the crowd says. The crowd is wrong more than they are right; that's why they're in the crowd, and that's why the markets chew them up and spit them out while smart marketers and traders, so a market heroes and traders stand tall. Be the lion outside of the herd of the wildebeest who are laughing and splashing in the watering hole while you pick a nice juicy steak. That's all I've got to say about that one.
Phil Newton: And this is good life advice as well, not just market advice.
Sean Donahoe: Oh absolutely.
Phil Newton: We've already ... I think we bang the drum of make your own decisions. Don't do what everyone else is doing. If it just happens to be that you do end up doing the same thing as everyone else, then that's fine, but at least you've made your own mind up. Don't fall into the trap of following the herd for the sake of following the herd.
Sean Donahoe: Very good.
Phil Newton: I'm sorry, I kind of got on a tangent. I was gonna say something profound, Sean, and it just escaped me. Maybe we can tune in next week while Phil stops looking at squirrels out the window.
Sean Donahoe: Abso-bloody-lutely. Well, let's put the book aside for a moment 'cause there are a couple of delusions that I think Phil was wanting to bring up in reference to this. Maybe they're profound, maybe they're not, but what was the couple that you wanted to take aside?
Phil Newton: Yeah, I mean, I think it's more just from, to be even more relevant to trading, popular delusions that I see ... Just things that I've seen over the last little, 15, 20 years of trading and coaching people and talking to new and experienced traders alike. But there's many delusions that people fall into, and I was speaking to a couple of newer students this week, and just trying to, as you like to say, course correct. I like that phrase. I'm gonna steal it.
Sean Donahoe: Go ahead.
Phil Newton: You're trying to course correct what's some people's misbeliefs, and it's not their fault 'cause they're only at this stage, perhaps, regurgitating what's been, but one of the biggest ones is, in fact, probably the biggest offender, as far as I'm concerned, is leaving or convincing themselves that indicators are signal generators.
What do we mean by that? We've talked about this before as well, but we've given a few examples, but say, just using a simple example, if 30 period moving average crossed over 100 period moving average, that would suggest that the short term trend is, and because of that cross in moving averages then, people confuse that with having generated a signal to buy or sell, and that is a popular delusion.
That's what I see with indicators. Just because moving average, whatever period length, it doesn't matter ... Whatever tool that you're using, just because it's done something. The math is crossed, the moving averages are crossed, the stochastic is oversold and below 10. Whatever tool that you're using, just because that condition is being met, it does not generate a signal. Every word had a full stop after it there Sean, I don't know if you noticed.
Sean Donahoe: I kind of noticed the bold and the underline and the exclamation points.
Phil Newton: Yeah, I can't stress it enough. Consider myself on a soapbox for that last sentence as well. You have to use your imagination because you know I've got a face for TV. Face for radio even. Oh dear, I don't know where I am today, Sean. Please help me. Beam me up, Scotty.
Sean Donahoe: Oh dear me. Just put down the razor blade and the mirror.
Phil Newton: It just sends me crazy, as you can probably imagine, that the foolhardiness of using considering indicators as signal generators. Just think about that for a moment. An indicator, a mathematical formula has said that given the data that we've inputted, it's given me this reading, and usually on the default setting, which is for most indicators, a 14 period setting. So in the last 14 bars, or the last whatever time frame you want. The last 14 days are from the daily charts. A particular condition has been met.
The most stupid example I see is with oscillators. Stochastic for example. Understand the tool that you're using, I suppose as well, is kind of the sidebar onto this. In the last 14 days, price is as high as it's ever been in the last 14 days. Therefore, the stochastic will be oversold. Sorry, overbought because it's the highest it's been in the last 14 days.
That's the default setting. That's all stochastics is telling you. It's not a signal to sell.
Sean Donahoe: Exactly.
Phil Newton: So if you can understand the tools of the trade, then it's going to be significantly easier to help you interpret what price is doing, and as such, if it's highlighting an opportunity for you to trade in the first place.
Sean Donahoe: Absolutely.
Phil Newton: So, reality with indicators is that it's just a mathematical formula that's gonna help you interpret what price is doing. It always comes down to price. What's it doing? Put it into context. If we're in an uptrend, as we keep saying, just add this into your training routine. In the last 12 months or the last 200 or so bars if you're on entry day chance, in the last 200 bars, what is price doing? It's going up. It started at the bottom left of the chart, it finishes at the top right, ergo we're in an uptrend.
We want that confidence. Now that you know what the long term trend is, maybe looking at an indicator on oscillator example that is oversold might provide you with a better opportunity, a good place to be aware that maybe I should consider buying or being foolish now that that condition's been met. Without the context, most of the indicators are absolutely pointless.
Sean Donahoe: Very true. Now, the next one you had, which I thought was good, was believing that the entry signal, and I know that is the word that we're kind of ... but it is thinking that just having an entry signal is a complete strategy. Now, this is one we see a lot.
Phil Newton: I've got to admit, this is the textbook's fault. This is the textbook's fault.
Sean Donahoe: Yes.
Phil Newton: 'Cause that's how they're presented. This is, and again, this is the signal that's generated from the indicator, and it's the textbook's fault. It really is. But because of the way that they present the information, they way the information is presented ... Again, to use our moving average crossover example, the moving average that the longer term is crossed over or the short term is crossed over the long term, therefore a signal has been generated.
But then it's kind of suggested, it's not really explained in almost any book that I've ever come across, but then it suggests that that is the complete strategy; that's all you need. That's the Holy Grail. That's the secret ingredient that's going to make you a profitable trader of the financial markets if you used that particular tool set on the charts.
And for some reason, people believe instantly the notion that that is a complete strategy, and we both know that that's complete nonsense.
Sean Donahoe: Absolutely. Absolutely, and there's so much BS in and around this, but we see it echoed.
Phil Newton: It's just incomplete.
Sean Donahoe: Yeah.
Phil Newton: It's incomplete information.
Sean Donahoe: Absolutely. Now, the last one, which I think is really good, is-
Phil Newton: This one is gonna set a rocket under you as well.
Sean Donahoe: It bloody well is.
Phil Newton: Soapbox is at the ready?
Sean Donahoe: Okay, doubling down on ... Yeah, absolutely. I've got my soapbox ready to stand on here, but doubling down on losses to win back and profit, which is a popular ... I mean, yeah, there's a thing that was a strategy for gamblers called the Martingale, which relies on the fact that as long as you double up .
Phil Newton: I thought it was because it was in the mid 1800s that this was devised with roulette, as I understand it.
Sean Donahoe: It was, yeah.
Phil Newton: Some French guy. I'm guessing it was Martingale.
Sean Donahoe: I don't actually know the nationality, but basically it means ... I think you're probably right, but basically if you imagine that you are placing a bet. Let's just say that you had very even Steven gambling thing. Toss of a coin, and you bet $10 to start with, and then you bet $20 if you lose. $30 if you lose. $40-
Phil Newton: No, you double it.
Sean Donahoe: Oh sorry, you double. I'm sorry.
Phil Newton: Yeah, yeah you double it.
Sean Donahoe: Sorry, I'm sorry. Bad math. So $20, $40, $80, $160, $320, no sorry.
Phil Newton: You keep doing that until you ... You keep doubling your stake if you like until you have a winner.
Sean Donahoe: Exactly.
Phil Newton: The only thing you can win back is your original. You'll win all the losses, but you'll get your tenner back. Whatever it was you originally .
Sean Donahoe: Basically it only goes ... Yeah, but-
Phil Newton: Give it a one for one reward.
Sean Donahoe: ... you will have basically come ahead by your original bet. Well the problem is that you have to have a gigantic deep pocket to make that work, and the problem is the people who try and use that in Vegas soon realize that's why they put a limit on the amount you can bet on any, like even in blackjack 'cause people use it in blackjack a lot as well, and it's a really dumb strategy, but mathematically it works.
Phil Newton: Mathematically you're absolutely right, Sean. Mathematically it works but, and again, but, capital letters, underscored, you need deep pockets to apply it 'cause you couldn't do it in the stock market. There's no table in the stock market.
Sean Donahoe: If you have a losing streak-
Phil Newton: Other than what's in your accounts.
Sean Donahoe: Yeah, if you have a losing streak that exceeds your ability to double up, you're screwed. And the same again, that's why they limit this in on the tables where you've got limits on ... You can't then exceed that bump. Your ability to double up is now crushed, and that's what it's all about.
Phil Newton: And a lot of novices fall into this. "Well if all I've got to do is this doubling down to win back, surely I'll get my money back, and I'll only ever be profitable." That's the fallacy of this Martingale doubling down strategy to win back.
While we acknowledge, mathematically, it's right, but it doesn't take into consideration your financial status, the accounts, the size that you have 'cause suddenly you're gonna be trading very big position size very quickly even with a short losing streak of four, five losses.
And to be fair, if you've got a strategy that is not consistently winning with any degree of regularity, you probably shouldn't be using that method anyway if it's old first of all, but you've probably not got a good trading methodology if you think that adding this Martingale strategy is gonna be the secret ingredient to trading success.
Surely refining entry and exits and the management position in between would be a far better use of your time than imagining what life would be like if you could only double down one more time and hope the next one is gonna be the one.
Sean Donahoe: Absolutely.
Phil Newton: 'Cause that's what you're saying every time. "Next one's gonna be the one."
Sean Donahoe: Yeah, this time next year we'll be millionaires. That's the old Del Boy theme, but people have that as a popular delusion. We'll call that the Del Boy delusion. There you go.
Phil Newton: It's almost like the ... kind of like a lottery mindset. If I can just buy enough lottery tickets ... Yeah, you'll win, but will you win enough to cover the purchase of the lottery tickets. That's essentially what we're doing. It's stupid to say the least.
