Rebel Traders 040 : 3 Ways to Fix Your Trades…

Are you checking all the boxes, crossing all the T’s and dotting all the I’s but still struggling with your trades and not being profitable. Well, let’s see what we can do to fix that…

This week the Rebel Traders and cranking it up to 11 and getting ready to rock as they give you the 3 core ways that you can fix your trades. It does not matter how close you stick to your strategy, sometimes something just isn’t right.

Well, in this week’s podcast, Sean and Phil show the 3 things that most people miss that could be the make-or-break for their trading.

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Automated: Struggling with your trades? Want to fix them in three steps? 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 minefield. 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 once again back from the dead, Mr. Phil Newton is here in the studios.
Phil Newton: Hello. We need some ominous risen from the dead type music. It's a shame we couldn't be fun with the zombie-themed show.
Sean Donahoe: Absolutely. The Walking Dead. That's what we need. The Walking Dead theme
Phil Newton: I have risen from the grave. Yes. I'm feeling much better today, thank you. Still not quite 100 percent, but nevertheless, much better than this time.
Sean Donahoe: Absolutely. He's still vertical, and that's the bloody main thing. So we are going to be doing a few different things here, today. We are gonna be checking all the boxes, crossing all the T's and dotting all the i's, but hey, you are still struggling with your trades, and you're doing all those things, and still not profitable, we are gonna show you how to ... Well, basically how to fix that and help you every step of the way.
Phil Newton: give you a helping hand I think, aren't we?
Sean Donahoe: Abso-bloody-lutely, and that's what it's all about. What else have we got, Phil?
Phil Newton: We've also got the quick-fire rounds, which is your trending questions answered. We've got the bullshits the week, my continued favorite section. We've called it the hyperbowl, the shenanigans of the industry and the , we're gonna try and find the core question. Is it over there behind you? Of where is trade?
Sean Donahoe: Abso-bloody-lutely. We keep it locked up in a box, and we're loaning out every now and then. So, anyway-
Phil Newton: Special occasions.
Sean Donahoe: Special occasions, indeed. So fixing your trade. That's what we're gonna be talking about here today, and we're gonna look at three different ways that you can fix trades that basically, let's just take a step back and ... It doesn't matter how detailed you may. Maybe you've got a great strategy, or you believe it's a great strategy, you're doing your daily trades, and it's just not working out. You're throwing money into the market, you don't know what's going wrong, so what we want to do is kind of take a look at three different ways that you can adjust, analyze and improve.
Phil Newton: Improve overall performance, I think might be a good catchall phrase.
Sean Donahoe: I think so, yeah. That's a good ways to start. So let's start with number one, and I know this is one that is quite likely the biggest problem that we see with students, but also most traders can identify with. And it's, "What was your reason for entering the trade, and where are you getting the hell out?"
Phil Newton: I think it's a plus in a good way and bad way. I think there's pluses and minuses. First, because the majority of textbooks, this is what they focus on. This is the shiny object parts and all of those people's indoctrination to trading, it's the single generation of-
Sean Donahoe: Oh, my lord, yes.
Phil Newton: That people are talking about in textbooks. This is the thing that usually attracts most people. What's gonna get me in the trade. Finding clarity on that is ... It seems easy, but the reality is it can be difficult, and as we keep saying whatever it is that you're doing, keep peeling back the layers and put more detail, put more meat on the bones until you've got ... To be fair, I was just on a coaching call prior to our podcast, Sean, and I was actually talking about this very thing. Put more meat on the bones. I personally want to be able to say with absolute clarity and have a very definitive way of saying, because you know why I keep trying to point out the wording and the phrasing. If you're saying things like maybe and could be and possibly, and there's no conviction, there's no definitive definition of purpose, was the phrase I've been using recently. I want to be able to with absolute clarity what I'm doing, when I'm doing it, why I'm doing it. And if I can't answer in that clarity, then something's wrong.
So perhaps, rather than thinking about the entry, just to kind of give a general overview of when you're taking any course of action, do you have that distinction, that definition, and that HD experience, if you like, of what you're doing? Because if you've got a little bit of a wishy-washy whimsical way of expressing what you're doing, then perhaps you need some more clarity.
Sean Donahoe: That's a bloody good point, and I like that. Clarity of purpose. And that is something that I think we should use as almost a catchphrase for this very point, because if you are not very clear, like you're saying of why you're getting into a trade. What is the definition of your conditions? What were you looking for? What did you find? Why are you taking that action? Then again, that clarity is gonna give you consistency.
Phil Newton: Yeah, but we're looking for, for a trade, I want to be able to make a statement of facts, that again, is just another way of saying something similar. For example, we're regularly talking about the firs step that we do is determine a direction. The trend is your friend, almost. Now I want to be able to say in a nice 12 months this stock is going up, and I want that to be a statement of fact, because when I know that, I know that maybe buying the dipping it up trend is a good idea. But it all starts with-
Sean Donahoe: BTFD. BTFD.
Phil Newton: You see where I was going with that. But you know what I'm saying. But it starts with that once the statement of fact, like a good lawyer making a good argument. What is the ... Based on the evidence that you see presented in front of you, aka, the charts, what is your statement of fact? This stock is going up. When you can say that, then defining an entry point becomes so much easier.
Sean Donahoe: Absolutely. Now again, we talked in the beginning this is what the textbooks focus on, and we've talked about indicators not being signal generators. We're looking for conditions. It might be a combination of things.
Phil Newton: go on a major tangent there.
Sean Donahoe: Abso-bloody-lutely. Let's-
Phil Newton: Reign Phil back. Reign him back.
Sean Donahoe: We're the traders in the box, we'll also hide the soapbox there just in case. But we've got ... Again, you've got to have the definitive purpose of your trade kind of mapped out. This is why I would get into a trade, but on the flip side of that, you've also gotta have this is why I won't get into a trade, and I think this is also a big pitfall that a lot of traders get into, because if they don't have that clarity of why they will avoid a trade, it might not check all the boxes. Maybe there's one or two boxes they start checking, but they think, "Eh." And again the wishy washy "Eh." Well, you know what? I think I maybe doing that, or I think I'll do it, or it will do.
Phil Newton: It will do. It will do.
Sean Donahoe: But again, if you're not selective about why you won't get into a trade, you might find that a lot of your trades actually are bad trades, because of that one factor right there. What do you think about that?
Phil Newton: Yeah, exactly. It's that definition of clarity that we ... We're gonna use that phrase a lot this episode. We found certainly we like to say it, and we're gonna keep saying it.
Sean Donahoe: Absolutely. It makes us sound smart.
Phil Newton: But now I keep going back to the experience that I had when I was in my late teens. Not that one, Sean.
Sean Donahoe: I wasn't ... You read my mind.
Phil Newton: I was in Blockbuster Video reading a very large tome of a technical analysis book. Again, I'll relate the story, because it's a many-faceted experience, but primarily, it was the realization I had as I was going through both a 1,000-page textbook on all the indicators on sun for the second time, and I had this realization that this doesn't tell me how to get into the position. It talks about all the indicators, and again, the signals, and again, I wasn't convinced about them even then, naïve with my knowledge if you like. I didn't bought into the signal generation element, even though I was reading a lot on the subject about that. But it was the ... All these things are great in that I was quite drawn to patterns, you know triangles, breakouts, that sort of thing. At no point ... It just said by the breakouts the breakdown. That was the, as much as it got into the entry, there was no definition, there was no clarity of what you actually do. It was just by the breakout. How do you do that? Again, if you think about ... Remember the movie Cocktail, Sean?
Sean Donahoe: Yes.
Phil Newton: With Tom Cruise, and he's just got the job behind the bar, he's serving drinks, and he literally doesn't know what's in the drinks, but he gets asked, "Can I have a martini?" It's like, "What's in that?" He just literally doesn't know what it is. But it's just like pour a martini. It's that same experience. By the breakouts. By the dip. It sounds like it's more than what it is, and, "Oh, yeah. I'm just gonna buy the dip, or I'm gonna buy the breakout." How do you actually do that? This is what we mentioned ... The first thing that we mentioned was get even more detail on what you're doing is your reason to get in. Buying the breakouts is what you're gonna do, but understand how you're actually gonna deploy that, and keep getting as granular as you can until you know exactly what, when, why and how you're gonna do it. When you've got that knowledge and got that confidence, everything starts to fall into place. In almost like dominoes, one after the other, you know, click, click, click, click.
You just get this quite confident experience to be able to put the trade on, because you've got that definition of what, when, why, how you're gonna take some action. And I suppose it's good advice for anything in life. Just understand what you're doing and when you're doing and why you're doing it at every juncture. And you will have the confidence to do it again next time. Maybe the trade doesn't work out from a profitable viewpoint this time, but at least you know what you're gonna do, when you're gonna do, why you're gonna do it the next time and replicate it and repeat, replicate, repeat. It allows I that consistency to deploy the strategies you understand at that moment over and over and over again. Because that for me is what success looks like. It's being able to repeat the process with confidence again and again today, tomorrow, next week, next month, next year, 10 years, 20 years down the line. I'm pretty much doing something very similar to what I was doing 20 years ago. I've just got more clarity on what I'm doing and how I'm doing it every day.
Sean Donahoe: Abso-bloody-lutely. And guys, we've said this in many episodes, and I'm gonna say it again today. Keep a trading log. You want to track why you're getting into each trade, what you're feeling, which is one of the things that Phil is very strong on, as well. But also, just make sure you've got that clarity for each trade that you're logging down, why you got into it. So when you're looking back at your trades, you're like, "Why the hell did I do that one? What was that one. " You look back at your trading log and it's like, "Oh, yeah. That's right." Because this leads into the next thing, which is what's your reason for getting out of the trade? Now again, a lot of ... You can get into the perfect trade at the perfect time with everything all the i's crossed and the T's dotted. I know that's the wrong way around. I did that deliberately.
But at the end of the day, you could be in the perfect position, but if you're not getting out at the right time, that position could be a complete waste of time, so you need to
Phil Newton: Is that a euphemism, Sean?
Sean Donahoe: It's just the karma sutra of trading. This is gonna go off the rails real quick if we're not careful. But again, define your reason for exiting the trade, so that you can exit profitably when your specific conditions are met. So with that being said-
