Rebel Traders 044 : The Coriolis Effect

The Rebel Traders and sat down with their snipers picking of targets with pinpoint accuracy at a great distance in their portfolios and they are going to show you how in this weeks Podcast.

Are they round the bend or flying over the insanity horizon? In this week’s Rebel Traders show, Sean and Phil discuss how localized events can ripple across the world and present interesting early warnings and opportunities for the smarter trader…

So strap in and we whirl around the world in under 80 minutes and see if we can pick off a few prime targets through the scopes...

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Sean Donahoe: It's time to dial in the scopes and pick off a few targets at a great distance. 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 there ladies and gentlemen, this is Sean Donahoe, and I am joined by the terrible twos, the dynamic duo, Mr. Andrew Page, and our regular, Mr. Phil Newton. How are you guys doing today?
Phil Newton: The dynamic duo? Does that mean I have to start going na-na-na-na-na-na-na-na-na-na-na-na-na-na-na-na Trader Boy?
Sean Donahoe: I was going to say, you have to wear your underpants on the outside like you usually do, so no change there.
Phil Newton: I normally wear them on my head, with two pencils up my nose.
Sean Donahoe: As you do. What you do in your private and spare time is entirely up to you.
Andrew Page: I believe this is a radio show and we don't have to see that.
Sean Donahoe: Yeah, thank God for that.
Phil Newton: Well, if you do a little Google search, nevermind.
Sean Donahoe: Yeah, you'll find his arrest records, and there you go. Dear me, funny stuff.
So, Andrew joining us this week, and again, feeling a little bit under the weather, a little bit of summer flu, or spring flu, or what have you.
Phil Newton: Man flu.
Sean Donahoe: Yeah, man flu, there you go. So, how you doing, sir?
Andrew Page: I'm alive, I'm doing okay.
Sean Donahoe: He's alive, that's the main thing. You're doing all right, that's good. So, anyway, this week we are wrapped in our gillie suits, looking through the scopes of our snipers, picking off targets with pinpoint accuracy, at a great distance in our portfolios, and accounting for what is called the Coriolis effect.
Phil Newton: We've also got the trader mail bank, where your trading questions are answered. We continue the favorite section of the week is the bullshit of the week, we call it the hyperbole, the shenanigans, the nonsense, the nuisances, and anything else we can find that just generally pisses us off.
As always, we ask a core question somewhere amongst of all of our shenanigans, is the core question of where is the trade?
Sean Donahoe: Awesome. Okay. So, we're going a little geeky here, because if you're not familiar with what the Coriolis effect is, it's something that is, well, we need to establish. So, basically, it's all to do with trajectories and the curvature and the rotation of the Earth.
So, basically, it's an effect whereby a mass moving in a rotating system, experiences a force. The Coriolis force acting perpendicular to the direction of the motion of the axis on rotation. Okay, there's the physics explanation.
Basically, on Earth, the effects tend to deflect moving objects to the right in the northern hemisphere, and to the left in the southern hemisphere. And this is important in the formation of things like cyclone weather systems. However, we're talking about ballistics. And this is kind of where I'm making the trading analogy.
The Coriolis effect refers to the deflection or the trajectory of the bullet generated by the spinning motion of the Earth. This not only affects the drop off in terms of the vertical trajectory, but also, the horizontal trajectory, because the effect is negligible at medium distances, but around about 1,000 yards, this is why we're talking about snipers, a 1,000 yards plus and it's really important, because it can add to the other minimal errors to keep you off target, considering that the Earth spins at 1,000 miles an hour.
So, when you've got that distance accounted for, you have to make adjustments, and this is where it comes into what we're talking about with trading, because we're talking around the world, things that are happening in different parts of the world as the Earth spins, but it might knock you off your trajectory of what you want to do.
So, literally, the Coriolis affects everything in terms of physics, not firmly attached to the Earth's surface. It affects fluids, like air, water, as well as floating and odd flying objects like ships, planes and even bombs.
Phil Newton: Trains, automobiles.