Sean Donahoe: Yeah. Absolutely. So with that being said, I think we've put a nail in that one. Many, many popular delusions, and a little bit of madness of the crowds. Go check out the book. I'll link it in the show notes 'cause it is really, really good, and it is, like I said, two books in one.
Phil Newton: It's a twofer.
Sean Donahoe: It's two for Tuesday. There you go. So, we'll put that in there.
So with that being said, let's rock on.
Recording: And now, it's time for the Rebel Trader tip of the week. Brought to you by tradecanyon.com. Ready to take your trading game to the next level? Discover where smarter traders come to get coached by the best and learning to trade just got way easier. Trade Canyon. Smarter traders live here.
Sean Donahoe: Okay, so Rebel Trader tip of the week, and this is something that I advocate a lot for with students and also myself: Become obsessed with tracking your progress. So you're knowing where you are, where you came from, and our success rate, your wins, your losses minimized is gonna ... It's basically more physical data to your growth and success as a trader because we all have our personal biases, our egos, and everything else in our emotional awareness-
Phil Newton: If it's in black and white, you can't ignore it.
Sean Donahoe: Yeah. Exactly. You may think you're a master, but if you're not actually succeeding, then boom.
Phil Newton: The numbers might tell a very different story.
Sean Donahoe: Exactly. You've gotta understand where you are, black and white, as Phil said. ... hard data that reinforces the perception of growth. And it will also drive you. When you have that hard data, it'll drive you month after month to refine your trading and get better, magnifying your portfolio growth.
So again, become obsessed with tracking your success, keeping the trading logs like we mentioned a little bit earlier on.
Phil Newton: I suppose that begs the question, Sean. The usual question I get asked when I suggest this is do you track your ... What do you track? If you're not sure what to track, don't worry about it, all the things that you could track. Just literally put your position, your entry, your exits, and whether it was profitable, and then from that you can start to ... Over time, you'll say, "Okay, well I want to know this information." And then you can add things to it, but just start with did this win, by how much, or did it lose and by how much, and then you'll be able to see, "Okay, I'm making money, or I'm losing money." And then -
Sean Donahoe: Did I follow my strategy?
Phil Newton: Yeah, and how many was I winning, and how many was I ... You can start to work out your kind of win rate, if you like.
So for example, I know on average that 65% of time I'm making money, and I just don't know which 65% of the trades will make me money, but that gives me confidence to put the next trade on. I'm making money 65% of the time, and on average my account is going up quite consistently. These are things I know, and I only know these things because I'm tracking what I'm trading.
Sean Donahoe: Very much so, and that's really it at the end of the day.
Phil Newton: You can add everything else later. Is your business profitable? That's the first thing that you want to know. Is it profitable, and on average about how much of the time am I profitable?
Sean Donahoe: Exactly.
Phil Newton: Let's take it the other way just for a moment, Sean. If you know that 35% of the time you're only making money 35% of the time, again not a bad strategy, but overall you're still making money, then that helps you weather the bad times because you're waiting for that 35% of the time that you're making money.
Sean Donahoe: That's exactly it.
Phil Newton: And you'll only know that, and that gives you the confidence to kind of suck it up and take a couple of punches in the stomach because you know that 65% of the time it's not gonna work out the way that you expect, but if you're making money, then yeah, 35% of the time you are gonna make money, and you know just to wait it out, wait it out, wait it out. It's the averaged. It just gives you the confidence to be able to put the next trade on because you've got this data at your disposal so that you can put the next trade on.
Sean Donahoe: Yeah. That's it. At the bottom line, just get the hard data, track it over time, and if you see it going up, guess what? You're becoming a better trader. If you see it going down, then where are your pinpoints? What's going on? Those are the points you need to address.
Phil Newton: those marvelous men in those flying machines. If your account's going up, diddly up, Phil.
Sean Donahoe: Indeed. Hopefully not going down diddly down, down. So ... Dear me, I can't believe he worked that in there. Anyway, with that being said, let's jump over to the quick fire round.
Automated: If you've got questions, they've got answers. Sean and Phil dive into the virtual mailbag for this week's Rebel Trader's quick fire round.
Sean Donahoe: So, okay, rummaging around in the Rebel Trader mailbag here, as I'm now having Dick Dastardly and Muttley going through my head with the Catch the Pigeon, which is the natural follow on from the last segment, but here's a question for you Phil.
Okay, now this is actually one that I thought you would appreciate because it's kind of ... it's right in your wheelhouse. Wouldn't buying both a put and a call on the same stock produce guaranteed returns? So, I wanted to kind of go into the strangle side of things here a little bit, but yeah.
Phil Newton: All right, I like long strangles, but you've got to do them, as far as I'm concerned, in a quite particular way. And will buying a product, will it guarantee returns? No, is the short answer. It's not a flippant answer either that, no, it will not guarantee returns. Nothing will guarantee a return. Let's just make that abundantly clear, and having an expectant movement will.
Now if you think there's gonna be an explosive movement on the stock, and the options are inexpensively priced, the implied volatility ranking is, for example, low or as low or close to as low as it's been in say the last 12 months, so it's got a low ranking, so the options are inexpensively priced. Then it might make sense. Notice the word. It might make sense to buy a long strangle, as long as you set it up right because one side's gonna be a winner, one side's gonna be a loser.
So you need to set it up in such a way, and it can be done, whereby you've, assuming that you're right and you see said explosive movements, then the side that you make money on needs to be at a faster rate than the side that you're losing money.
Sean Donahoe: Yeah.
Phil Newton: That can be done, and if that's above your head and this isn't strategy for you, if you want to know how to do it, by all means get in touch. We're very open with what we do. If you'd like our time, then obviously put your hand in your pocket. And with that being said, it can be done, but it's by no means a guarantee of returns.
I usually like to do these when options are inexpensively priced and I think there's gonna be an explosive movement and I'm looking for the stock to move in excess of 10 to 15% absolute minimum. So, I have criteria for this type of setup, but yes, I quite like a long strangle every now and again.
Sean Donahoe: Perfect. Perfect. Perfect. Okay-
Phil Newton: I was gonna say Sean, I've got a question for you before we skip over.
Sean Donahoe: Sure.
Phil Newton: Kind of timely and topical. So, are the trade tariffs that have been proposed or the potential trade war, is that gonna potentially trigger a black swan event that could crush the markets?
Sean Donahoe: No one knows, and no one knows what's going to be triggering the crowd in this case. I don't think so. I think we've already been in a trade war. We talk about this a little bit in the Happening Now report in a little more detail with our other cohort in podcasting, Mr. Andrew Page.
But at the end of the day, we've already been in a trad war for a long, long time, and our industries have been undermined.
Phil Newton: And will it cause that black swan event? I mean, I think that's what, surprisingly because the crowd, the popular herd is talking about such things, it puts the fear of God in ... Just a phrase people, don't look into that. It puts fear into people about will the markets collapse or crash or ... It's certainly the fear mongering of the talking heads.
This is a question I've been asked a few times recently, I know you have, which is why we raise it today, but is it anything to worry about I think is the ultimate question. Should we worry about the markets collapsing if there's going to be some sort of trade war.
Sean Donahoe: I don't think so. Now, we've been talking about abolish the environment we've been in for the last nine years and what have you, and we're due for a major correction. We had a little bit of a sell-off and a blow-off in recent weeks, and that has been a pressure valve. I think a lot of this .
Phil Newton: So it's not going to impact the consumer in a major way?
Sean Donahoe: No, it's like $50 to $100 on a car. Well, that's not really that much considering the price of a car. And again, it's all the economies as scale ... I think this is a lot of fear mongering. I think this is a lot of the market media-
Phil Newton: Posturing and positioning.
Sean Donahoe: ... posturing and positioning. I think a lot of it is leverage. Again, talking about NAFTA and everything else, which is what we mentioned in Chewing the Fat the other day. I don't think so. I don't believe so, but-
Phil Newton: Interesting perspective.
Sean Donahoe: ... we are due for, I would say, a bearish environment, so it's a case of, okay, you've got an awareness. Here's the thing: you're asking that question. What's your awareness looking for the events?
Phil Newton: Maybe you're over bullish in your portfolio would be my kind of reaction. Maybe you're only concerned because you've got a slightly bullish or overly bullish biased portfolio. Maybe you find things to put into the mix that would counteract that fear.
Sean Donahoe: Exactly.
Phil Newton: Either lighten the load, reduce your position size, maybe think about some exposure or protection should such a ... If that's your big fear, then you know there are certainly steps and strategies that you can use to kind of reduce the impact of at least the fear of that black swan event. Yeah, it's gonna cost you, but if it makes you sleep at night, then it's worth doing.
Sean Donahoe: Absolutely, and the other thing is, if you have ... This is what I was gonna say as well is if you have a balanced portfolio with, you know, where you can profit from a downside move, there's-
Phil Newton: Goes back to 50/50 in this portfolio, I am sleeping like a baby.
Sean Donahoe: There you go, and again, it's just gonna help you profit from any downward movement because again, a lot of people have that preconceived notion that you can only make money when the market's going up. No, you can make money on both sides. This is a two sided market. This is not cryptocurrencies. You can actually do a lot with this market and profit from both sides to balance your portfolio.
Phil Newton: Perfect.
Sean Donahoe: So, last one: is it important to learn candlestick chart patterns to be a successful trader?