Phil Newton: To take our own advice, how can we actually do that? Just some quick tips on how to do that. I'm a fan of Bollinger Band's Just to help put some structure on interpreting the job.
Sean Donahoe: A little of meat
Phil Newton: I mean, I want to enter at the Bollinger Band extremes just because that's how I identify, or one of the ways I identify an opportunity. So that's the entry element. So if you're unsure of to where to set a target to get out, maybe use either if you lower Bollinger Band, aim for the upper Bollinger Band or the middle Bollinger Band. Or maybe a multiple of the height of the Bollinger Band. I'm just trying to give you a very simple, very mechanical structure. Just a description without actually having to look at the chart. It's just a quick way to say, "Okay, well if I'm in the lower Bollinger Band, maybe we can expect the midpoints or the upper Bollinger as target one, target two type of scenario." And it just gives you, again, some structure, a place on the charts to at the very least evaluate will it go further?
Sean Donahoe: Absolutely. This is where extra profits can be taken is where, and this is something we have alluded to in the past. We can talk about it in little more detail, is would you still be in the trade today? So I you, say, have a reversion to mean strategy, and we'll use the Bollinger Band example here. So if you're at the ... Most Bollinger Bands 20 day moving average is the center line, and you look at that as you've got an extreme. Let's have a look at Facebook as an example, which we'll talk about in a little bit. So Facebook had a couple of rough days, and they're at the extremes, but if my target now was the 20-day moving average, which, again, we're maybe following down, that's the mean. So I've got that, but would I still be ... Do I still think if there was a recovery, and the momentum of that recovery, do I still think there's still meat on the bone? Would I still stay in that trade? Well, yeah, maybe I would. Again, this is hypothetical. It's not actually doing that right now.
Phil Newton: But it gives you a point on the chart to start to ... When it gets here, I'm gonna revise.
Sean Donahoe: Or reevaluate. Exactly. And that's the cool thing.
Phil Newton: Or if you want to be mechanical, I can say, "Maybe when it gets there, I'm just gonna close the position." That's personally what I do. When it gets to my target, I am closing out, or when it gets what I do when it gets to within 80 percent, because I treat my target as a zone. So when it gets in that zone, I'm gonna take profit. That's it.
Sean Donahoe: That's it.
Phil Newton: If I've got a second target, I'm gonna reevaluate. It doesn't look like it's moving further. Is there, as you were saying, is there more in it? I think that's probably the ... Again, I see very few students who, prior to coming to us, have when am I gonna get out? They're not asking that question. And this is the textbook's fault. Just again, jump on the soapbox again. Because they're always focused on the entry or the indicator and the signal generator and the ... And an entry's not a strategy. As we keep saying many times, part of it is the entry. Part of it is the exit. Another part if it's the money management. To be fair, the biggest part of it's the psychology, because everything else, excluding the mind is a skill that can be learned. What's gonna keep you in the game today, next week, next month, next year, 10 years, 20 years down the line is the psychology how you are impacted by your emotional experience of the trade. Whether you want to believe it or not, it's a big part of long-term success in trading.
Sorry, a little Mr. Ranty Pants again there, Sean.
Sean Donahoe: That's all right.
Phil Newton: But I think the points ... I'm gonna try and bring this back on track, is the target. It's that reason to get out. If you're struggling to ... If you're watching your positions, because again, to fix the position is you might be successful on the entry elements, but on the exit, you're not seeing the profit that you were expecting. And it's ... You've seen the profitable trades just disappear. Maybe you should be more clinical with your targets. You're seeing the profits, but you're hoping for more, and if that's your experience, then maybe you should be ... To be fair, do what I do. Just take the decision, the what if out of the equation, and just say, "When it gets there, I'm gonna close profit," or when it gets to 80 percent of the way there, I'm gonna close profit. And I put all that in my spreadsheet before I click send on my order, so that when it gets updated, I can see I'm 83 percent of the way towards where I'm expecting the stock to get to. I'm going to close the position today.
And that's a decision I make from the spreadsheet and not from the charts.
Sean Donahoe: That's perfect. And again, very, very valid, indeed. Now-
Phil Newton: reasons that people log.
Sean Donahoe: Abso-damn-lutely. And that kind of rolls into our next thing, because again, talking about trading logs and keeping an eye on things is how big is your position? This is number two. We often-
Phil Newton: , Sean? I'll show you mine, if you show me yours.
Sean Donahoe: I've got so many smart assed answers to that position-
Phil Newton: talking about it.
Sean Donahoe: Yes. Absolutely. So, yes, if your position too large?
Phil Newton: Probably, is the answer for most people.
Sean Donahoe: I was gonna say 90 percent of the time, we're talking to students about this, the answer's yes. And this can lead to all sorts of problems. Now Phil as talking about the psychology, which is incredibly important. One of the things that I focus on a lot of mental toughness, or mental fortitude and resilience and also a divestment of interest, or divestment of emotion in regards to money. Again, those things-
Phil Newton: popular phrase. It's not easy.
Sean Donahoe: It's not easy.
Phil Newton: I'm not gonna lie to you. It's not easy.
Sean Donahoe: It takes time, and it takes effort, because we all have a fear of loss, but at the end of the day, and this is one thing I know Phil is very much-
Phil Newton: Itching to comment on.
Sean Donahoe: Yes. There you go. It is a case of trade smaller. Trade smaller, trade a percentage, a small percentage. We usually recommend 0.5 percent of your overall capital per trade. And then you can scale up to one once you're more confident. That's one thing we recommend to allow you to have more positions, but also, a divestment of your portfolio, or-
Phil Newton: As small as possible. I know we've got the percentage figure, but sometimes with a smaller trading account it might not always be possible. So just trade what ... I think the good place to start, trade what you're comfortable with. From a psychological viewpoint, everyone's got a number in the back of their minds somewhere, and it might be bigger or smaller as a percentage than we've just suggested. But everyone's got that number. What's that number for you? And that's where you should start. And then if you still got some, you know, the emotional experience, the sweaty palms, the nervousness, the inability to not check positions every five minutes. If you're still having that experience, then your positions it's probably too big. Keep reducing your position sizes, and the good thing with stock options is you can keep reducing your position size to sensible low dollar amounts where some of the strategies that we like to advocate, you can find a trade that's suitable from a risk points of view for every appetite. As we keep saying, it sounds completely counterintuitive to reduce your position size.
But if you think about the difference between the professional trade ... I want to say the professional trader, I mean the person who's been doing it day in, day out, they're making consistent returns, and they've been doing it several years. They've seen a variety of different model conditions. That's what we mean by the professional. Not necessarily the hedge fund-type person, which is normally what we're talking about when we say professionals. You could still be retail trader. But the inexperienced retail trader is so focused on how much money they can make. And it's a natural reaction, because, hey, we're doing this to make money. To be fair, any business is about making money. But the difference between trade in the markets is that's all people focus on, is how much money can I make. But they're not looking at the risk that they're taking to make that reward. They're trying to trade with as big a position size as they can, or too big a position size than they should to make, "Look at the gains that I could make. I only need one trade."
And you swing for the fence type of mentality, and this time next year, Rodney, I'll be a millionaire. It doesn't work like that. Counterintuitively, if you trade significantly smaller and increase the frequency with which you trade lots of fingers in lots of pies. I'm an advocate of at least one trade a day. You do one a day, 20 trading days in a month, you've got a nice portfolio of 20 positions. You do that every day at every month, you're gonna have this rolling portfolio, and your portfolio's gonna fluctuate sort of 15 to 35 positions doing one or two every day. It's totally manageable. It really is. It sounds a lot, but if you're just doing one a day, it takes 10, 20 minutes. The point I'm trying to eventually come around to is you trade less with smaller position size, then you can increase the frequency and the number of occurrences that you trade. And then you stop stressing about the one trade. The over leveraged experience. Stressing over is your position size too big. Just generally being stressed over the one position and worrying about diversification.
Naturally, you'll start doing this, because you're trading more frequently, and it's such counterintuitive a suggestion, but surprisingly it works. And it works, because that's how the professionals trade, because we're often looking for the best opportunities, but we're looking for that number of occurrences to get the portfolio experience, and that's what makes money. That's what works. That's what the hedge funds do. That's what big traders do. That's what the professionals do. That's the difference between the inexperienced retail mind of "how much money can I make," and the professional traders are always focused on "how little can I lose?".
Sean Donahoe: Absolutely, and you stole that one right out of my mouth. That's one thing I was gonna say is it's not how much money you make, it's how much you keep, and that's very important.
Phil Newton: Why didn't I start with that phrase?
Sean Donahoe: I know. There you go. I thought you were gonna say it halfway through, and I was just like, "Okay, I've got a point I wanted to make," but it's absolutely true. It's important in business, and this is a business.
Phil Newton: It's so counterintuitive, you almost forget about it, because it is such a counterintuitive thing. How little can I lose? What would he say ... Well, of course, you should focus on how little you should lose. But very few new traders do. There are always folks that are, "Look how much money I can make." Well, don't worry about the money that you'll make. Just focus on not losing what you've got. Because if you have a bad run, and let's face it, we're all gonna have bad runs. Just like any other business, we're gonna have bad days, bad weeks, sometimes we'll have bad months. That's just the way it is, but the reason why we're focused on how little can we lose is because if I do have a bad day, yeah, sure I'm gonna take a knock emotionally, but it means I'm in business tomorrow, and that is more important to any business than having ... Let's do the real-world example scenario. We need one ... Like a Wayne's World-type thing example.
Sean Donahoe: I can see hus fingers going through the air doing that.
Phil Newton: Is this camera on? But real-world example. If you own a shop on the high street, let's just imagine it's a shoe shop, for example, just because I never use that example. But imagine that you've got everything invested in selling one pair of shoes at once, but then the shop burns down, and now you're out of business. But imagine if you've for a portfolio of businesses, and you've got three or four different sites, three or four different locations. You've got one on the side street, you've got one in the suburbs. You've almost got your own privately-held chain of shoe shops. You've got a portfolio of small businesses, for example. Sadly, if one of them does burn to the ground, you're not our of business, and that's the point I'm trying to make. If you've got the ability to get back in business tomorrow, then that's great. And speaking of ... If you've only got one business, one location, then this is what insurance is for.