Sean Donahoe: Amsterdam.
Phil Newton: No, that was a movie.
Sean Donahoe: Yeah, there you go.
Phil Newton: You're doing well there. C'mon, keep it up.
Sean Donahoe: If you're going to Planes, Trains and Automobiles. Very few people can do that. Anyway, and we'll leave that there.
Phil Newton: Keep it up.
Sean Donahoe: I was going to say, Planes, Trains and Automobiles, my favorite quote is, "Hey, my hands-" Yeah, exactly, you were going over it. That's not a pillow.
Phil Newton: Over twenty pillows.
Sean Donahoe: I love that. We were talking movie quotes right before we started recording, and we're just wobbling each other's brains here.
But, we are talking and putting us back on topic, we are in this case talking about global economics and how one action happens on one side of the world, and as it rotates through the day cycle, it can have ramifications on other parts of the world.
And we're really talking here about the Asian markets and the European markets Not only economies, but also they are obviously in way different timezones, so what happens in Asia could affect what happens in Europe. And then, conversely, the US markets as the day progresses, as ramifications happen in those different parts.
And the same with the US, when the US takes a big hit, it can have ramifications for the following day for the Asian markets and vice versa. So, as things rotate, and we saw this recently guys. I mean, when we'd started, at the beginning of the year when the markets decided ah, okay, well, actually, I say that, it's like mid-February, the end of January, mid-February, when we saw some serious sell-ups and some serious corrections, and we were like oh, are we just hitting the fan here, or what.
Again, major, major impacts in the Asia markets and European markets. I mean, we see that a lot. What say you, and let's start with Andrew, what say you about the correlation between these different markets?
Andrew Page: Well, I think it really has to do with the fact that we're a globalized economy now. The entire world is very interconnected and dependent upon each other, especially with issues like trade and obviously those terrorists against China, and China imposing terrorists against the US, has been in the news. And so, that doesn't just affect the US and China anymore.
I mean this isn't the 1920s or 30s, everything is instantly transmitted around the world, thanks to instant communications. And we're just so reliant on foreign entities, and foreign entities are so reliant on us for just the day to day business cycle that everyone goes through.
And so, yeah, things move really quickly, and even markets where things aren't directly related, it's just when larger economies move some of these smaller economies, thinking their best guess assumptions about what's going to happen to them, based on what's happening in the US or Europe.
Sean Donahoe: Yeah. What's your opinion? I know there's a common phrase, it's when America sneezes, Europe catches a cold. I mean, you've seen that, a lot of years trading. But you also see the flip side of that, as well.
Phil Newton: Whereas it was perhaps a one way street with the major economies, I think that depending on the industry that we're perhaps focusing on, it might be that it, again, it's now a two way street, because this information, you know, if you've got say, a smaller country that has say, a major economic impact, then that can have a reverse flow of information go out to the rest of the world.
That might impact decisions in the wider economies around the world. Again, just primarily because of the speed of information. You know, it's instantaneous these days, you're not having to wait six months and a slow boat from China to get information from China anymore.
Sean Donahoe: Yeah, it's not the 1700s, where you had to-
Phil Newton: Nothing against China. I'm just-
Sean Donahoe: Using them as a point of reference, because of the tariffs. Oh, it's absolutely.
Phil Newton: It's the other side of the world for me, literally.
Sean Donahoe: Yeah. Now, we've got some major emerging markets as well, that have a lesser impact on I would say the big boys, which we're really talking about the Japanese markets, the China markets, the European markets, and somewhat, and Phil, you've got more of your finger on the pulse over in across the pond there. Is the FTSE and the British markets, are they, would you say, significant enough away from the main European markets to have its own kind of impact on the world stage?
You know, because again, I'm obviously guys, you can tell by my accent, I'm from the UK as well. But what would you say in regards to that and how it's perceived since their Brexit? Is it still retaining its sovereignty in terms of its power and influence as an economy?
Phil Newton: I mean, geographically, it's a small country.