Phil Newton: No. It's not important. To be fair, it's not important to know or learn a lot of things to be a successful trader. I actually was thinking about this over my lunchtime, which is a few hours ago, and I recall a trader who basically he was a moving average trader, and the moving averages don't matter, but basically what he did was he waited for the moving averages to cross, and then he would either be a buyer based on the cross or a seller based on cross. He was only a trend trader.
And you know what he did, Sean? He took, he hid price on the chart. He didn't actually look at price at all. He only looked at moving averages.
Sean Donahoe: Hmm.
Phil Newton: I know. Interesting, eh? So, basically he was buying bullish or bearish, buying or selling based on the moving average cross that he was looking at. He had quite deep pockets. He didn't run stocks because of that, and he was basically just waiting ... I think he was trading the futures market at the time, but that's essentially what he did.
So, no you don't need to know candlestick patterns, but he found that most relaxing way to trade. He wasn't focused on every optical or downtick or what doji, spinning top, hammer, three quacking ducks, whatever the pattern is.
Sean Donahoe: The three quacking ducks, I love it.
Phil Newton: Yeah. Whatever the pattern is, he's not worried about it because all he's trying to do is trade the trend. He wasn't capturing tops. He wasn't capturing bottoms. He was just pinching the bit in the middle, and that's all he wanted. That's where he's happy, and as a long term trader, he was making good money doing that.
Now to accomplish that task, he basically removed price because he saw that as a hurdle and just traded when the averages crossed. So he was just trading when the moving averages crossed. It's quite an interesting concept. It's not for everyone, don't get me wrong; it's quite an extreme way of trading, but just trying to illustrate the points or to answer the question. It's not important to learn candlestick chart patterns to be a successful trader.
How do you want to trade? Start with the end in mind. How do you want to trade is probably more important to me than what you use to accomplish the trade.
Sean Donahoe: Yeah. I agree with that wholeheartedly. I mean, it's the same thing is, it just depends on where you want to specialize in. I think for what we do it's a good skill to learn, but it's not essential.
Phil Newton: I think it's an addition 'cause the way that I teach people is not to memorize a list of patterns or short patterns or candlestick patterns. I've just got essentially one pattern, but the way that I describe it, it actually all encompasses several types of patterns just because the way that we teach it, so you don't have to worry about is it a three quacking ducks or is it two roosting hens, you know? Whatever the name of the pattern is, you don't have to worry about the name of it as long as you understand what the price activity that created the pattern in the first place. That's what we teach you so that you don't have to worry about the name of that 'cause the name of it doesn't matter. We'll only know after the event what the name of something is called anyway. As long as you understand what's going on, that's going to get you into the trade, not what it's called.
Sean Donahoe: Abso-damn-lutely. Okay, 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 hijinks and hokum of so called experts. Yep, it's time for Bullshit of the Week.
Sean Donahoe: Okay, so Bullshit of the Week. This is a double sided bullshit. This could go either way based on the facts as they emerge, so let me present it as is, and you can extract whatever bullshit you like from this.
Phil Newton: It's worth suggesting you can make up your own mind as to whether it is, isn't, or how much bullshit we're in.
Sean Donahoe: Absolutely. So here it is. Former Trump advisor Carl Icahn, who is a billionaire investor, sold his stake in steel companies, about $31 million, before Trump announced his trade tariffs on steel and aluminum.
Now here's the thing. He is, like you said, American businessman, investor, and he is the founder of and controlling share holder of Icahn Enterprises. Okay, so allegedly, he sold 31 million of his shares in a crane manufacturer man ... I can't even say it. Manitowoc Company. Now here's the thing. In the weeks before Trump said he would impose new tariffs ... Now here's the thing. Depending on your news source, and this is where I think the bullshit it, some say it was in the days before the announcement, but most of the mainstream, I would say, more trusted sources, are saying weeks.
So here's the bullshit. If it was weeks before the announcement, then obviously there could've been a lot more other things going on that would've defined and said, "Hey, maybe I've got ... This position is not going anywhere for whatever reason. I'm gonna dump this one; I'm gonna put it somewhere else." Okay, fine.
Phil Newton: To be fair, he only took a third of his position off. For all intents and purposes that's a problem if the profit taken, if he's closing it for a profit.
Sean Donahoe: Absolutely. Here's the thing-
Phil Newton: It's not like he's closed out completely.
Sean Donahoe: But here's the BS. Now if it was in days before Trump announced his thing, and again, a lot of it is hyped up newsworthy because-
Phil Newton: It was a slow news days.
Sean Donahoe: It was ... Well I think a lot of them also, anytime Trump does something, the media wants to kind of attack him and find a way to attack him. Let's just face it, let's be honest here and take politics on the table for a second. The mainstream media does not like Trump, okay? Well, fine. Okay, fine. Irrelevant. But if it was weeks before but they're reporting days before, that puts a completely different spin-
Phil Newton: Fake new dot com.
Sean Donahoe: Exactly. That puts a completely different spin on it, so in this case, the bullshit with the media because they're misrepresenting the timeframe. If it was actually genuinely days before, then yeah, that smells of insider kind of trading type deal going on. That's bullshit.
Phil Newton: So one's been given a nod and a wink, haven't they? Yeah.
Sean Donahoe: Exactly. But if it's weeks before, then there's a lot more timeframe, a lot more influence and a lot more other things that could've been a factor, so you know-
Phil Newton: And to be fair, taking the time factor out of the question, kind of my tuppence worth is it's only a third of his position. If he had taken two thirds of it off, then regardless of timeframe, I would say someone's been given a nod and a wink somewhere. It's only a third of his position. It's not ... Yeah, it's still millions of dollars, but in terms of his position, it's only a small portion. Arguably, it's not really that big of an impact.
Sean Donahoe: Mm-hmm (affirmative). Now-
Phil Newton: Sorry, just my idea. Sorry, Sean. Just sticking me oar in where it's not welcome.
Sean Donahoe: Well, no, it's absolutely-
Phil Newton: Just in the counterpoint, it's like, I'm arguing, like who cares? It's not gonna impact how I trade. Why make all the fuss?
Sean Donahoe: No it's not, but it's-
Phil Newton: But it's just a good example of bullshit and the talking heads going batshit crazy over this little problem that doesn't really matter.
Sean Donahoe: Yeah, they basically, I mean in the long and the short of it, and it is in the phraseology, he's a former Trump advisor, and apparently according to ... Yeah, he sold more than a third of his stake in this company from February 12th through the 22nd. And then they're saying that last April, different bodies, were citing security concerns regarding steel and aluminum trading, and the imports and where the economy basically is in regards to that.
So, these reports and concerns were made public on February 16th, so they're saying, "Hmm, this stuff was coming in before he made his thing," but like you said, it's a third of his stake. That means he's still got two thirds in it, and it's not really relevant, but again, do you call it bullshit because it's in the weeks before or the days before. How do you put that in the quotes?
Phil Newton: Well, as I was saying, the size of position and how do you measure it?
Sean Donahoe: Exactly. Exactly. Now here's the thing. Trump made those announcements last Thursday. Did someone get a wink and a nod? Maybe, maybe not.
Phil Newton: Probably, but you know what? Prove it. That's the counterargument to it. Prove it.
Sean Donahoe: Exactly, and the fact that he-
Phil Newton: It's just to be lazy with an answer.
Sean Donahoe: And it's a crane manufacturer, and he only removed a third of his stake. It's a nothing burger story, but it's one of those ones as okay, look at the timeframe, let's look at that.
Phil Newton: Let's bring out the parade for this one because we've got not much news to talk about.
Sean Donahoe: Exactly, so I had to call bullshit on that one. It's like, oh give a . Well there you go.
Anyway, with that being said, let's wrap up the show right there because I think that's been an epic kind of insight into the popular delusions or the madness of crowds. Again, I will link that book or the two books on the-
Phil Newton: It's a two for one, but yeah.
Sean Donahoe: It's a two in one, but I'll link it on the show notes, but again, I really enjoy doing this show, but please remember that this show is not free. It will cost you a five star review. Go to tradecanyon.com/rebeltraders. You can find all of the different ways to listen to the show. You can subscribe right there, but do leave us a five star review. This helps us get the message out and our podcast out to more traders just like you so that they can share the benefits of what we talk about here and all the benefits that you're getting from this as well.
Phil Newton: Yeah, well, since we're talking about the mind and psychology, and if you'd like to stroke our egos further, you can certainly connect with us on Facebook and send us some love messages or hate messages depending on what you want. I wouldn't mind getting sort of love messages 'cause if you've got to this point, you can't not hate us.
You can also find us on the Twitter machine as well. You can find us there, same link: tradecanyon.com/rebeltraders, and again, you can send your adorations about the show right there.
Well, Sean, it's been a great show. It has been very interesting. A subject that's very close to my heart is the mind and psychology. As far as I'm concerned, it's the thing that's gonna keep you in the game, and not just next week, next month, next year, but you know, 20 years down the line. It's the mind and how you cope with the trading minutia on a day to day basis. So yeah, very interesting subject.
With that said, what do we have coming next week?
Sean Donahoe: Well, we're gonna go do a little bit of Wizard of Oz, just don't look behind the curtain. We're gonna look at market drivers, manipulators, manipulations, all the nefarious I ... Just don't look behind the curtain. Well, we're gonna peel it back and have a look and kind of-
Phil Newton: Need some tense piano music, don't we? .
Sean Donahoe: So I don't know if I end up being the tin man or the lion or what have you, but we'll see.
Phil Newton: Maybe Dorothy, just because the shoes. Why not? Just to keep on with my shoe fetish and to be flippant.
Sean Donahoe: Dear me. Okay, so Dorothy. We'll do that next week. With that being said though, take care for now-
Phil Newton: Bring Toto along.
Sean Donahoe: Absolute, well he's down stairs barking his ass off, so ... So, yes, we're not in Kansas anymore, let's rock on, and we'll see you next time. Take care for now.
Phil Newton: Bye for now.
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