Sure your gonna be out of business for a few days, a few weeks, because the reality is you need to tidy up in that scenario, but that's what insurance is for. You've got the insurance to get you back in business. You're not out of business. You're protected against the possibility that that happens. And that's what we're doing in the trade. We're doing the trading equivalent by trading small, by having the attitude of how little can I lose and protecting the capital that we have so that if the worse case scenario does happen, I'm in business tomorrow. And that's what I want every at juncture every step of the way, because when, not if, when a bad day, bad week, bad month happens, I'm in business tomorrow. And I'm not losing sleep over that attitude, Sean. Don't know about you.
Sean Donahoe: No. That's exactly it. And it kind of leads into our last point that we want to go over here. The third thing you can do to fix your trade is what is your strategy, and does it have a positive expectancy? Now we were talking about law of large numbers, and Phil just gave a great example. If you've got many businesses running, and everything else, and you've got a portfolio and everything else-
Phil Newton: Multiple streams of income, I think is the popular phrase that people like to use today.
Sean Donahoe: Yeah. Robert G. Allen. He kind of came up with that as a book many years ago.
Phil Newton: Yeah, multiple ... That can come in many forms, as well. Maybe it's a couple of business locations, maybe it's a couple of businesses. Maybe you've got a day job, a side job. Maybe you've got a little something going on, a little bit of a side business going on somewhere in the financial trading world. Multiple occurrences. I'm not reliant on all my profits coming from one position. And right now I've got 66 positions on at this moment, Sean. I don't know if you know that. It's a little bit more than what I normally have. But that's just the way it is.
Sean Donahoe: Yeah, I'm hovering ... I was gonna say I was hovering at 42, and I was thinking, okay, and I'm debating whether I need a few more, a few less. I'm like no, I'm okay where I am right now.
Phil Newton: I've got to admit, it's just the way it worked out. I kind of ... As I've mentioned on a previous episode, after the ... I don't know. We're calling it a crash, but we'll call it a crash. But after the recent market mayhem, should we say-
Sean Donahoe: Let's call it a reset.
Phil Newton: Yeah. After the recent market mayhem, I found out myself with an empty portfolio, because everything came home, which was great news for bottom line points of view, but I suddenly have an empty portfolio. I've got to admit, I went a little bit crazy, and filled my boots. I was actively engaged in looking for multiple setups every day. I kind of filled my boots a little bit, but then the market conditions allowed me to fill my boots. Today and yesterday, trade goes on.
I'm very happy with that, because one of the ... Again, I know that kind of trap that is easy to fall into is that should I put this trade on? It goes back to that. What was your reason for getting in the trade if you don't have the clarity to put the trade on in the first place, then you probably are not gonna put the trade on. But you're gonna be nervous. You're gonna have the emotional experience, and to help overcome that is you should have a positive expectancy strategy, which is just a fancy way of saying it makes money on average. And have it physically written down. Again, so it comes back to you know what you're gonna do, when you're gonna do it, why you're gonna do it, so you can replicate it in a methodical and consistent fashion, today, tomorrow, next week, next month, five years, 10 years down the line. That's your business. Every business has that plan, and sadly to say it's worth some time spending, but write it down. So you've got absolute clarity.
And then when you're tracking it in your spreadsheet, you know there's a column for this point. There's a column for that point. Has this been met? Check, check, check. Maybe there's a little box for the whimsical things like mindsets. Dear diary, I was feeling sad when I put this trade on. Did that influence your trading? You can start to track those things. Because everything you can track and monitor can be measured and improved upon.
Sean Donahoe: Absolutely. And again-
Phil Newton: I'm on a roll today, Sean. I don't know what I'm taking. Maybe it was the caffeine. I don't know. I'm hitting my second wind today.
Sean Donahoe: There you go. And the main thing is ... This is another thing that ties in with what Phil was just saying, which is absolutely bang on the money, do you have your rule set? Do you have a trading plan? Is also evaluate how much speculation is involved in your trading, because this can be a weakness in a lot of people's trading, is the speculative angle. Not rule-based. If you have a speculative element, that means doesn't matter how good the previous two points were. How your position size was, whether you got entries on entries, you've got discretion, then it's a point of vulnerability across all the board. Doesn't matter how much everything else lines up. When you add discretion, you add vulnerability.
Phil Newton: And to be fair, Sean, technically what I do is discretion ... Well, to be fair, what we do is discretionary training. And then it's worth pointing out that while you can buy the dipping it up trend, for example, how can you mechanize how you interpret buying the dipping it up trend? I think that's worth ... So it is okay to use discretion, but how can you mechanize the process of that discretionary experience, because buying a dipping it up trend is a discretionary evaluation for a lot of people. So how are you gonna do that? Can you mechanize the process so that you're at least replicating the thought process that goes into it? interesting exercise.
Sean Donahoe: Consistently.
Phil Newton: Because that's how I started to develop more rigid, rule-based systems that almost like an algorithm. Technically, that's what I'm doing. How can I mechanize the process of the decision making?
Sean Donahoe: Absolutely. It's basically a rule for each decision element. So is this doing this? Is it doing that? And are we in this situation?
Phil Newton: Yeah. how's this. And this is what we were talking about right at the beginning with the definition of clarity. Has this happened? Yes. Okay, great. Let's move onto point number two. Has this happened? Well, it looks like it. Don't go any further. Go look at something else. You want a yes, yes, yes, yes to all those kind of closed questions. The algorithm. Has this happened? Yes. Has this happened? No. Right. Go and look at something else. It's just that. Follow the algorithm. If you can define with clarity what you're doing, then it's gonna give you such a stress-free experience.
Sean Donahoe: Absolutely. I call it "if, this, then, that" trading. Because it really is asking those closed loop questions. Checking the boxes and again, if it doesn't check all the boxes, move the hell on. And I think that's another point that a lot of people don't do, like we said, is they-
Phil Newton: It's one of the hardest things for people to do is to recognize that, "Hey, actually not everything quite meets that criteria, which is all the more reason to have your strategy written, set it up on a spreadsheet, so that you're going through, you're kind of like one rule at a time. And if it doesn't meet the criteria, go and look at something else. I've got to admit, I put that out to all our students is the recognize the ability to move onto something else when there's no trade here. Nothing to see here. Move along. We've got so much opportunity in the stock market, we're almost spoiled for choice, so let's not waste our times with the maybes and the could be's, and "Well, it looks like it's developing this." I want yes. Hell, yes. This has developed, and the trade will go on. That's what I want. That's the definition of clarity that we're looking for.
Sean Donahoe: Absolutely. So there you go, ladies and gentlemen. Those are the three ways that you can fix potentially your trade.
Phil Newton: I don't know about you, Sean. I think there was more than three.
Sean Donahoe: I think there was ... Well, we wrapped them up into three groups.
Phil Newton: We put a nice little bow on them.
Sean Donahoe: I think we got a nice little bow on there, and a few bowless ones in the middle, as well, so it's all good. So with that being said-
Phil Newton: And for the eagle-eyed amongst you, I was just gonna say, for the eagle-eyed amongst ... Or the Eagle-eared amongst our listeners, I think you probably got the bulk of how we trade in there.
Sean Donahoe: There are a few certainly little bombs dropped in there, as well. Pay attention, and you'll siphon off a couple of little interesting tidbits. But so with that being said, let's move onto the next section.
Automated: And now, it's time for the Rebel Traded 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: So kind of in line with today's theme is step back and look back. Here's the thing. We're talking about trading logs. We're talking about tracking everything, noting everything. Being very precise with your language, your reasons for getting in, out of a trade and everything else. But make sure you are keeping those records, because here's the thing. You need to know where did you start? How long ago did you look at how far you've come from where you started to where you are right now? Have you seen progress or regression? See, this is the thing. When you have all of these things that we've just been talking about, you can take a step back and see how you've grown as a trader, how you've improved. What are your stats compared to when you first started? You don't want to be in a position where you're paying for the most expensive lessons by throwing your money into the market and learning from a lot of mistakes. We all make mistakes, but you need to be able to make sure that you're better tomorrow than you are today.
And by doing and following a lot of the things that we've said in this show, it's gonna certainly help you get there. But if you're not taking a step back to look back at yourself with ruthless evaluation of your own performance, and the self discipline and self confidence to say, "You know what? I screwed up." Or "You know what? That's my problem right there." Or "Yeah, you know what? I'm doing that."
Phil Newton: It might not even be that, Sean. we've talked about before is kind of like how i develop my strategy. It was along the same vein. It was from day one, I fell into tracking my own trading, keeping a journal physically of what I'm doing and mostly as we've spoken about many times. But my strategy developed ... It wasn't a case of how can I improve upon the positive results. It was after the trade, because I was paying attention to the emotional side, it was, "Man, that was a rough trade," not necessarily from ... I could still be a profitable trade, and it might've been a rollercoaster. How can I ... That was a rough experience. How can I exclude that trade again? And then you'll come up with a rule or you'll put some more definition on what you did to get there in the first place, and that's the refining process. But you're only gonna know that when you're tracking and monitoring and keeping close tabs on your strategy and the performance and your emotional state of mind.
When you've for that knowledge, at the end of the trade, or at the end of day, or at the end of the week, or at the end of the month, you can sit back and you go, "That was a good month. How do we do more of that?" My strategy developed down the road of how can I do less of that experience? How do I exclude that from my own trading? Because I didn't like how I felt when I put that type of trade on, or when I made that decision. So what can I do to prevent me from an undesirable experience? And it might still ... We've mentioned it before. It might still produce a profitable result, but it was for me, emotionally an undesirable experience. So I wanted to exclude those decisions, or firm up decisions to do more of the same or specifically exclude some acts that I was ... Undesirable thought process.
Sean Donahoe: Absolutely. And this all comes back from the same thing, which is being able to step back and look back, not only at your most recent year trades, but also, again, longterm, medium term, short term. Again, these are all metrics that you can look at yourself and evaluate, and see, "Hey, can I avoid these potential problem trades?" Or, again this is another flip side of what Phil's saying is this one caused an emotional rollercoaster. So is that the trade? Or is that me? Is the weakness ... And again, I'm not implying anything with Phil's psychological profile here, because we all know he's a basket case.