Sean Donahoe: Yeah.
Phil Newton: But economically, it's still-
Sean Donahoe: It's a powerhouse.
Phil Newton: Usable powerhouse, yeah. You know, by comparison. I'm struggling to give a decent enough answer. I don't pay a great deal of attention and I get this is one of those areas that I'm intentionally ignorant on, and I'm very happy to remain intentionally ignorant. Again, please don't use the word, I'm not just ignorant.
Although, I'm intentionally unknowledgeable on a lot of subjects. And this is one of them. It's not my forte. Looking at the geopolitical and economical stage. I would rather just focus on price, and in fairness, this was the decision that I made many years ago.
However, with that being said, I think that, I don't know what I think to be quite honest. It's just not something I pay attention to. I don't think I can give any form of instructive answer, or contribute to what I think in that what regard.
Sean Donahoe: Oh, fair enough. Okay. Well, one thing we can agree on-
Phil Newton: You can cut that out, or leave it in. Whatever you want. I'm very happy with that decision. My focus is primarily very short term in nature. So, because of that, I don't pay that much attention to the larger field. So, whether Europe, or the UK, or Germany, or an individual country is having an impact on a world stage, it's not that important to the decisions that I make from a trading point of view.
Sean Donahoe: Well, let's take it from the currency standpoint. That's kind of where I was leaning towards, is we talk about the Great British pound, which is traded against the Dollar. We look at the Japanese Yen traded against the dollar, the Swiss Krona, it is the Krona, right? I always try and say that wrong, which is measured against different currencies as well.
And well, I don't always try, I always succeed in saying it wrong, but if you look at these different currencies, they are all tied to the US Dollar. And a lot of commodities as well, are measured against the US Dollar. Now, that in itself, is a real highlight of how connected these economies are, because the US Dollar is the measuring step. And from the currency's perspective, and I know you're a 12 years a day trade, I'll get his little monocle and catchphrase here correctly.
I mean, you saw a lot with the currency dependence, as the measuring stick. What did you see in terms of influence when one basically had an issue, the ramifications through the rest of the currency market? Did you see a lot of shifts back and forth between those different currencies?
Phil Newton: Having the US Dollar as the benchmark, it could be any currency, it just happens to be that the US Dollar is the benchmark. I think the dependence on that is becoming less and less, particularly when you look at the far east, are looking at more of a basket of stocks, or having something other than the US Dollar as a benchmark to measure the valuation.
I think we're so ingrained into having the US Dollar as the benchmark, that it's going to be difficult to move away from it. Europe in itself tried to compete with that with the Euro and have their own single currency, which personally, I think's foolhardy.
Sean Donahoe: Yes, agreed with that.
Phil Newton: It's a nice idea, but again, having a single currency, again, it is a great idea in principle, but the reality is, it doesn't work having that. So, we do need to have some type of benchmark, a way to compare a different country against the next country and that common denominator is quite traditionally and historically always been the US Dollar, because it's got one of the larger impacts from an economic point of view on the world stage.
Having said that, though, there is less dependence on that. More countries and states are becoming less dependent on outside influencers and becoming more self sufficient. Again, Russia's the common example. Russia is a, oh, the old Russia, anyway. It was always self contained. It could be self contained. It doesn't really need to go outside of its own borders to survive, essentially.
In China, arguably, it could also be the same thing. It's such a large land mass as well, they've got lots of natural resources. They don't really need to look outside, although they do, because there's lots of other factors at play there.
Sorry, we're getting off the beaten track a little bit, but currencies, from a trading point of view, I like that slight instability, because that creates volatility from a price point of view, it creates something to trade, it's something that we don't have at the moment. Yes, the currencies and the relationships between economies and countries, they still happen, but they're not at the same degree that we saw just 10 years ago. There's a little bit more stability and that creates less volatility from a trading point of view.
I suppose from an economic point of view, that's a good thing.