[01:57]Sean: Okay, so what the hell is this show about? Where are we going with this? Phil introduced me to a book a few years back that is now one of my favorites and has found a place on my bookshelf. It's called the Extraordinary Popular Delusions and there's a second volume which is the Madness of Crowds. Two books in one.


[02:21]Phil: And it was written many years ago. If you can get past the old English, it's actually quite an interesting read.


[02:29]Sean: It was actually an early study in crowd psychology by a Scottish journalist called Charles Mackay.


[02:35]Phil: That's why you're in favor of it.


[02:37]Sean: There is a wee bit of bias there indeed. It was actually first published in 1841. You might think, that's not exactly 50 Shades of Gray or one of these modern thrillers, but this is very interesting.


[02:56]Phil: A page turner.


[02:57]Sean: It is a page turner. When you get into it, I found it absolutely fascinating. Now the book basically chronicles its subjects in three parts - national delusions, peculiar follies, and philosophical delusions.


[03:18]Phil: Just to interrupt you again, Sean, it's not Phil's delusions, it's philosophical delusions.


[03:20]Sean: Yeah, if they did an updated version they might have a section for Phil there, but who knows? At the end of the day though, Mackay was a very accomplished teller of stories.


[03:38]Phil: Forward thinking for his day.


[03:41]Sean: Very much so.


[03:44]Phil: And I suppose for the time, some of these things we kind of take for granted, the topics. But you're right, it was very forward thinking and today it's quite common to broach a lot of these subjects. We've talked about some in the past, the popular follies in the context of the markets. This was talking about how people behave like idiots when they get together in groups. That is the layman's version of it. It's things you probably recognize on a daily basis. I'm a fan of the book anyway. It is a very interesting read if you can get past the old English which is disjointing to read if it's the first time you've done it but it's well worth it.


[04:34]Sean: The one thing with this book though is it does chronicle things we take for granted. For the period that it was set in...


[04:46]Phil: Groundbreaking thoughts.


[04:48]Sean: Yeah, we talk a lot of about history repeating itself, but it's very interesting. Let's start with the first. I've taken some quotes from these two books that I think is a good place to start.


[05:16]Phil: We shall put the top hat down and break out the monocles.


[05:21]I'm gonna put two monocles on that way I have my glasses, that way I can read my notes here. The first quote is, "Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one." Let's break it down. That basically says it's very easy for men in crowds to be dumb as bricks.


[06:00]Phil: An extreme example of this would be a public riot. We saw this in the U.K. the last couple of years. They went batshit crazy, acting like a crazy crowd because someone was inciting the hate. Let's go and throw bricks through windows. The popular crowd also thought that was a good idea and there was a riot through half the country.


[06:26]Sean: What happens is it becomes almost like an infection.


[06:33]Phil: Seemingly rational people start doing crazy things. That's an extreme example. But it happens in a microcosm with two or three people, or a local level when a prejudice just to keep it general. If a group of people is prejudiced against someone's behavior, if they were speaking to those people individually they probably wouldn't have a problem with it. But because the group has that opinion, even though the individual might not. That's that herd mentality.


[07:11]Sean: Now we also see this and bring it trading with bubbles. Suddenly it kind of aligns with people's biases, beliefs and everything else.


[07:29]Phil: The market only goes up is an example at the moment.


[07:33]Sean: We've seen it with crypto.


[07:42]Phil: #crypto. It gives me no end of amusement. I do find that phrase amusing. I don't know what it is. Another example of my being stupid is everyone hashtags everything. #etf #buythedip


[07:38]Sean: Perfect example. But if you look at things like we've had cryptocurrency, we've had the housing bubble. If you want to go back to Charles Mackay's era, we had the Mississippi company bubble, we had the tulips in the early 1700s, the South Sea bubble of 1711 and 1720. A lot of these brought out the herd mentality.


[08:39]Phil: We see it at Christmas every year. When everyone goes crazy over the popular toy.


[08:46]Sean: When Phil wants his GI Joe with the kung fu grip.


[08:51]Phil: Everyone jacks the price up. Auctions are another good illustration of this. The stock market is technically an auction. If we had a housing auction or Sotheby's or something, if it's a popular item everyone goes batshit crazy for it.


[09:11]Sean: It's true. One of the things we do as traders, we're very conscious of where the crowds are, where the crowds are moving and we do that a lot by studying the charts, the markets, and having an awareness of what's going on. We deliberately want to extricate ourselves from the crowd. In some instances maybe with the crowd in sentiment, we don't want to be in the crowd and dramatically reduce our IQ.


[09:45]Phil: It might be worth making a separation between the consistently successful trader versus the rest of the traders, the herd. Perhaps a lot of traders are trying to trade, as we've said many times, the general public is the last to know and the last to react. What we don't want to do is be the last person to react, which is predominantly what the herd is doing. They finally decided to make some sort of decision when it comes to the financial markets. They're the last to know anything. As traders, we want to be ahead of that. While we advocate a lot of the common knowledge like buy the dip, no one actually says how to do that. Most people are not buying the dip in a rally like they think they are. They're the last to know. They're getting out when the turn has already started. The herd is late to the party. What we want to do is use the technical tools as they were intended to help evaluate an opportunity.