Phil Newton: No insurance. We've all got different experiences, so it frustrates me, because I have spoken to a lot of people over the years that don't have or didn't have that same emotional reaction to some trading or a lot of their own trading, because maybe they're just more emotionally stable than I was. I've got to admit, I recognize that the emotional side of trading for me was gonna be a hurdle that I would be consistently having to jump over. And that's what I wanted to improve on. For other people, they don't have that, and that's ... I'm secretly jealous, and I want to punch them in the face, but if you don't have that experience, some people are okay with that. But early on in my trading, I didn't have that, so I wanted to track and monitor and control it to the point where it's just part of what I do now. I'm not saying I'm not impacted emotionally from trades, because we're all impacted. It's just the degree to which I was was causing me to take undesirable responses.
I would be clicking buy, sell, buy, sell, buy, sell one afternoon, and I remember it vividly. I'd be at the time. And it was just buy, sell, buy, sell, buy, sell, and for an hour that's what I did. And it turned out to be a horrible experience. And if I had just sat back and done nothing, then it would've been a profitable day.
Sean Donahoe: You broke with those commissions.
Phil Newton: But that's the thing. How can I not do that again? And my answer at the time was to unplug that mouse after I put the trade on.
Sean Donahoe: And you know what? We've all been there. We've all done that. And again, this is where experience and time in the trenches does come into a lot of this, because you develop that emotional fortitude go through those situations. Again, but it's the identifying of is it my trading? Or is it me? Or is it my strategy? It helps you. Again, stepping back helps you evaluate those areas, so that you could address them, fix them or work on them. That's the main thing. So there you go. Rebel Trader tip of the week. Perfect. Rock on.
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 quickfire round.
Sean Donahoe: So the quickfire round. Rummaging in the mailbag now that we have Phil back in the saddle. Start with this one with you, which is an obvious one, but we've got it in our mailbox, and I had to kind of scratch my head, because I don't think person's ever listened to this show or hasn't really been paying attention. But do options traders really make money? I have to kind of sit back and go, "Well, that's why we're here." But
Phil Newton: I want to add to the question, because I was sent, actually a similar question earlier in the week, as well, Sean. And it was, "Can you make money buying options?" And the question came about was because the person who sent me the question had found one of those tester that basically you bought on the first day of January on Apple every month for the last 10 years, would your options have made money? That was the type of back testing software that they were playing with. That type of ... And this is the argument always for not buying options and being a premium seller is because if you're just purely buying options based on time and duration and hoping to be right on direction based on some theoretical probabilistic outcome, then sure. You're gonna lose money. Every day of the week you're gonna lose money.
Sean Donahoe: Absolutely.
Phil Newton: But we're not just randomly buying options. We're trying to apply, again, a systematic approach to find That's what we're trying to do. So within the context of the trend, I'm buying the dip with a defined parameter at a particular point. And then there's other things that we look at, which not worth looking at right now.
What I'm trying to get to, believe it or not, Sean, is when you've got a process to follow that helps you find an opportunity, and then time your opportunity, it is possible that as an option buyer to make money. And to make good money, as well. Because the way that I see what I do with stock options as an alternative a less capital-intensive way of trading the stock by replacing it with options or a variety of different option strategies. So, as a buyer, yes you can. But if you're just looking purely on the first day of the month, we're gonna buy and option that's or a particular level on the markets, on the option chain. Then you're probably gonna lose money, and you lose money every day. So it's conditional. Do option traders really make money? Yes, they can.
Sean Donahoe: Well, guess what? It's about your strategy. It's about what you're doing. It's about your overall approach. Exactly. You've got to look at it as a whole business, not just, "Oh, I'm buying an option." No, you've got your portfolio. You've got your money management strategies. You've got ... It's a big, big machine that is actually very simple when you get down to it. But, if you are not ... If you're just looking at one thing and these weird back testing softwares, because I've played with pretty much every single one out there. Again, a lot of them cannot simulate what we do.
Phil Newton: Usually, people are and technical analysis. And that gives us a very unique experience to be able to say that on average, 65 percent of the time, we make money. And that's what you do expect without positive expectancy strategies. That's my whole argument for trading.
Sean Donahoe: Abso-damn-lutely. So what else is in the mail bag?
Phil Newton: So we've also got, "What is your preferred broker at Trade Canyon for students to use?" I think it might be worth saying that there are many brokers that are available, but the one you choose might not be right for the next person. I think we've got to apply some sort of disclaimer here.
Sean Donahoe: Abso-bloody-lutely. Here's the thing. We do not have a, and I put this in quotes, "preferred broker." We don't recommend or have a relationship with any broker.
Phil Newton: More specifically, Sean, we're not getting any kickbacks from a broker for recommending them, which is what most people do. I think that's an important thing.
Sean Donahoe: That's a very, very ... Yeah, that's where I wanted to go with that, because-
Phil Newton: I've never believed that that is a ... I mean, sure, from a business point of view, we're losing a revenue source. But at the same time, I'm very confident to be able to remain agnostic to suggestions, to have an unbiased suggestion, because I happen to like them or I don't happen to like them or whatever the case may be. So this is just our personal viewpoints. It's not necessarily Trade Canyon's. I've got my personal preference. You've got your personal preference. I suppose it's like driving a car, Sean. What do you think?
Sean Donahoe: Well, absolutely.
Phil Newton: Not every car is right for the same person.
Sean Donahoe: Absolutely. And so what you're trying to do and why. Are you trying to carry seven kids to soccer practice? Or are you trying to just take a fast trip up Route 66 from ... Which doesn't really exist anymore, all the way from Chicago to California. It's really horses for courses, but again, just to clarify, no, we do not have a kickback from any broker, because while we are as, Phil correctly said-
Phil Newton:
Sean Donahoe: Losing a revenue source, we're maintaining integrity. That is really important to me in this business is that we don't have that closed behind the curtain b.s. going on like a lot of other companies.
Phil Newton: And technically, I think you're supposed to speak to a financial advisor to get a proper viewpoint of that. It's a typical question to answer, even if we can give that ... Is it technically financial advice? I can't remember what the I think it depends on when you are ... I think it-
Sean Donahoe: No, this is not. This isn't advice, but let's just say the ones that we use.
Phil Newton: I think it depends what way you're on the world. I've always viewed it as financial advice, but my personal view is that it depends on what you want, because what I like is not necessarily right for you. And if you want the full swing and all sing and all dancing, concierge-type service, you're gonna pay a premium for it.
Sean Donahoe: And you don't need to-
Phil Newton: And if you want to be able to pick the phone up and have them push the buttons for you, that's gonna come wit ha premium. And there are services out there that the gold standard is sure the service-type treatments. And guess what? You're gonna pay a premium for it. But if you just want the low cost, no bells, no whistles, I want to do it myself, push the buttons, then there's a solution for you, as well. And then there's all the ranging degrees between them, and it's not just a case of which has got the lowest commissions. Maybe you want some charting package in there, as well. So again, you might pay a little bit more, but less than the concierge service, but more than the discount broker, because you've got some extra facilities. What is it you're looking for? As we keep saying, it's like the car, isn't it? Are you a BMW guy? Or are you an RD guy? Or maybe not RD, given the current troubles they've had, but you get my point. or is it Mercedes?
They both go from A to B, but do you want the BMW badge on the front? Or do want the Mercedes badge on the front? They both do the same things.
Sean Donahoe: Absolutely. Absolutely. And a lot of it comes down to which software you want to use, because it's the software that gives you the ability to manage everything, and then it's usually attached to a broker along the line.
Phil Newton: And if you want something from the '90s, there's a broker for you over there, as well. But if you want something that's more up to date, there's also a broker for you.
Sean Donahoe: Absolutely. If you want to be trade station. I've used e-signal. I'm not that keen on Ninja Trading, but that's just a personal preference. There's lots and lots of different systems out there that then tie into all sorts of brokers and-
Phil Newton: To be fair, I think Ninja is just a charting platform that also plugs into some brokerages. It's not technically a brokerage, but I know what you're saying there. It's more of an interface, isn't it?
Sean Donahoe: Yeah, it's the interface to the broker. Basically, that's it. A lot of the discount brokers out there do have connections with a lot of popular software. They have their own software, they have unlined software. It really is gonna depend on what you want to do, what's available to you. Think or Swim, for example, is something we use a lot in our training, but at the end of the day, you can't use that in some countries, because they're just not available in some countries. Which is backed by TD Ameritrade. I mean, there are all sorts of other options out there. Interactive Brokers is one we like, but it's we use or have used.
Phil Newton: It's from the '90s.
Sean Donahoe: But it is very much from the '90s. I would say that they need to get up to date a little bit. But again, it's gonna depend do your research and check the fine print. That's all I can really say in regards to that. But like I said, we do not have a official preferred broker or any relationship where we're getting kickbacks, because I like to keep our integrity. So next question. How do you make sure-
Phil Newton: I thought I was gonna ask you that, Sean, but nevertheless, whatever. Go on.
Sean Donahoe: Okay, well, let's answer it together. How do you make sure you are not assigned-
Phil Newton: Should we hold hands?
Sean Donahoe: If you like. But just ... I'm-
Phil Newton: Stay over there.
Sean Donahoe: Stay over there. Anyway. How do you make sure you're not assigned stock when a call option expires profitably? This is, one, again is gonna depend on your broker and depend on your software, but what's your answer, Phil?
Phil Newton: Well, generally, if an option expires in the money, you're probably gonna be assigned stock, because that's what you're buying at the end of the day. Your option gives you the right to buy 100 share at a set price, on a set day should that option expire in the money. So that's what an option is. You will be assigned the stock if it expires in the money. However, if you don't want that to happen, then maybe the day before it expires or on the day or at any time before it expires in the money, close it. That's how you avoid being assigned stock.
Sean Donahoe: That's exactly it.
Phil Newton: Nice simple answer.
Sean Donahoe: Simple. Simple, simple. Now there are ... You can also-