Sean Donahoe: Now from the devaluation of the US Dollar, which has happened consistently over the last few years, but has, in the last 12 months, been pretty dramatic, over actually coming up to 18 months. What do you see as that having an effect other currencies as well? Even though a stable decline isn't the same as a-
Phil Newton: Monumental-
Sean Donahoe: Monumental-
Phil Newton: Price movements.
Sean Donahoe: Yes. I mean, we're looking at, and the one thing that I want to-
Phil Newton: It's all about 2005 - 2006 for different reasons.
Sean Donahoe: So, what do you see there?
Phil Newton: It happens regularly. It happens regularly. We see these types of extremes in the currencies. If you look at the last 50 - 60 years at any benchmark against the US Dollar, you'll see that there are these monumental price swings, and usually they're a precursor to a significant economic shift, or a significant economic change in the viewpoints of how that is going to impact, particularly the world's economies.
And again, if you look back over the lat 40, 50, 60 years, you'll see that there US Dollar has gone to one major price stream as a precursor to a global economic shift. So, from that perspective, it's a cycle that happens regularly.
Is it anything to worry abut this time round? Not really, just because we're living through it at the moment, it's on everyone's minds, it's present. And you're always going to experience that when something's going on that you happen to be living through, as opposed to looking back and saying this happened in history, you're going to objectively look at it through history, but because it's happening right now, everyone talks about.
It's difficult not to try and analyze it, micro analyze it even, but the reality is, it sort of happens, I was going to say on a regular basis, but every 20 years something like this happens.
Sean Donahoe: Now, from the commodity side, let me bring in Andrew here. Again, we've got the US Dollar as a measuring stick for pretty much most commodities including oil. Now we were talking, funnily enough, Phil was talking about the independence that Russia and China potentially have, and we were talking in last week's Happening Now about the pipeline that, or was it the week before, that Russia is building in record time to pump oil directly into China, which was again, a fascinating engineering feat, but these countries do have independence somewhat from the US, while China holds a lot of our debt, obviously if it happens there's a currency manipulation and everything else, but from a commodity side, these two countries are becoming very independent against each other and the US, and there's a lot of big moves away from the US being that measuring stick.
Do you think that well bodes for the future of the USD being that measuring stick for the commodity side?
Andrew Page: Well, so yeah, that's a good question. I think that going forward, obviously the US Dollar is just going to have less weight. Back in the last 100 years, really, the US has been an incredible power house in the world, and the economies that compete with us, mainly Japan and Germany, were pretty much destroyed after World War 2.
So, we really, we just had this incredible strength, going into the turn of the 21st century, and I think that that really cemented the US Dollar as the measuring stick, as you say, because, again we were talking about how technology's all becoming instantaneous. What became instantaneous at the time when the US was at the front, it was the world super power.
So, going forward, I think that of the other economies have caught up, and places like China and India are going to take more and more of the center stage. I'm not saying the US is going to move off the center stage, I'm just saying that we're going to need to share it with other countries that just are going to have larger economies than us eventually, just because they have so many more people.
Sean Donahoe: It's a big tectonic shift, it really is.
Andrew Page: Yeah.
Sean Donahoe: In geopolitical outlets.
Andrew Page: Yeah, but to get back to your original question about the dollar specifically, for now, the US Dollar is widely considered the most bare currency in that it's least manipulated. China and Russia, their governments obviously do help their economy out quite a bit, and obviously you know China, really manipulates its currency to keep it low, so they can export more to us.
So, these countries might set up their own exchanges, like China is doing, but how will foreigners view that, going forward. I think for quite some time, there's going to be a lot of skepticism on the true value of their currency, versus ecommodity, but I think that that will change eventually, as countries become less reliant on the US.
I think that need for manipulation will cease, but for now, I don't see the measuring stick changing from USD.
Sean Donahoe: Yeah, now we were talking funnily enough in the Happening Now, about President G's speech about opening up for investment and foreign investment, not placing the limits and everything else that has been done in the past, but China has been opening up its own oil exchange, which is something else we had talked about.