[11:12]Sean: Very much so. This kind of tips into where we're looking at the markets and there's a lot of indicator traders who use them. They cluster around common values. It creates its own self-fulfilling prophecy. Phil has this story about Woody's CCI. I'm gonna let him take over.


[11:41]Phil: We've talked about it from the point of the talking heads talking about price has reacted off the 200-period moving average. There was a guy with surname Woody, hence the name Woody's and the common indicator he liked to use was CCI. Hence the name, Woody's CCI. He basically developed a group, a following, of how to use CCI to interpret trading or identify trading opportunities. In fairness, a very successful trader. He developed such a following with this methodology because it was quite simple to use, quite easy to interpret. It was very rule-defined, which is what we're striving for when we're using any type of methodology. We want to be able to replicate what we did previously. That's why it was very attractive. It aimed at a global audience of users. As such it often became a self-fulfilling prophecy because so many people were using the indicators and the methodology behind the tools. They're all looking at the same instruments and popular markets and timeframes. They were kind of creating the setups and moves for themselves and that's when the setups started to fail because there was no buying or selling power beyond what they were creating. Because of this, so the story goes that people who can move and influence the markets were in the short-term manipulating some of the setups so that it created this frenzy of traders buying or selling whatever instrument was being manipulated. They were getting in a position while professional traders were getting out and they were using this herd of influx of buying and selling, liquidity, and that creates small movements. Some of the bigger players were taking advantage of this because they were scalping off retail traders blinding taking every signal and not using their heads to evaluate the opportunity. They were just trading, and I use the term very loosely, signal, generated loosely from the tools and methodology. The methodology for a short period of time broke down because there was no follow-through from the movements they were expecting. They were basically just buying and selling to each other. Surprisingly, Sean, we could take Woody's CCI out of the equation and put cryptocurrency in its place because that's essnetially what's manipulating the bubble that we've just seen. It's just people buying and selling between themselves creating and generating on "signals" with no real movement behind the markets.


[14:42]Sean: Very true. So, the next quote I want to discuss is one of my favorites but old English, so bear with me. "Of all the offspring of Time, Error is the most ancient, and is so old and familiar an acquaintance, that Truth, when discovered, comes upon most of us like an intruder, and meets the intruder's welcome."


[15:10]Phil: It's almost like poetry.


[15:12]Sean: It kind of is. You'd never catch me reading poetry in a million years, but, so what does this mean? It means we have our own biases and we all make mistakes. The problem is when the mistakes override the strategies and pure math of what we should be doing, we just disregard them. We basically take those errors as the truth and ignore the truth because we've redefined where we stand. I'll give a blackjack example. It's like hitting a 16 against a 6 with the dealer. One of the cardinal rules is if you've got a 6 or less against a dealer, then you're likely gonna stand on a 12th or more. 16 - you've got a high probability of going broke if you go ahead. It's a bad strategy but if you win, even though it's a mistake to make that move, you're more inclined in the future to hit 16s because that one time you won against a dealer, it sets that new boundary of I won that time so I should win every time.


[16:37]Phil: It's that recency bias we were talking about in the previous show.


[16:40]Sean: The problem is that when you make a mistake or some sort of error, whether it works out or not, we tend to have that little bit of bias against it but whenever our strategy or probability or rules should be saying one thing, we tend to ignore them, especially when those mistakes become profitable or they actually work out. And that is a big thing.


[17:10] Phil: You ignore because you had the favorable outcome. You made some money. This is quite a serious thing actually, when it comes to the market, that error blindness. I made a mistake and didn't execute my plan how I should have, but it made me money anyway, therefore I must have done something right. One way to overcome this is to reevaluate what you consider a successful trade. We've spoken about this a few times in the past. This is gonna keep me in the game. 20 years down the line, this mindset of reevaluating how you determine a successful trade so you can avoid this error bias that you were just describing.


[18:15]Sean: I think you were going to lean into a trader's log.


[18:21]Phil: I was gonna suggest that making money doesn't mean it was a successful trade. Perhaps reevaluating what we call a successful trade is gonna help me recall whether I did or didn't make an error. Some of the most profitable trades I've had have been some of the most stressful because they were placed in error. A successful trade is one where I followed my plan through to letter. I planned it and executed it how I planned it. Afterwards, I ask myself, did I do everything I said I was gonna do? Yes? Okay, that was a successful trade. The monetary aspect is secondary to that. If I ask myself the same question and I still did everything I said I was gonna do, only this time it just produced a monetary loss or gain. The monetary outcome is not consequential to considering a successful trade. As such I can say I have been a successful trader for many years. I very infrequently have a losing trade. It doesn't mean I don't have monetary losses. It just means I've executed my trades to the letter. What you were suggesting was that if you placed a trade and made money, it was successful. I'm gonna deviate from my plan again in the hopes it will make money again. That's not a strategy.


[20:31]Sean: As you know guys, we don't want to throw anything to fate, and that leads into our next one. "How flattering to the pride of man to think that the stars on their courses watch over him, and typify, by their movements and aspects, the joys or the sorrows that await him!" It's very poetic. What does it mean? Throw everything to fate, that the stars and the lords of the stock market will look over you, they care about you because you're so important to the markets.


[21:21]Phil: Pride of man. Suck it up and check your ego. It's not a case of being right every trade. It's a business. It's about being right on average. If people can push this to the side, they'll get over the pride of ego. The reality is, you can have 35% of your positions making money, there's lots of people that would bite your arm off with that success rate. If you're overall making money on average even with a 35% success rate, that's a good strategy. You're making money. It's difficult to execute because the other 65% you're losing, but if you're making more than you're losing, it's a good strategy. People want to be right every time because it's egotistical. I see it all the time in my news feed - look how great I am. I've made money again. Look how great I am, how wonderful my life is. It's not just in the trading world. The reality is you're only seeing the surface. Check that pride. It's got nothing to do with being right. It's about a business plan that has a positive expectancy outcome, a posh way of saying on average we make money. It's nothing to do with fate, it's all about probabilities.


[23:13]Sean: Absolutely. Playing the probabilities and not the longshots is a more consistent way to make profits. I see a lot of people swinging for the fence, relying on fate, and it's a fast way to go broke. It will destroy you. We see a lot of market players and traders who have their heads buried in the sand. They've got their heads up their butts.


[24:01]Phil: If you can control the emotional elements... don't be sucked into the popular delusions of the crowd. Be your own man, or woman, or trans or whatever the politically correct thing to say is nowadays, be your own person. Have your own mind. Now that you've got this awareness of an opportunity, there might be a crowd of people saying do this, but make your own mind. Do your own research. Is this the right opportunity for you considering the way you like to trade or invest? I think that's the best way. It's got nothing to do with ego. Check it to one side. Is it the right thing for your business? If you control yourself with that simple asking of question, you're not gonna fall into these traps. Now you can avoid them.


[25:07]Sean: Perfect. That leads onto the next one. This is a weird one to read. "We go out of our course to make ourselves uncomfortable; the cup of life is not bitter enough to our palate, and we distill superfluous poison to put into it, or conjure up hideous things to frighten ourselves at, which would never exist if we did not make them." We make life difficult for ourselves. We take something that is difficult and make it even worse to kind of scare ourselves. This is especially true with groupthink.


[25:48]Phil: I think Henry Ford summarized that a hundred years later. Bear in mind this is 1840. Was it Henry Ford who said, "Whether you think you can or you think you can't, you're right"? It's another way of saying the same thing to take it out of Old English. If you've got a negative mindset and you think you're going to bugger up in some way, you probably will. Whereas if you've got a preconceived notion of success, you probably will see success. It's this mindset that is described in that phrase there.


[26:27]Sean: Absolutely. Traders tend to add too many complications to their trading and make their lives more difficult.


[26:45]Phil: Look at the people who are posting, look at how great my new system is. They've got 50 indicators, 20 moving averages, a couple of oscillators, little of everything. The chart is all colored, auto trend lines on there. It's over-complicated.


[27:06]Sean: It really is.


[27:17]Phil: I can only succeed because I'm using all these indicators. Actually, it's probably the opposite but you're just oblivious to the fact that you've set yourself up for failure.


[27:29]Sean: Well the problem is when you have so many different things and indicators, you're going to pick out your own biases for your own moves by one or two of those indicators that now have given you your own "signal". Everything else might be contradicting, but you'll pull out what you see anyway when you have that much stuff going on.