Phil Newton: Depending on your broker, you can say close out before any expire ... I think it depends on the facilities, but generally, if it expires in the money, typically the default is you're gonna get assigned. That's what ... The option is the right to buy or sell a set number of shares on a set date, for a set price. You've got the rights, but not the obligation. If you don't want the obligation, then close the position.
Sean Donahoe: That's the word I wanted to use. Absolutely. That's it. One day before expiration, before it all closes, before the end of the market day or whatever Make sure you're maintaining and managing your portfolio.
Phil Newton: To be fair tying it into setting a target that we talked about earlier, when prices ... When the stocks hit the target that you expect, chances are your option would be profitable assuming that you're on the right side of the position. Then close the trader at the target. That's how I avoid it, and usually seven to 10 days before expiration, I'm thinking can I close the position? It's not doing it as fast as what I would like. If it was in the money, I'm gonna take a small profit. If it's out of the money, I'm not gonna worry about it. Out of the money.
Sean Donahoe: Absolutely. And that's what it's all about at the end of the day is, again, it's all down to that portfolio management. So 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 feature 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. Yeah. It's time for Bullshit of The Week.
Sean Donahoe: So Bullshit of The Week, and this I absolutely love. Now I have never seen so much-
Phil Newton: You've been giggling about this like a-
Sean Donahoe: I have.
Phil Newton: Like a clown for days.
Sean Donahoe: I actually wanted to record a dedicated video just about this one topic and get on my soapbox about this, because a lot of you guys know, I've got my fingers-
Phil Newton: This is your sorest point, isn't it?
Sean Donahoe: It is. I've got a lot of fingers. A lot of different businesses, and one of them is in the marketing specs. So in a story sent Facebook stocks tumbling, if you've been following the news, wiping out over $37 billion in market cap, because of this one piece.
Phil Newton: Little finger to the corner of the mouth. Billion dollars.
Sean Donahoe: Absolutely.
Phil Newton: Dr. Evil there.
Sean Donahoe: Jesus fuck. I was gonna say get Mini Me over there, but anyway. It's a much-hyped and overplayed story that has set the world on fire. But here's the shocker. In shocking news, an advertising and analytics company generates analytical data and uses it for marketing. Yes, I'm talking about-
Phil Newton: Dun, Dun, Dun.
Sean Donahoe: I know. We need that big organ thing going off, Joshua, our podcaster guy's gonna have to go find some ... He's gonna have to go find some dramatic music to throw in there. But anyway, yes, there is a whistleblower who is spilling the beans. As Phil was laughing about earlier on.
Phil Newton: I just didn't know where to begin with it. That was the headline I saw. Whistleblower. Whistleblower Spills the Beans. Well, was he blowing the whistle, or was he spilling the beans? Would you make up your mind?
Sean Donahoe: Abso-bloody-lutely. Anyway, so basically what happened, this company in the UK and something Analytica, I can't remember the first name. But they were basically scraped and analyzed people's profiles on Facebook, compiled all of the IDs, created custom audiences and targeted them with political ads. Now here's the thing. Every-
Phil Newton: This is all public information, just to kind of underscore the nerdy stuff that you've just said. This is all public information. If you'd commented, just a very simplistic example, "I really like Trump," or "I'm really against Trump," or whatever it was. That data has been logged, and your profile has been tagged as "This is a pro-Trump person," or "This is a pro-Clinton person," or this is a pro-whoever. So in fact, that's what you're talking about here just to kind of
Sean Donahoe: It's ridiculous.
Phil Newton: So people who like Trump who like cat videos who also like ... All this is public information, essentially.
Sean Donahoe: Now this is big data mining. This is big data mining, and I'm gonna get on my soapbox for a second, because I'm just So basically what this company has done is something that everyone's up in arms, and there's all sorts of words about, "Oh, your profiles have been hijacked, and Facebook's data breech," bullshit. It's bullshit.
Phil Newton: We've just highlighted public information.
Sean Donahoe: It's data. And what they've done is they've gathered and analyzed all this data. They've gone through all sorts of data. They use psychological profiles based on different behaviors, different things that you do. Again, that you've put out there, they've looked at it, analyzed, "Oh, you're a dog person. You're more likely to vote for Trump. Cat people who are more likely to vote for Clinton." I mean, that's a ridiculous example, but that's the kind of thing, so they're measuring and connecting.
Phil Newton: But that's the level of detail that you could get.
Sean Donahoe: So they've managed to create these psychological profiles-
Phil Newton: It's the digital equivalent of driving down your road and seeing who's got the Trump flag or the Clinton flag in the window.
Sean Donahoe: Yes. And then targeting them with that.
Phil Newton: Because it's public information.
Sean Donahoe: Exactly. Now here's the thing. Obviously this is Facebook, everyone's like, "Oh, my God, there's two billion people on Facebook." Well, guess what? If you don't want to be profiled, don't go on social media, because, again, think about this, and this is absolutely the ridiculous thing. Facebook's already doing this to you and selling that information to advertisers, including me. I can go on Facebook right now. I can target everything down to people of certain ages, income types, whether they own a house or not.
Phil Newton: Who drink or like wine or whatever. You can literally get the psychographic and demogra ... But then it's not just Facebook. Guess what? That's what marketing companies do.
Sean Donahoe: Absolutely. So it's absolute bullshit.
Phil Newton: This is not new.
Sean Donahoe: It really ... This whole story is over hyped, over blown, just because it's right now, it's really cool to jump on the whole anti-
Phil Newton: Privacy bandwagon.
Sean Donahoe: The whole anti-administration bandwagon.
Phil Newton: It must've been a slow news day.
Sean Donahoe: It's wiped out a lot of value or cap market cap value from Facebook, and they're saying, "We're having emergency meetings about this data breech." There's no data breech. Where this company did get some sneaky shit-
Phil Newton: I'm kind of trying to jump up on your bandwagon there, Sean, because it is absolutely nonsense. This is revolutionary. It's not whistle blowing. It's not a new idea. It's not something that's been hidden from us. This is pretty much what every websites who's collecting any type of information. That's what they do. Even if it wasn't online, you can drive, as you just flippantly said, you can drive down someone's road and see if there's a flag on the outside under the awnings, of if you're a pro-Trump or a pro-supporter, of if you make donations, this is all public information. This is what makes it complete bollocks. I'm sorry, Sean. I kind of jumped on your soapbox there with you.
Sean Donahoe: It is.
Phil Newton: It frustrates me, because it's public information, and it's not a whistleblower in any way shape or form, and this is the type ... Just taking the story aside for a moment, this is the type of nonsense that the talking heads and the crisis news network keep talking about and to shock and awe the unsuspecting public into buying into the adverts that they want to sell you. That's the ironic thing. They're using these stories and these shock and awe headlines to sell you their own advertising and to get you on their database of likes and dislikes, so they can do exactly the same thing.
Sean Donahoe: It is. Cambridge Analytica, this is the headline-
Phil Newton: I think that's what they call ironic.
Sean Donahoe: It is. The irony is like a limp balloon there. It's just like bang, there you go. But Cambridge Analytica's the name of the company, and the guy who's the, and I'm putting it in quotes, "whistleblower" said, "I made Steve Bannon's psychological warfare tool." It's not psychological warfare. Guess what? It's profiling and targeting, and that's what it is. Like I said, I mean-
Phil Newton: And that's just a fancy way of saying, "I like Clinton and cat videos." That's a psychological profile, and if you find a group of people who also like Clinton, and I'm just making the names up here. Don't take it personally. But you get the idea, that's all it is. It's just a fancy way of saying you've got certain behaviors be certain traits that are also common with a certain percentage of the population. Well, of course. That's not changed in 100 years.
Sean Donahoe: Exactly. It's just that we have now the tools, the AI, the algorithms to go and figure all that out, and guess what? I can tell you right now they're saying, "Oh, well, because this is what helped the current administration get in," well, guess what? They were doing that, not as extensive or comprehensive or-
Phil Newton: Has Putin been mentioned, yet, as a co-conspirator?
Sean Donahoe: Oh, dear me.
Phil Newton: I can see that in tomorrow's news.
Sean Donahoe: That'll be the next bloody thing. But I mean, it's like the previous administration. They did something similar, but not as sophisticated or successfully. Oh, well. That's on them, but I can guarantee in future campaigns, they're gonna be looking at that, because if that gives them an edge, they're gonna be doing that. Absolutely either in deference or in conjunction with Facebook. Facebook's having emergency meetings right now. They're being called to answer before the senate and all sorts of bullshit, because it's a whole bunch of hype and bullshit and smokescreen and stupidity. And Phil's point there about they want to create this hype train so that you look at their ads is absolutely dead on. It's all attention whoring, and this is actually one of the biggest pieces of bullshit that we've ever covered in the Rebel Trader sessions. This one has just set the meter and the bar way, way higher for future bullshit, but hey, we'll see where it goes, but there you go. Anyway, with that being said-
Phil Newton: I'm liking Facebook chart now. It's at a good 163, 165 level. I'm liking this level, Sean .
Sean Donahoe: You know, I had a-
Phil Newton: I might take a little nibble out of it, because it's just that so far as we come into the almost lunchtime period.
Sean Donahoe: I actually short them last week, and I closed out my trade this morning, because I'm thinking, "Do I want to swing that around to ride a rally?" But I think this ... We'll see where it goes, but right now, I closed out my short on them. This whole story was a blessing for me. It made me some money. Great. Fantastic. I was already short, but at the end of the day, just piece of b.s. It really is. But with that being said, that is the end of this week's show. Now that I'm gonna step down from my soap box. Thank you for listening. Hope you've enjoyed today's show, but do remember this show is not free. It will cost you a five-star review on whichever platform you're listening to. Go to tradecanyon.com/rebeltrader. You can sign up, keep abreast of new episodes of the show. You can subscribe right there, and leave us a review, because we love to hear from you. And this also helps us get this message out to more traders and investors just like you.
Phil Newton: And just remember, if you're still listening, just remember, you're my favorite. You can also connect with us on Facebook and the Twitter machine tradecanyon.com/rebeltrader, and to be fair, Sean, what have we got coming up in next week's show, Sean?
Sean Donahoe: I was gonna say, he's getting it there. So here's gonna be a little bit of a cryptic clue. Who is the more foolish? The fool? Or the fool that follows? So we've bit of Obi-Wan Kenobi wisdom there. But that'll just be a teaser for next week's show. Make sure you check it out, and we'll see you next time. So with that being said, rock on.
Phil Newton:
Automated: For more cutting edge trading advice and a free trader workshop to help you build a personalized trading plan and make smarter trading decisions, go to tradecanyon.com now.
Automated: Features. Options on features. 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 result. 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.