So, I think that is a big, again, China is really positioning itself for at least the next 20 - 50 years as a change of venue shall we say, and a change of focus to become that region's obviously main economic hub, and I think that is going to be very telling for the shift in the world stage. And it really is a tectonic shift, but with commodities, and again, taking looking at that, we've got a lot of, and you mentioned India with one of the, we consider that one of the emerging markets and everything else, but it really is going to be the fourth actor on this stage.
One thing that I'm wanting to circle around to though, guys, is a lot of these companies, or countries, have big companies, that have international presences. So, for example, we have a lot of banks that are owned by China in the US. So, when China has a crisis, or an issue, or anything else, it could affect the banks that are trading over here, or other companies, that say are US based companies that are over in China, or India, or Europe, or anything else.
What do you see as, from that perceptive, of opportunities? Because one thing, this is one of the reasons I was bringing this up is, I always like to look, I do my planning for my next day's trades in the evening, because I like to see how the Asia markets are opening, what's happened through Europe, because obviously the European markets close at lunchtime over here and everything else.
So, I like to see, okay what's happening over there and is it going to have any influence on anything over here, because one thing I like to do is I like to look at say, Japanese companies or the Chinese companies and see what companies are over here that might be inversely affected, because of that shift.
So, I can hop on something with the futures, or I can look at something with those for possible okay, open the doors, let's see what's happening the next day as influence or amplifiers to maybe existing routes.
How do you see that? Have you seen any effects like that yourselves in your own trading, as from the commodity side, and also from any other currency side in the past there, Phil. So, I'll start with I guess Andrew on that one. What do you see as that kind of ripple effect at the company level, rather than the general economic level?
Andrew Page: Well, from the commodity's perspective, yeah, definitely. It does ripple over. The main reports in China really do change, especially certain crops here in the US. Soy beans, or maybe crops around the world aren't doing as well, and US crops are doing okay, and so the price will rise.
But yeah, I think that there is even a lot, even for more local markets, there is a lot of that independence still, just because it just shifts the whole supply and demand balance pretty dramatically.
And I don't know, commodities are just, that's a wild market. Things just seem to shift quickly. Things move along and then all of a sudden, something happens, a storm comes in, or a crop was just not as good as people expect, and the price just really seems to move quickly across the world.
Sean Donahoe: Now the interesting thing is, we talked about this in the past, but we were talking about satellites and imagery and everything else, which, again, you could look at anywhere in the world right now and see okay, what's moving here, what's not moving, what's going on here.
We could talk about trade, okay what's loading up in Hong Kong harbor, and looking at, okay, what's the volume being moved for the day? How many boats are coming in and out, to give you an idea about what's going on, coming from a global trade perspective.
There's lots of things that we do like again, give us quick information, or can potentially give us quick information. I mean, how do you see that affecting in the future?
Andrew Page: So, yeah, I think that is going to be a real game changer, and unfortunately, I think that until it becomes an affordable service to the everyday person, unfortunately, I think that the larger institutions are really going to reap the major benefits from it.
Sean Donahoe: Yeah, that's not going to be available at any time soon.
Andrew Page: Yeah, and so that's a bummer. That's just consolidating more power at the top, as far as the trading world is concerned. And this technology will eventually be available to the average Joe.
It's not like high frequency trading. We are going to need a team algo and everything like that to keep it running. The satellite imagery, you're just going to have to subscribe to a service and it's all going to be there for you.
And I don't know, it's really going to be interesting to see how markets react to news, like how fast they react to it, or overreact, or just say oh okay, well we already expected that. So, I think that going forward, it's one of the most interesting pieces of technology and services that I'm looking forward to.
Sean Donahoe: Now, okay, so Phil, what's your take on the micro level so to speak, of okay, something happens in China, like a circuit breaker did back in 2016 and everything else, and then we saw all markets react, what do you think about individual companies? Do you see any possible opportunity there when that happens?
Phil Newton: There is a lot of opportunity from the point of view that there are dual or multi listed companies, so like Sony, for example. It's got more than one listing, or more than one exchange around the world.