[27:57]Phil: You've got so much going on there, you'll see what you want to see. It's that confirmation bias. Of course you're going to find something to support whatever you've convinced yourself of. You can find the evidence for that, or not for that. Just pick one tool, pick your favorite. All they are is a way to help you interpret the data. If you can do that, you only need one tool. When you get used to trading, you will remove the indicators off the chart because you'll just know what to trade. You're always comparing what price is doing, but you're looking at it through the lens of your favorite tool. Eventually you won't need it.


[28:56]Sean: They're filters. It's to raise your awareness. That's really it. Funnily enough, we also see a lot of this superfluous poison - the news, financial networks. Traders who want to make their lives difficult go to their interpretive sources and add more noise to the mix. A lot of these talking heads have one on one side, one on the other, arguing about who's right, which works into your confirmation bias. It's just noise and you're making your life more difficult. They play to the herd. You need to be the lion on the rock looking at the wildebeest, thinking what a juicy steak. That's what we position ourselves as.


[29:58]Phil: You raised a point with the news network. What we mentioned earlier is the news is representative of the general public. They are "educating and informing" the general public.


[30:20]Sean: Bullshit.


[30:22]Phil: It's entertainment as far as I'm concerned. It's not really providing any value in the world. The news and the media stations represent the general public, who as we've established, are the last to know anything. This herd we keep talking about. When the music stops, they're gonna be the last holding the parcel and it's a ticking bomb inside. They're not gonna be early on the opportunity most of the time. Why would you want to follow the crowd if you're the last to know a piece of information? That piece of information is not gonna make you a better trader. Having a systematic approach to find, filter and sort opportunities and be ahead of that announcement when they come out are gonna be your reasons to get out. The crowd wants to get in. A good example might be an earnings announcement. Very often, I'm in before a known news announcement and most of the time I'm right. If the trend's going up, I'm buying the dip in the uptrend. Just because there's earnings on the horizon, doesn't mean I'm not gonna place that trade. It's usually favorable in line with the overall trends. For most people, the herd, the crowd is their reason to get in and be interested in a trading opportunity. For us, the majority of informed consistently profitable traders, that's their reason to get out because that herd is gonna be on the other side of your position. They're not making their own decisions.


[32:05]Sean: Absolutely. Now here's another one I think ties very nicely to what Phil was just talking about. "We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first."


[32:33]Phil: We see this in pop culture all the time. Who's bought the latest handbag, who's shagging who, what divorce, Kanye and whatever the other one is. It's trash culture as far as I'm concerned. Everyone goes crazy for whatever blue dress the royals are wearing. Who cares? Make your own mind up. A historic example of pop culture, everyone went batshit crazy over the Beatles music. Although I'm a born and bred Liverpudlian, and home of the Beatles is Liverpool, I never really saw why people were going crazy over the Beatles. It's okay music. I quite enjoy it. But not all of it's fantastic. But at the time, people lost their minds over their music. It's this crowd, this herd. Because my neighbor enjoys it, I must enjoy it. That crowd psychology, that keeping up with the Joneses is for many people infectious because they can't make their mind up. Was I a little bit too critical there Sean?


[33:46]Sean: No I think you're dead on.


[33:47]Phil: If you happen to like the latest handbag some celebrity's bought, that's fine. But don't be excited because that celebrity has it. Most of the time, you probably shouldn't do what the latest celebrity's done that's been published in the news because it's idiotic behavior most of the time.


[34:20]Sean: We're gonna bring it back to the markets. You can point at any bubble and you'll see your own hords pointing to their own destruction. Prime example-


[34:27]Phil: Lemmings off the cliff, I had a vision when you said that.


[34:33]Sean: That's exactly why. They do run to their own destruction. When you look at the crypto bubble as an example.


[34:45]Phil: People are scratching their heads at why it's now were in March, 2018, and they're wondering why it's not 30,000 on Bitcoin. It's hopping around 12,000.


[35:01]Sean: It was 10 this morning. Using it as an example, right now it's trading a two-year low in terms of volume. People are backing away from Bitcoin like crazy. Just a few months ago, it was at 20,000 and people were selling. When your taxi driver or barista is talking about Bitcoin as a viable investment when they've never looked at investments before. It is the magnet that pulls them in. It was written in 1841, but it has reference to the tulip mania of the early 17th century where a particular type of tulip, a bulb, would be the most expensive object in the world because of this tulip mania. That is a prime example.


[36:14]Phil: I think it's funny that what dates the time for tulip mania, it only happened over a few short months, back then you either had money or didn't have money. Two extremes. People who had some money were sending their butler to buy and sell tulips on the market. Same with the South Sea bubble, they'd send their butlers to go and buy. What they didn't know is that their butler was taking and selling their silverware on the way to the market and then buying some for themselves and then on the way home were buying the silverware back with their profits and then hand in their resignation and becoming a lord of their own manor. If you read the history, some of the stories-


[37:11]Sean: They are amazing.


[37:13]Phil: Phenomenal. The butler is suddenly a millionaire because he sold the lord of the manor's silverware to finance their own trading.


[37:23]Sean: It is insane.


[37:26]Phil: Front-running their master's orders. Historically speaking, it's fabulous, but nothing's changed in 150 years.


[37:39]Sean: Now even at the time, there were three bubbles in the early 17th century which were the tulip mania, South Sea bubble which lasted from 1711-1720, the Mississippi bubble which was 1719-1720. Again, very short-lived bubbles but they all hold the same delusion of making it irresistible to the masses. What's the solution? Discipline, awareness and the fortitude to withstand the magnetic draw of the crowd. That will help you make some smarter decisions.


[38:24]Phil: Interesting observation. I read this book in my late teens. I was still going out with friends to bars. Because I'd had this awareness early on of crowd psychology and the follies that people do, you will see this in bars quite regularly. You go in the main entrance. There's a giant bar with several servers behind it. People will go in and if its busy go from the door they've walked in to the nearest section of the bar. What they don't realize is that there's only one person on that section. What they don't do is take as step to the left or right or look around the crowd and see there's five other servers and the rest of the building in an empty bar. If they just used their head and not followed the crowd and make their mind up. You can evaluate not just the bar area by the entrance, look at the whole venue. There's lots of servers that are not doing anything. What I would do is go to one of these servers, get my drink and then go back to my other idiot friends who were still queuing at the back of the queue. I'm standing there sipping my drink. On a regular basis, they would ask me "where'd you get that?" I went to the server that wasn't serving anyone around the corner. I'm just standing there having my drink while they're waiting for their turn in the crowd. You see this all the time. Our objective is to make you aware. These things happen all the time. Don't rush into anything, whether it be financial trading or going to the bar. But just notice the crowd. Now that you're aware of it, open your eyes. Take a step back and evaluate the situation and you can be the smart person in the room. You'd be surprised at how it impacts your life on a day to day basis.


[41:14]Sean: Love it. The last one we're going to discuss here. "The obnoxious hat was often snatched from his head and thrown into the gutter by some practical joker, and then raised, covered with mud, upon the end of a stick, for the admiration of the spectators, who held their sides with laughter, and exclaimed, in the pauses of their mirth, “Oh, what a shocking bad hat!” “What a shocking bad hat!" Now remember this was written in 1841.


[41:59]Phil: 1840. People did wear hats on a regular basis and it was rude not to wear a hat. What would be your hat of choice? Would you be a top hat monocle person?


[42:14]Sean: I am a top hat monocle person. There you go. But then again I have my flat cap days as well.


[42:25]Phil: When you're out surveying the peasants.


[42:27]Sean: Absolutely. Here's the thing. If you stand outside of the crowd, the crowd will often deride and scorn those who they feel stand alone because they're not part of the group.


[42:42]Phil: Might this be an example of peer pressure? The crowd acting frivolously and stupidly because you're being different. Because you're thinking via self rather than the low, crass attitude of the crowd. They're not the best thing most of the time. The crowd is usually dictated by the lowest common denominator. If you stand out, you're going to be derided for having a flat cap instead of a top hat and monocle. Look at him, at how silly he looks.


[43:35]Sean: Absolutely. So let your results determine your stance. The crowd if wrong more than they're right, which is why the markets chew them up and spit them out, while smart market heros and traders stand tall. Be the lion outside of the herd who are laughing and splashing in the watering hole while you pick a nice juicy steak.


[44:04]Phil: This is good life advice as well. Don't fall into the trap of following the herd for the sake of following the herd.


[44:37]Sean: Well let's put the book aside for a moment because there are a couple of delusions Phil was wanting to bring up in reference to this. Maybe they're profound and maybe they're not.