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[00:00:10] Show Introduction

[01:52] Sean: So, fixing your trades. We're gonna look at three different ways that you can fix trades. It doesn't matter how detailed you are. Maybe you've got a great strategy or believe it's a great strategy. You're doing your daily trades and it's just not working. You're throwing money into the market and you don't know what's going wrong. We want to take a look at three different ways you can adjust, analyze, and improve.

[02:25] Phil: Improve overall performance.

[02:32] Sean: That's a good place to start. Let's start with number one. This is quite likely the biggest problem we see with students, but also, most traders can identify with. It's what was your reason for entering the trade and where are you getting the hell out?

[02:50] Phil: I think in a good way and a bad way, there's pluses and minuses for this because the majority of textbooks focus on this. This is the shiny object part of most people's indoctrination into trading. It's the signal generation that attracts most people. What's gonna get me in the trade? Finding clarity on that seems easy, but it can be difficult. We keep saying, keep peeling back the layers and put more detail, more meat on the bones. I was just on a coaching call talking about this very thing. I personally want to be able to say with absolute clarity. If you're saying things like maybe and could be and possibly, and there's no conviction, definitive definition of purpose... I want to be able to say what I'm doing, when and where. If I can't answer that, something's wrong. When you're taking any course of action, do you have that definition, that HD experience? If you've got a wishy-washy way of expressing what you're doing, perhaps you need some more clarity.

[04:34] Sean: That's a bloody good point and I like that. Clarity of purpose. We should use that as a catch phrase for this. If you are not very clear of why you're getting into a trade, what is the definition of your conditions... What were you looking for? What did you find? Are you taking that action? Then again, that clarity is going to give you consistency.

[05:03] Phil: The evidence we're looking for, I want to be able to make a statement of fact. For example, the first step we do is determine direction. The trend is your friend. I want to be able to say, in the last 12 months, this stock is going up. I want that to be a statement of fact, because then I know that buying the dip in an uptrend is a good idea.

[05:32] Sean: BTFD. BTFD.

[05:33] Phil: Yeah. It starts with a statement of fact. Based on the evidence you see presented in front of you, AKA the charts, what is your statement of fact? This stock is going up. When you can say that, defining an entry point becomes so much easier.

[05:59] Sean: Absolutely. Now, again, we talked at the beginning that this is what the textbooks focus on and that indicator are not signal generators. We're looking for conditions. It might be a combination of things. You've got to have the definitive purpose of your trade mapped on. This is why I would get into a trade. But on the flip side of that, you've also got to have this is why I won't get into a trade. This is a big pitfall a lot of traders fall into, because if they don't have that clarity of why they will avoid a trade, it might not check all the boxes. Maybe there's one or two boxes it's not checking and they think, ahhh, well you know what, I think I'll do it.

[06:55] Phil: It'll do.

[06:55] Sean: But again, if you're not selective about why you won't get into a trade, you might find a lot of your trades are bad trades because of that one factor right there.

[07:06] Phil: Yeah exactly. It's that definition of clarity. I keep going back to the experience I had in my late teens. Not that one, Sean. I was in Blockbuster Video reading a very large tomb of a technical analysis book. The realization I had as I was going through a thousand-page text book of all the indicators under the sun for the second time, and I had this realization this doesn't tell me how to get into the position. It talks about all the indicators and signals and I wasn't convinced about them even then, naive with my knowledge. I hadn't bought into the signal generation subject. I was quite drawn to patterns and breakouts, and it just said buy the breakouts or sell short the breakdown. That was as much as it got in the entry. There was no definition of clarity of what you actually do. Well how do you do that? Remember the movie, Cocktail, with Tom Cruise?

[08:28] Sean: Yes.

[08:27] Phil: He's just got the job behind the bar, serving drinks, doesn't know what's in the drinks but he gets asked, can I have a martini, what's in that? It's the same experience. Buy the breakouts. It sounds like it's more than what it is. Oh yeah, I'm just gonna buy the dip or the breakout. How do you actually do that? The first thing we mentioned was get more detail on your reason to get in. Buying the breakout is what you're gonna do. Understand how to deploy that and keep getting as granular as you can until you know what, when, why and how you're gonna do it. When you've got that knowledge and got that confidence, everything starts to fall into place almost like dominos. You get a confident experience to put the trade on because you've got definition. I suppose it's good advice for anything in life. You'll have the confidence to do it next time. Maybe the trade doesn't work out profitably this time, but at least you know what you're gonna do, when and why next time. Replicate. Repeat. Replicate. Repeat. It allows you that consistency to deploy the strategies you understand at that moment over and over. That for me is what success looks like. It's being able to repeat the process with confidence today and 20 years down the line.

[10:18] Sean: Absolutely. Keep a trading log. You want to track why you're getting into each trade, what you're feeling (one of the things Phil is very strong on), but also, make sure you've got that clarity for each trade you're logging down - why you got into it. When you're looking back at your trades wondering why you did something, you can say, oh yeah... because this leads into the next thing which is what's your reason for getting out of the trade? Again, you can get into the perfect trade at the perfect time with all the I's crossed and T's dotted (I did that deliberately). You could be in the perfect position, but if you're not getting out at the right time, it could be a complete waste of time. But again, define your reason for exiting the trade so that you can exit profitably when your specific conditions are met. So, with that being said -

[11:37] Phil: Some quick tips on how to do that... I'm a fan of bollinger bands to help put some structure on the charts. I want to enter at the bollinger band extremes, because that's one of the ways I identify an opportunity. If you're unsure of where to set a target to get out, maybe use, if you're in at the lower bollinger band, aim for the upper or middle bollinger band. I'm just trying to give you a very simple, mechanical structure without having to look at the charts. It's just a quick way to say if I'm in at the lower bollinger band, maybe we can expect the midpoint or upper bollinger as target 1, target 2 type of scenario. It gives you a place on the charts to, at the very least, evaluate if it will go further.

[12:35] Sean: Absolutely. This is where extra profits can be taken. It's something we've alluded to in the past, which is would you still be in the trade today? If you say you have a reversion to mean strategy and we'll use the bollinger band example - Most bollinger bands have the 20-day moving average as the center line and if you look at that as you've got an extreme. We'll use Facebook as an example. Facebook had a couple of rough days and they're at the extremes, but if my target was the 20-day moving average which may be following down, that's the mean. I've got that. Do I still think if there was a recovery, do I think there's more meat on the bone? Would I still stay in that trade? Well yeah, maybe I would. Again, this is hypothetical.

[13:31] Phil: But it gives you a point on the chart to start to say, when it gets here -

[13:36] Sean: I'm gonna reevaluate. Exactly. That's the cool thing.

[13:38] Phil: Or if you want to be mechanical, you can say, maybe when it gets there I'm gonna close the position. That's what I do. When it gets to my target, I am closing out. Or when it gets to within 80%, because I treat as my target as a zone. When it gets in that zone, I'm gonna take profit. That's a second target I'm gonna evaluate. It doesn't look like it's moving further. As you were saying, is there more in it? I see very few students who, prior to coming to us, are asking when am I gonna get out? This is the textbook's fault because they're always focused on the entry and the signal generator. An entry is not a strategy. Part of it is the entry. Part is the exit. Another part is the money management. To be fair, the biggest part is the psychology because everything else excluding the mind is a skill that can be learned. What's gonna keep you in the game today, next month, next year? It's the psychology - how you are impacted by your emotional experience of the trade. Whether you want to believe it or not, it's a big part of long-term success in trading. The point is, it's the target, that reason to get out. You might be successful on the entry, but on the exit, you're not seeing the profit you were expecting. Maybe you should be more clinical with your targets. Do what I do and take the what if out of it. When it gets there, I'm gonna close profitable. I put all that in my spreadsheet so when I click send on my order, it gets updated, I can see I'm 83% of the way towards when I'm expecting it to stop. I'm going to close the position, and that's a decision I make from the spreadsheet and not the charts.

[15:58] Sean: That's perfect and very valid.

[16:01] Phil: Another reason to make log.

[16:03] Sean: Absolutely. And that rolls into our next thing, keeping our next thing. How big is your position? This is #2. Is your position, too large.

[16:33] Phil: Probably is the answer for most people.

[16:35] Sean: I was gonna say 90% of the time we're talking to students about this, the answer is yes. This can lead to all sorts of problems. Phil was talking about the psychology. One of the things I focus on a lot is mental toughness, fortitude, resilience, and also a divestment of emotion in regards to money.

[17:01] Phil: It's not easy.

[17:04] Sean: It takes time and effort because we all have a fear of loss. It is a case a case of trade smaller. Trade a percentage (we recommend 0.5% of your overall capital per trade) and then you can scale up to 1% when you're more confident.

[17:39] Phil: As small as possible. I know we've got the percentage figured, but sometimes with a smaller trading account, it might not always be possible. Trade what you're comfortable with. Everyone's got a number in their mind. It might be bigger or smaller than what we suggest, but what's that number for you? If you've still got an emotional experience - sweaty palms, the inability to not check positions every five minutes - your position size is probably too big. Keep reducing. The good thing with stock options is you can keep reducing your position size to sensible, low dollar amounts. You can find the trade that's suitable from a risk point of view. It sounds counter-intuitive to reduce your position size. But if you look at the person who's been doing it for several years consistently and has seen a variety of different market conditions. The inexperienced retail trader is so focused on how much money they can make, and it's a natural reaction because we're doing it to make money, like any business. They're not looking at the risk they're taking to make that reward. They're trying to trade with as big of position size as they can, or too big a position size than they should. Look at the gains I could make. I only need one trade. Swing for the fence mentality. It doesn't work that way. If you have lots of fingers in lots of pies... I'm an advocate of at least one trade per day. Twenty days in a month and you'll have a rolling portfolio. It's gonna fluctuate 15-25 positions, but it's totally manageable and takes 10-20 minutes a day. Trade less with smaller size and you can increase the frequency. You stop over-stressing about one position, the over-leveraged experience. Stressing over is your position size too big. Worry about diversification. Naturally you'll start doing this, and it's such counter-intuitive advice, but surprisingly, it works. It works because that's how the professionals trade. We're looking for the portfolio experience. That's what the hedge funds do, big traders do, professionals do. Inexperienced traders are focused on how much money can I make, while professionals are focused on how little can I lose?