Sean Donahoe: Yeah.
Phil Newton: So, if you want to have an eye on that, but it's difficult, because what you're kind of thinking about then is, well, if the Asian markets take a tumble overnight and you're looking to do something, then maybe it gives you an opportunity to hedge your exposure by shorting the dual listed or multiple listed stocks.
It gives you a little bit of a heads up to maybe prefer and plan to do something at the opening bell. So, try and take advantage of it as an opportunity. When things are moving fast, I don't believe that that's the right time to be piling in with the herd, because crazy thing happen. If you've got a nice balanced portfolio, then I firmly believe that it shouldn't matter what's going on around the world.
Something, somewhere, will be profiting from either the rise in prices, or fall in prices. And the way that I treat it, if something's going on overnight, like for example, today I was looking, similar to you, I was looking at the overnight futures, and because of where I am in the world, the Asian markets were rallying quite strongly. The overnight futures on the SNP and the typical American index were starting to rally quite nicely.
And that gave me a heads up to potentially expect a nice positive movement higher. So, maybe I'm thinking about taking profits, rather than trying to join and trade the move that's already happened.
So, I'm not necessarily thinking about it in terms of trying to put a new position on, if that makes sense. I'm more thinking, okay, well how can I minimize the risk of the ones that are going against me, if I need to do that, maybe I'm looking to take some profits. That's how I'm thinking about these types of cross-border movements and cross-market movements, and how they're going to impact the market that I'm trading more directly.
That's the way I do it. And again, I know that other people will have a different viewpoint. Again, it largely comes down to, what do you want from trading, what's your style of trading, what are you looking for from your trading. Mine is not dependent on the international markets giving me a heads up indication that something could be happening on a local market that I'm trading.
Sean Donahoe: That's fair enough. Now, the other flip side of this, and again, it should be obvious to everyone, but Phil's based in, or just outside Liverpool, in the UK, trading primarily the US markets. Okay, so he's a few hours ahead, about six hours ahead of me right now, trading the US markets. And that's where he's got his primary focus.
You don't really trade anything in the UK, or the US, do you? Is that correct?
Phil Newton: No, ultimately, I'm looking for the opportunity. And when I say the opportunity, I'm looking at what the next opportunity for the next decade is. So, previously, like I always joke, I was 12 years a day trader, it sounds like a bad movie. I didn't get an oscar for it, I can tell you that.
But that was the opportunity back then. In 2002 - 2003, I was looking for what I believe was the next opportunity. And I wasn't clever enough to come up with it myself, I had to have it pointed out. Currencies was the opportunity that arose at the time, because when I started trading, they weren't popular or commonly traded by the general public, the retail trader shall we say.
And then it became popular. Then there was an explosion in the market. The currencies market literally went mental. And for 10 - 12 years, it was a great market to trade. It overshadowed other markets. Prior to that, I was trading the Spanish index, because that had, for me at the time, the best movements, the best opportunity for exceptionally short term trading, but also had European hours, because I didn't want to trade in the evenings at the time, because I'm based in the UK as you mentioned.
So, again, what I'm thinking about is, what's the next opportunity, where's that going to be, I believe the coming bare market is going to be the opportunity, and what's going to be impacted by that bare market, the economic contraction when it happens. Not a case of if it happens, but when it happens, that's what I'm thinking about.
So, what's going to be impacted by that new contraction. And it might be a global contraction in the economy. So, from that perspective, the big picture, I am thinking there's going to be a slow down in the economy, but where's that going to be impacted the most, I believe that's going to be in the US markets, because we've seen this hockey stick growth in the, if you just look at say some of the US stock indexes. They've been going in straight line for nine years.
Now you don't see that in the European indexes, so the opportunity for a contraction or a bare market is not going to be as great in the European markets, compared to the US markets. Does that make sense, Sean?
Sean Donahoe: No, absolutely. That's exactly what I was looking for.