[44:52]Phil: I think it's more relevant to trading. Things I've seen over the last 15-20 years of trading and teaching, and talking to new and experienced traders alike. There's many delusions people fall into. I was speaking to a couple of new students this week, trying to course correct some people's misbeliefs. The biggest one as far as I'm concerned is leaving or convincing themselves that indicators are signal generators. To use a simple example, if a 30-period moving average crossed over a 100-period moving average, that would suggest a short-term trend. Because of that cross, people confuse that with having generated a signal to buy or sell and that is a popular delusion, and that's what I see with indicators. Just because moving average, whatever period length, whatever tool that you're using, the Mac-D's crossed, the moving averages have crossed, the stochastics are oversold. Whatever tools you're using, just because that condition has been met, it. does. not. generate. a. signal. Every word had a full stop after it there, Sean.


[46:40]Sean: I noticed the bold and underline and exclamation points.


[46:44]Phil: Consider myself on a soapbox for that last sentence. You have to use your imagination because I've got a face for tv. It just sends me crazy that the fool heartedness of considering indicators as signal generators. Just think about that. An indicator, a mathematical formula, given the data we've inputed, it's given me this reading on the default setting. Most indicators, 14-period settings, on the last whatever time period, 14 days or whatever, a particular condition has been met. The most stupid example is in the last 14 days, price is as high as it's every been in the last 14 days. Therefore, the stochastic will be over-bought. Because it's the highest it's been in the last 14 days. That's the default setting. That's all stochastics is telling you. It's not a signal to sell. If you can understand the tools of the trade, it can be significantly easier to help you interpret what price is doing and if it's highlighting an opportunity to trade in the first place. The reality with indicators is it's just a mathematical formula that helps you interpret what price is doing. Put it into context. If we're in an uptrend, add this into your trading your routine. In the last 12 months of 200 day charts, the last 200 bars, what is price doing? It's going up. It starts at the left bottom and finishes at the top right. Ergo- we're in an uptrend. Now that you know what the long-term trend is, maybe looking at an indicator, an oscillator that is oversold, might provide you a better opportunity. Maybe I should consider being bullish now that condition's being met. Without the context, most of the indicators are absolutely pointless.


[49:16]Sean: Very true. The next one we had was 'believing that the entry signal, that having an entry signal is a complete strategy'. This is one we see a lot.


[49:34]Phil: This is the textbook's fault. That's how they're presented. This is the signal that's generated from the indicator. Because of the way they present the information, to use our moving average crossover example, the short term is crossed over the long term, therefore a signal has been generated. But then it's suggested, not really explained in almost any book I've ever come across, that that is the complete strategy. That's the holy grail, the secret ingredient that's gonna make your profitable trading of the financial markets if you used that particular tool set. For some reason people believe that is a complete strategy. We both know that's complete nonsense.


[50:31]Sean: Absolutely. There's so much BS in and around this.


[50:40]Phil: Incomplete information.


[50:41]Sean: Absolutely. Now, the last one, which I think is really good. I've got my soapbox ready to stand on here, but doubling down on losses to win back and profit. There was a thing, a strategy for gamblers called the Martingale, which relies on the fact that-

[51:13]Phil: It was in the mid-1800's that this was devised with roulette. Some French guy.

[51:23]Sean: I don't actually know what nationality, but basically if you imagine you were placing a bet. Very even Stevens, toss of a coin. You bet $10 to start with and then you bet $20 if you lose, $30 if you lose, $40-

[51:48]Phil: I know you double.

[51:50]Sean: Sorry, you double it. So 20, 40, 80, 160, 320...

[52:00]Phil: And you keep doing that until you have a winner. The only thing you can win back is your original stake.

[52:15]Sean: Basically, you will come ahead by your original bet. The problem is that you have to have a gigantic deep pockets to make that work. People try to use that in Vegas soon realize that's why they put a limit on the amount you can bet, even in blackjack. It's a really dumb strategy. Mathematically, it works.

[52:44]Phil: Mathematically, it works, but you need deep pockets to apply because you couldn't do it in the stock market.

[52:57]Sean: If you have a losing streak-

[52:57]Phil: Other than what's in your account.

[53:01]Sean: If you have a losing streak that exceeds your ability to double up, you're screwed. That's why they put limits on the tables. You can't bump. Your ability to double up is now crushed.

[53:20]Phil: A lot of novices fall into this, but if all I've got to do is this doubling down to win back, surely I'll get my money back and I'll only ever be profitable. That's the fallacy of this Martingale, doubling down strategy to win back. It doesn't take into your financial status, your account size. You're gonna be trading big position sizes very quickly even with a short losing streak of 4-5 losses. To be fair, if you've got a strategy that is not consistently winning with any degree of regularity, you probably shouldn't use that method anyway. Surely refining entry and exit would be far better use of your time that imagining what life would be like if you could only double down one more time and hope the next one's gonna be the one.

[54:36]Sean: This time next year, we'll be millionaires. We'll call that the Dell boy delusion.

[54:46]Phil: It's kind of like a lottery mindset. If I can just buy enough lottery, I'll win. Yeah, but will you win enough over the purchase of the lottery tickets?

[54:59]Sean: Absolutely. With that being said, I think we've put a nail in that one. Many popular delusions and a little bit of madness of the crowds. Go check out the crowds. I'll link it in the show notes. Two books in one.

[55:18]Phil: It's a two-for.

[55:21]Sean: It's two for Tuesday. Let's rock on.

[00:55:30] Rebel Trader Tip of the Week


[55:44]Sean: Okay so Rebel Trader Tip of the Week. This is something I advocate a lot for with students and myself. Become obsessed with tracking your progress. Knowing where you are and where you came from, your success rate, your wins, your losses, is more physical data to your growth and success. We all have our personal biases, our egos, and everything else and our emotional awareness.

[56:14]Phil: If it's in black and white you can't ignore it.

[56:13]Sean: Exactly. You may think you're a master, but if you're not actually succeeding-

[56:21]Phil: Numbers might tell a very different story.

[56:23]Sean: You've got to understand where you are. Hard data that reinforces the perception of growth. It will also drive you month after month when you have that hard data to refine your trading and get better, magnifying your portfolio growth. Again, become obsessed with your success by tracking your success, keeping your trading logs.

[56:51]Phil: That begs the question, Sean, the usual question I get asked when asked if I track. What do you track? If you're not sure what to track, don't worry about it. Put your position, entry, exits and whether it was profitable. From that you can start to, overtime you'll add things to it, but just start with this win or loss, by how much. You'll be able to see I'm making money or I'm losing money.

[57:26]Sean: Did I follow my strategy?

[57:28]Phil: And how many was I winning/losing? Win rate. I know 65% of the time I'm making money. I just don't know which 65% will make me money. But that gives me confidence to put the next trade on. On average, my account is going up. These are things I know because I'm tracking what I'm trading.

[57:56]Sean: Very much so. That's really it at the end of the day.

[58:15]Phil: If you know that 35% of the time, you're making money, overall you're still making money and that helps you whether the bad times. You're waiting for that 35% of the time you're making money. That gives you the confidence to suck it up and take a couple of punches in the stomach. You know that 65% of the time, it's not going to work out the way you expect. But if you're making money, 35% of the time, you are making money and you know to wait it out.

[58:58]Sean: That's it. Get the hard data, track it over time, and if you see it going up you're becoming a better trader. If you see it going down, where are your pain points? Anyway, with that being said, let's jump over to the Quickfire Round.

[00:59:20] Quickfire Round


[59:41]Sean: Rummaging around in the Rebel Trader mailbag, here's a question for you, Phil. Wouldn't buying both a put and a call produce guaranteed returns?

[1:00:18]Phil: Will it guarantee returns? No. It will not. Nothing will. If you think there's gonna be an explosive movement on the stock, and the options are inexpensively priced and the implied volatility ranking is low or close to as low as its been in 12 months, the options are inexpensively priced. It might make sense to buy a long strangle. As long as you set it up right. One side's gonna be a winner, one side's gonna be a loser. You need to set it up in such a way that can be done. Assuming you're right, the side you make money on needs to be at a faster rate than the side you're losing on. That can be done. If that's above your head, this isn't the strategy for you. If you want to know how to do it, get in touch. If you'd like our time, put your hand in your pocket. And with that being said, it can be done but it's by no means a guarantee. I like to do these when they're inexpensively priced and I'm looking for the stock to move 10-15%.

[1:02:05]Sean: Perfect.

[1:02:07]Phil: I was gonna say Sean, I've got a question for you before we skip over. Kind of timely and topical. All the trade tariffs that are being proposed, or the potential trade war, is that gonna trigger a black swan event that could push the markets?