[21:24] Sean: Absolutely and you stole that right out of my mouth. It's not how much you make, it's how much you keep, and that's very important. It's important in business and this is a business.

[21:47] Phil: It's so counter-intuitive. You almost forget about it. But when you say it, it's like well of course you should focus on how little you can lose. Very few new traders do. If you have a bad run, and we all will, yeah sure... you'll take a hit emotionally today, but you'll be in business tomorrow. Real world example - if you had a shoe shop on the high street, imagine you've got everything invested in selling one pair of shoes, but then the shop burns down. Now you're out of business. But imagine if you've got a portfolio of businesses, three or four different sites, locations, etc. Sadly, if one does burn to the ground, you're not out of business. You'll be out for a few weeks, but that's what insurance is for. You've got the insurance to get you back in business. We're doing the trading equivalent by trading small and protecting the capital we have, in case of the worst-case scenario. When (not if), a bad week or month happens, I'm in business tomorrow. I'm not losing sleep over that attitude.

[24:15] Sean: No, that's exactly it. It kind of leads into the third thing you can fix a trade and that is, what is your strategy and does it have a positive expectancy? We were talking about the law of large numbers. If you've got many businesses...

[24:46] Phil: Multiple streams of income.

[24:46] Sean: Yeah, Robert G. Allen came up with that as a book years ago.

[24:49] Phil: Yeah, that can come in many forms as well. Maybe it's a couple of business locations, maybe it's a couple of businesses. Maybe you've got a day job, a side job. You're not reliant on all profits coming from one position. Right now, I've got 66 positions on.

[25:17] Sean: I was hovering at 42 and debating if I need a few more or a few less. I'm okay where I am right now.

[25:27] Phil: I've got to admit, it's just the way it worked out. After the recent market mayhem, I found myself with an empty portfolio because everything came home. From a bottom line, it was great news, but I suddenly went a little crazy. I was actively looking to fill my boots. Today and yesterday, they're starting to produce as well. Random comments about my portfolio. The point is, I've got a positive expectancy strategy. Trade sets up, trade goes on. Have it physically written down. Every business has that plan. Everything that can be monitored can be improved upon.

[27:52] Sean: Absolutely. This ties in with what Phil says... Also evaluate how much speculation is involved in your trading. This can be a weakness in a lot of people's trading. The speculative angle is not rule-based. It doesn't matter how good your previous trades were. If you've got discretion, you've got vulnerability across the board.

[28:42] Phil: Technically, what we do is discretionary trading. While you can buy the dip in an uptrend, how can you mechanize how you interpret how you buy the dip in an uptrend? It is okay to use discretion, but how can you mechanize the process to replicate the thought process?

[29:16] Sean: Consistently.

[29:19] Phil: That's how I started to develop more rigid, rule-based mechanisms, almost like an algorithm.

[29:33] Sean: It's basically a rule for each decision element. Is this doing this? Is it doing that? Are we in this situation?

[29:42] Phil: Has this happened? Yes. Okay great. Let's move onto point number two. If you can define with clarity, it's gonna give you such a stress-free experience.

[30:15] Sean: Absolutely. I call it 'if this, then that' trading. If it doesn't check all the boxes, move the hell on.

[30:35] Phil: It's one of the hardest things for people to recognize, that not quite everything meets that criteria. All the more reason to have your strategy written. Recognize the ability to move on to something else. We've got so much opportunity in the stock market, we're almost spoiled for choice. Let's not waste our times with maybes and could be's. I want yes.

[31:17] Sean: There you go - the three ways to potentially fix your trades.

[31:40] Phil: For the eagle-eared of our listeners, I think you got the bulk of how we trade in there.

[31:47] Sean: There are a few little bombs dropped in there. Pay attention. With that being said, let's move onto the next section.

[00:32:00] Rebel Trader Tip of the Week

[32:17] Sean: Okay so, in line with today's theme is step back and look back. We're talking about trading logs and tracking everything, and being precise with your language, reasons for getting in and out of a trade, but make sure you are keeping those records. You need to know where to start, how long ago, did you look at how far you've come from where you started to where you are now? Have you seen progress or regression? When you have all of these things, you can take a step back and see how you've grown as a trader, what your stats are compared to when you first started. You don't want to be in a position where you're paying for the most expensive lessons by throwing your money into the market and learning from a lot of mistakes. We all make mistakes, but you need to make sure you're better tomorrow than today. By following a lot of things we've said in this show, it will help you get there, but if you're not looking back at yourself with ruthless evaluation of your own performance, and the self-discipline or self-confidence to say I screwed up, or that's my problem, or I'm doing that.

[33:37] Phil: It might not even be that, Sean. From day one, I fell into tracking my own trades and keeping a journal of what I'm doing physically and emotionally. It wasn't a case of how can I improve on my trades, it was because I was paying attention to the emotional side, it was man that was a rough trade. It could still be a profitable trade, but it might have been a rollercoaster. That was a rough experience. How can I avoid that? You'll put some definition in to see what you did to get there. That's the refining process. You're only gonna know that when you're keeping close tabs on your strategy and performance and state of mind. At the end of the trade or week or month, you can sit back and go 'That was a good month. How do we do more of that?' My strategy developed of how can I do less of that experience? What can I do to prevent an undesirable experience?

[35:20] Sean: This all comes back from the same thing, which is being able to step back and look back, not only at your most recent trades, but also long-term, medium-term, short-term, these are all metrics you can look at and evaluate and see can I avoid these potential problem trades? This was caused an emotional rollercoaster. Is that the trade or is that me? Is the weakness me?

[35:58] Phil: We've all got different experiences and it frustrates me because I have spoken to a lot of people over the years that don't have or didn't have that same emotional reaction to some trading, because maybe they're more emotionally stable than I was. I've got admit, I recognized the emotional side of trading was gonna be a hurdle that I would be consistently having to jump over and that's what I wanted to improve on. For other people, they don't have that and I'm secretly jealous and I want to punch them in the face. If you don't have that experience, some people are okay with that. But early on in my trading, I didn't have that, so I wanted to track and monitor and control it to the point that it's just part of what I do now. I'm not saying I'm not impacted emotionally, we all are. But the degree is lesser. I remember one instance, I was trading futures and was long/short, long/short for about an hour, and when I stepped back, I was back to my original direction of being long. My original stop loss had never been hit but I got sucked into the trap of being buy/sell. The trade went on and didn't go my way immediately. It was nowhere near my original stop loss because I was trading futures at the time. If I had just sat back and done nothing, it would have been a profitable day. How can I not do that again? My answer at the time was to unplug the mouse after I put the trade on.

[37:55] Sean: We've all been there and done that. This is where experience and time in the trenches does come into a lot of this because you develop a lot of emotional fortitude. It's the identifying of is it my trading, is it me, is it my strategy? Stepping back helps you address those areas so you can work on them. Okay, rock on.

[00:38:30] Quickfire Round

[38:39] Sean: So, rummaging in the mailbag, now that we have Phil back in the saddle, we'll start with this one with you. It's an obvious one but we got in our mailbox and I had to scratch my head because I don't think this person's ever listened to the show or hasn't been paying attention, but... "Do options traders really make money?" I have to sit back and go well, that's why we're here.

[39:06] Phil: I want to add to the question because I was sent a similar question. It was "Can you make money buying options?" The person who sent it had found a sim back tester. Basically, if you'd bought on the first day of January on Apple for the last ten years, would your options have made money? This is the argument for not buying options and being a premium seller: If you're just purely buying options based on time and duration and hoping to be right on time and direction based on some theoretical outcome, then sure, you're gonna lose money every day of the week. But we're not just randomly buying options. We're trying to use a systematic approach to find, filter and sort stocks and time our entries on 'traditional and principle based methods' to get involved in the market. We say buy the dip in an uptrend and have defined what we're doing in that process. I'm trying to find the overall trend or money flow, adding to the flavor of the trade at a statistical extreme with usually a bollinger band price extreme, a nice deep retracement. When you've got a process to follow that helps you find an opportunity and then time your opportunity, it is possible as an options buyer to make money, and good money. The way I see what I do with stock options is it's a less capital intensive way of trading the stock by replacing it with options. But if you're just looking to buy an option on the first day of the month that's a particular money on the options chain, you're probably going to lose money. It's conditional.

[41:44] Sean: Guess what? It's about your strategy, your overall approach. You've got to look at it as a whole business. You've got your portfolio, your money management strategies... It's a big machine that is actually very simple. If you are just looking at one thing and weird back testing softwares, a lot of them cannot simulate what we do.

[42:23] Phil: Usually people are asking because a lot of people, usually premium sellers - and to be fair, that's their argument for being a premium seller because the option doesn't make sense. If you're just arbitrarily buying and selling options. These softwares aren't taking timing and technical analysis into account. They're just looking at the theoretical numbers. You can do that with options. There are strategies that look purely at the mathematics to find a favorable trading opportunity for stock options. That's the attraction for a lot of people, but we're taking the fusion of the best possibilities of stock options on the buy and sell sides, and fuse that with charting and technical analysis and that gives us a very unique experience to be able to say that on average, 65% of the time we make money. That's what you can expect with a positive expectancy strategy. That's my whole argument for trading.

[43:15] Sean: Absolutely. Okay so what else is in the mailbag?

[43:19] Phil: We've also got "What is your preferred broker at Trade Canyon for students to use?" There are many brokers available. The one you choose might not be right for the next person. We've got to apply some disclaimer here.