[1:02:24]Sean: No one knows what's gonna be triggering the crowd in this case. I don't think so. I think we've already been in a trade war and we talk about this a little bit in the happening now report in a little more detail with our other cohort in podcasting, Mr. Andrew Page. At the end of the day, we've already been in a trade war for a long, long time and our industries have been undermined.

[1:02:55]Phil: Will it cause that black swan event? Because the crowd is looking into it, it puts fear into people about will the markets collapse or crash? It's certainly the fear mongering of the talking heads. Is it anything to worry about?

[1:03:30]Sean: I don't think so. We've been talking about the bullish environment we've been in for the last nine years. We're due for a major correction. We had a little sell off and blow off in recent weeks. That has been a pressure valve. I think this is a lot of posturing with Gary Cohn stepping down, the markets as of today taking a wee bit of a dip. But I think this is a nothing burger. I really do. It's gonna apply pressure if it does become a trade war. If the tariffs on steel and aluminum, what does that do? Well it puts a fraction of a fraction of a cent on the cost of your can of coke.

[1:04:29]Phil: It won't really impact the consumer.

[1:04:29]Sean: No, it's like $50-$100 on a car. That's not really that much considering the price of a car. Again, it's economies of scale. I think it's a lot of fear mongering and posturing and positioning. I think a lot of it is leverage, talking about NAFTA. I don't think so, but we are due for a bearish environment, so it's a case of we've got an awareness.

[1:05:17]Phil: Maybe you're over-bullish in your portfolio would be my kind of portfolio. Maybe you find things to put into the mix that would counteract that fear. Lighten the load, reduce your position size, think about some protection if that's your big fear. There's certainly steps to reduce the impact of the fear. Yeah, it's gonna cost you, but if it lets you sleep at night it's worth doing.

[1:05:54]Sean: Absolutely. The other thing is if you have a balanced portfolio where you can profit from a downside move.

[1:06:07]Phil: 50/50 in this portfolio, I am sleeping like a baby.

[1:06:07]Sean: There you go. It's just gonna help you profit from any downward movement. You can make money on both sides. This is a 2-sided market. This is not cryptocurrencies. Last one - "Is it important to learn candlestick chart patterns to be a successful trader?"

[1:06:35]Phil: No. It's not important to learn a lot of things. I recall a trader who basically was a moving average trader. The moving averages don't matter, but what he did was wait for them to cross and then be a buyer or seller. He was only a trend trader. He hid price on the chart. Interesting, eh? He was buying bullish or bearish based on the moving average cross. He had quite deep pockets. He didn't run stocks because of that. He was trading futures. No, you don't need to know candlestick patterns, but he found that the most relaxing way to trade. He wasn't focused on every obstacle or downtick or whatever the pattern is, he's only trying to trade the trend. He was just pinching the bit in the middle. Long-term trader, he was making good money doing that. To accomplish that task, he removed price because he saw that as a hurdle and traded when the averages crossed. It's quite interesting. Not for everyone. Just trying to illustrate it's not important to learn candlesticks to be successful. How do you want to trade is more important what you used to accomplish the trade.

[1:08:44]Sean: Yeah I agree wholeheartedly. The same thing is, it just depends on where you want to specialize in. I think for what we do, it's a good skill to learn, but it's not essential.

[1:08:57]Phil: I think it's an addition. The way I teach people is not to memorize patterns or charts. I've just got one pattern. The way I describe it encompasses several types of patterns because of the way we teach it, we don't have to worry if it's three quacking ducks or two roosting hens. Don't worry about the name of it, if you understand what's behind it.

[1:09:43]Sean: Absolutely. Okay, with that being said, let's rock on.

[01:09:48] Bulls**t of the Week


[1:10:13]Sean: This is a double-sided Bullshit. This could go either way based on the facts as they emerge. You can extract whatever bullshit you like from this. Former Trump advisor, Carl Icahn, who is a billionaire investor, sold his stake in steel companies, about 31 million dollars before Trump announced his trade tariffs on steel and aluminum. He is an American businessman and investor. Allegedly, he sold 31 million of his shares in a crane manufacturer, Mantiwak company in the weeks before Trump said he would impose new tariffs. Depending on your news source, and this is where I think the bullshit is, some say it was in the days before the announcement. But most of the mainstream more trusted sources are saying weeks. Here's the bullshit. If it was weeks before the announcement, there could have been a lot of other things going on that would have defined and said this position is not going anywhere for whatever reason, I'm going to dump this position.

[1:11:58]Phil: He only took a third of his position off. For all intents and purposes, that's probably profit-taking.

[1:12:05]Sean: Absolutely. Here's the BS. If it was days before Trump announced, and I think anytime Trump does something the media wants to attack him, let's just face it, the mainstream media does not like Trump. If it was weeks before, but they're reporting days before, that puts a completely different spin.

[1:12:47]Phil: FakeNews.com

[1:12:50]Sean: That puts a different spin on it. The bullshit is with the media because they're misrepresenting the time frame. If it was actually days before, that smells of insider trading. But if it's weeks before, then there's a lot more time frame that could have been a factor.

[1:13:20]Phil: Taking the time factor out, it's only a third of his position. If you're taking two thirds of it off, regardless of time frame, I would say someone's been giving a nod and a wink somewhere. Is it that big of an impact?

[1:14:07]Sean: Yeah, he's a former Trump adviser. Apparently he sold more than third of his stake on Feb 12th through the 22nd. They're saying that last April different bodies were citing security concerns regarding steel and aluminum trading and the imports and where the economy is to that. These reports and concerns were made public on Feb 16th before he made his announcement. But like we said, it's a third of his stake. That means he's still got two thirds in it and it's not really relevant. Whether it's in the weeks or the days before...

[1:15:09]Phil: How do measure it?

[1:15:12]Sean: Trump makes those announcements last Thursday. Did someone get a wink and a nod? Maybe. Maybe not.

[1:15:17]Phil: Probably, but you know what? Prove it.

[1:15:22]Sean: Exactly. It's a crane manufacturer and he only removed a third of his stake. It's a nothing burger story.

[1:15:36]Phil: Let's bring out the parade for this one because we've got not much news to talk about.

[1:15:39]Sean: Exactly. I had to call bullshit on that one. Anyway, with that being said, let's wrap up the show right there. I think that's being an epic insider into the delusions and the madness of crowds. Again, I will link the book on the show is not free, it will cost you a five star review. Go to tradecanyon.com/rebeltraders>. You can find all of the different ways to listen to the show. You can subscribe right there. But do leave us a five star review. This helps us get the message out to traders just like you. So they can share the benefits you're getting here.

[1:16:35]Phil: Since we're talking about the mind and psychology, if you'd like to stroke our egos further, you can certainly connect with us on Facebook and send us some love messages or hate messages. I would imagine it's all love messages, because if you've got to this point, you can't not listen. You can also find us on the Twitter Machine as well, same link. You can send your adorations about the show right there. Well Sean, it's been a great show. It has been very interesting. A subject that's very close to my heart is the mind and psychology. As far as I'm concerned, it will keep you in the game 20 years down the line. It's the mind and how you cope with trading minutia on a daily basis. What do we have going on next week?

[1:17:24]Sean: We're gonna do a little bit of Wizard of Oz. Just don't look behind the curtain. We're gonna look at market drivers, manipulation, manipulators, all the nefarious side, just don't look behind the curtain. We're gonna peel it back and have a look.

[1:17:39]Phil: We need intense piano music, don't we?

[1:17:44]Sean: I don't know if I end up being the tin man or the lion.

[1:17:53]Phil: Or Dorothy? Just because the shoes.

[1:17:59]Sean: Okay, Dorothy, we'll do that next week. With that being said, take care for now. We're not in Kansas anymore. Let's rock on and we'll see you next time. Take care for now.

[1:18:13]Phil: Bye for now.

Resources & Links Mentioned in This Week's Show

3 Key Takeaways From This Show

  • Don’t be part of the crowd but be aware of what the crowd is doing.
  • It’s fine to move with the crowd as an individual without succumbing to the crowds reduced capacity for critical thinking.
  • You’re a Lion, waiting on the rocks as the wildebeest wonder on by and you’re picking out the perfect steak for dinner.

Connect With The Rebel Traders

Download our Private "Universe of Stocks"

Download the 350 "Core" stocks we look at every day that present the best opportunities. Just enter your name and email below to download now...
DOWNLOAD THE LIST NOW
We value your privacy and will never spam you

Comments are closed.

×
HEADLINE HERE
SUB HEADLINE