[43:34] Sean: Absolutely. Here's the thing. We do not have a "preferred broker". We don't recommend or have a relationship with any broker.

[43:45] Phil: More specifically, we're not getting any kickbacks from a broker for recommending them, which is what most people do. We're a bit agnostic in that regard. From a business point of view, we're losing a revenue source. But at the same time, I'm very confident to be able to remain agnostic to suggestions or to have an unbiased suggestion. This is our personal viewpoint. I've got my preference and you've got yours. I suppose it's like driving a car. What do you think?

[44:22] Sean: Absolutely. Are you trying to carry seven kids to soccer practice, or take a fast trip up Route 66? But again, just to clarify, we do not have a kickback from any broker. While we are losing a revenue source, we're maintaining integrity. That is really important to me in this business. We don't have that BS behind the curtains like a lot of other companies.

[45:08] Phil: Technically, I think you're supposed to speak to a financial adviser to get a proper viewpoint. Is it technically financial advice?

[45:28] Sean: No, this isn't. Let's just say the ones that we use.

[45:31] Phil: I think it depends on where you are. I've always viewed it as financial advice, but my personal view is that it depends on what you want. What I like is not necessarily right for you. If you want the full-swing and all swing and dancing, you're gonna pay a premium for it.

[45:50] Sean: And you don't need to.

[45:52] Phil: If you want to be able to pick the phone up and have them push the buttons for you, that's gonna come with a premium. But if you just want the low cost, I want to do it myself, there's a solution for you as well. And then there are ranging degrees between them. Maybe you want a charting package. What is it you're looking for? Are you a BMW guy or a Mercedes guy? They both go from A to B.

[46:51] Sean: Absolutely. A lot of it comes down to which software you want to use because it's the software that gives you the ability to manage everything and it's usually attached to a broker along the line.

[47:01] Phil: If you want something from the 90's, there's a broker for you, or something more up to date, there's also a broker for you.

[47:08] Sean: If you want to be Gordon Gecko with the giant car phone that looks like a brick, you can do that too. At the end of the day, we use Think or Swim, Trade Station, I've used e-signal. I'm not that keen on Ninja Trader but that's just a personal preference. There's lots of different systems out there that tie into all sorts of brokers.

[47:34] Phil: To be fair, I think Ninja is just a charting platform that also plugs into some brokerage. It's not technically a brokerage. I know what you're saying. It's more of an interface, isn't it?

[47:43] Sean: Yeah it's the interface to the broker. Basically, that's it. A lot of the discount brokers out there do have a lot of connections with a lot of popular software or they have their own software. It really is gonna depend on what you want to do and what's available to you. Think or Swim, for example, is something we use a lot in our training, but you can't use that in some countries because it's not available. It's backed by TD Ameritrade. There are all sorts of other options out there - interactive brokers. There's one we like and use.

[48:18] Phil: It's from the 90's.

[48:22] Sean: I would say they need to get up to date a little bit. But again, do your research and check the fine print. We do not have an official preferred broker or any relationship where we get kickbacks, because I like to keep our integrity. So, next question - "How do you make sure you're not assigned stock when a call option expires profitably?" This is one that depends on the broker and software, but what's your answer?

[49:11] Phil: Generally, if an option expires in the money, you're probably gonna be assigned stock. That's what you're buying at the end of the day. Your option gives you the right to buy 100 shares at set price, at a set day should that option expire in the money. That's what an option is. You will be assigned the stock if it expires in the money. However, if you don't want that to happen, maybe the day before it expires or on the day, or anytime it's in the money, close it. That's how you avoid being assigned stock.

[49:49] Sean: That's exactly it. Simple, simple.

[49:55] Phil: Depending on your broker, you can say close out before any expiration. It depends on the facilities. Generally, if it expires in the money, the default is you're gonna get assigned. You've got the right, but not the obligation.

[50:23] Sean: That's it. One day before it closes or before the end of the market day or whatever. Boom. Make sure you're maintaining and managing your portfolio.

[50:34] Phil: To be fair, tying it into setting a target, when the stock's hit the target you expect, chances are your option would be profitable assuming you're on the right side of the position. Then close the trade at the target. That's how I avoid it. Usually 7-10 days before expiration I'm thinking, can I close the position? It's not doing it as fast as what I would like. If it was in the money, it's what I would like. If it's out the money, I'm not gonna worry about it.

[51:04] Sean: That's what it's all about. It's all down to that portfolio management. So, rock on.

[00:51:14] Bulls**t of the Week

[51:39] Sean: Bullshit of the Week. This one I absolutely love. I wanted to record a dedicated video about this one topic and get on my soapbox about this. As a lot of you guy know-

[52:00] Phil: This is your sore spot, isn't it

[51:59] Sean: Oh, it is. I've got a lot of fingers in different businesses, and one of them is in the marketing space. In a story that sent Facebook stocks tumbling, wiping out over 37 billion dollars in market cap.

[52:25] Phil: Dr. Evil there.

[52:26] Sean: Mini me over there. Anyway, it's a much hyped and overplayed story that has set the world on fire. Here's the shocker. In shocking news, an advertising and analytics company generates analytical data and uses it for marketing.

[52:43] Phil: Dun, dun, dun!

[52:51] Sean: Joshua, our podcasting guy, is gonna have to go find some dramatic music to throw in there. But anyway, there is a whistleblower who is spilling the beans.

[53:13] Phil: That was the headline I saw: Whistleblower spills the beans. Was he blowing the whistle or spilling the beans?

[53:24] Sean: Absolutely. Anyway, basically what happened is this company in the UK scraped and sourced and analyzed people's profiles on Facebook, compiled all the data and created custom audiences and targeted them with political ads.

[53:48] Phil: This is all public information. If you'd commented I really like Trump or I'm really against Trump or whatever, that data has been logged and your profile has been tagged as pro-Trump or pro-Clinton person or pro-whoever. And it's public. Facebook isn't being hacked.

[54:37] Sean: This is big data mining. Everyone's up in arms that it's been hijacked and Facebook's data breach... It's bullshit. They've gathered and analyzed it and used psychological profiles and seen oh, you're a dog person. You're more likely to vote for Trump, and cat people likely vote for Clinton. That's a ridiculous example, but that's the kind of thing. They've managed to create psychological profiles.

[55:30] Phil: It's the digital equivalent of driving down your road and seeing who's got the Trump flag or Clinton flag in the window because it's public information.

[55:40] Sean: Yes, and then targeting them with that. Here's the thing. Obviously this is Facebook. If you don't want to be profiled, don't go on social media. Think about this. Facebook's already doing this to you and selling that information to advertisers, including me. I can go on Facebook right now and target people based on age, income type, if they own a house or not.

[56:11] Phil: Who drink or like wine or whatever. It's not just Facebook. That's what marketing companies do.

[56:21] Sean: It's absolutely bullshit. It's over-hyped and over-blown. Right now, it's really cool to jump on the privacy, anti-administration bandwagon. It's wiped out a lot of market cap value. They're saying we're having emergency meetings about this data breach. There's no data breach. Where this company did get some sneaky shit-

[56:54] Phil: It is absolute nonsense. It's not revolutionary. It's not whistle blowing. It's not a new idea. It's not something that's been hidden from us. This is what every website who's collecting information - it's what they do! Even if it wasn't online, you can drive down someone's road and see if there's a flag outside. Just taking the story aside for a moment, this is the kind of nonsense the talking heads and crisis news network keeps talking about to shock and awe the unsuspecting public into buying the adverts that they want. They're using these stories to sell you their own advertising and get you onto their database of likes and dislikes so they can do exactly the same thing. I think that's what they call ironic.

[58:17] Sean: This irony is like a lead balloon. The guy who's the whistleblower said "I made Steve Bannon's psychological warfare tool." It's not psychological warfare! Guess what? It's profiling and targeting.

[58:39] Phil: That's just a fancy way of saying I like Clinton and cat videos.

[59:03] Sean: Exactly. It's just that we have the tools, the AI to figure that out. I can tell you right now that this is what helped the current administration get in. Well guess what? They were doing that, not as extensive or comprehensive-

[59:20] Phil: Has Putin been mentioned yet as a co-conspirator?

[59:27] Sean: That'll be the next bloody thing. But it's like the previous administration did something similar but not as sophisticated or successful. Oh well. I can guarantee that in future campaigns they're gonna be looking at it if it gives them an edge, either in deference or in conjunction with Facebook. Facebook is having emergency meetings and being called to answer before the Senate. It's a whole bunch of bullshit. Phil's point there about they want to create this hype train so that you look at their ads is dead on. It's all attention whoring and this is one of the biggest pieces of bullshit we've ever covered in the Rebel Trader sessions. This one has set the bar way high.

[1:00:23] Phil: I'm liking Facebook chart now. It's at a good 163, 165 level. I might put a bullish trade on.

[1:00:40] Sean: I actually shorted them last week and closed out my trade this morning thinking I might want to ride a rally. This whole story was a blessing for me and it made me some money, but it is a piece of BS. With that being said that is the end of this week's show. Thank you for listening. Hope you've enjoyed today's show. Do remember this show is not free. It will cost you a five star review on whichever platform you're listening to. Go to TradeCanyon.com/rebeltraders. You can sign up, keep abreast of new episodes, subscribe and leave us a review. We love to hear from you. This also helps us get this message out to more traders and investors just like you.

[1:01:37] Phil: Just remember, you're my favorite. You can also connect with us on Facebook and the Twitter machine at TradeCanyon.com/rebeltraders. What have we got coming up in next week's show, Sean?

[1:01:46] Sean: Here's a cryptic clue: Who's the more foolish? The fool or the fool that follows? Wee bit of Obi Wan Kan-obi there, but it's a teaser for next week's show. Make sure you check it out and we'll see you next time. With that being said, rock on.

[1:02:09] Phil: Bye for now.

Resources & Links Mentioned in This Week's Show

3 Key Takeaways From This Show

  • Carefully track and be selective of your entry and exit targets
  • If you are feeling stress about the size of your position, trade smaller and more often to diversify and reduce exposure to more comfortable levels
  • Make sure your strategy has a positive expectancy and stick to the strategy. Adding a speculative element always injects risk.

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