Phil Newton: I am looking at these things. I always like to play the dumb and perhaps poor farm boy in the room, but I do look at these things, but they're just not as important as what a lot of people like to pretend they are, or make out to be, just so they can sound clever, or they can sound like the really in dong trader in the room.
I don't really care that much. I'm looking for the opportunity, and this influencing why I'm trading the US markets, even though the UK markets, they're perhaps easier to trade on. European markets, they're more timezone favorable for what I'm doing. I'm looking for the next opportunity. It was currencies. The next opportunity I believe is going to be a bare market. That's going to be mean that with volatility rises, as we've seen a short term example of recently, where we saw prices sell off.
Because those prices sell of, volatility expands. What's the best way to take advantage of an expansion of volatility. Well, that's a big part of how options are priced, ergo I'm trading the US markets and options in preparation for the bare markets. And at that point, I'm going to switch from being mostly at five options, which is mostly what I do about 80 - 85% of the time these days.
I'm going to probably switch over to the mostly sell up options, take advantage of that richer premium when the bare market happens. And that's the opportunity that I see. And it might last, to be fair, the way things are going, it might last anywhere from three to five years in a normal economic cycle of things.
When that happens, I've been waiting for it for a few years already. It will happen and I'm ready for it. As he rubs his hands with glee.
Sean Donahoe: Absolutely.
Phil Newton: That's my big picture viewpoint of what I'm trading in the world today, and why I'm trading what I'm trading. Now, if that was going to be, we were talking about the Russian markets I think, Andrew, as well.
In the 90s, there was an opportunity in Russia. So, to find the opportunity that you believe you can take advantage of, and I always rather flippantly joke that if flipping Beanie bears on eBay's going to be the best use of my time and resources like you used to do the 90s, then that's exactly what I'll be doing. You know, what are the opportunities.
Sean Donahoe: Ab-so-bloody-lutely.
Phil Newton: I've been telling that joke for more than 10 years.
Andrew Page: I've heard that. I've heard that a few times.
Phil Newton: Once or twice.
Sean Donahoe: Once or twice. Once or twice. Now, the interesting thing is, and you're absolutely right about the expansion of volatility. I mean, right now, my portfolio is, it's actually about 60/40. 60% I'm buying options, 40% I'm selling options, especially with all the recent volatility. I've just been very, very lucrative.
But the flip side of that, I do like looking at the European markets, just to see what is going on. And it's more of an awareness to gather them, because things might pop up on the different radar. It's the same as I do with the Asian markets as well. And again, I only know a few specific companies, because they have influence over here as well, but I look at a lot of the banks, and that is usually giving me an indication.
When I see banks doing certain things, or I'm hearing, funnily enough, I'll watch the Australian reporting, because first of all, it's in English and I can understand it, but they're usually talking about what's happening with the Asia markets that's affecting their economy directly. And then from that side, that gives me an awareness of seeing other things that may be influencing over here, which to me is interesting, because again, it's local to them and it has more of a direct impact on their economy, because that becomes a proxy for the ripple effect, so to speak, of these.
But one of the things we were talking about earlier on is how we are all connected by currency, but where do you think, and I know there's going to be a twinge and a nervous ticking in Phil's eye here, cryptocurrencies, do you think that's going to help break down the barriers of the sovereignty?
Andrew, can you pick up those eyes and roll them back to Phil? Because he seems to have rolled them across the floor.
Andrew Page: Yeah, I got them.
Sean Donahoe: But I mean, cryptocurrencies, do you really think, and this is just the general topic, because this is one of the arguments all the pro-cryptocurrency people say is, it breaks down all the borders. Do you think from a sovereignty point of view, that will ever be legitimately the case? That cryptocurrencies will unify the influence between all these exchanges and everything?
I've got my own personal opinion.
Phil Newton: Well, they use a crypto as a common denominator, as an alternative to say the US Dollar, for example.
Sean Donahoe: Exactly.
Phil Newton: At the moment, I believe that in the, and I'm going to word my answer, I'll precursor it very carefully, the current iteration of cryptocurrencies is the modern equivalent of the 90s beanie bear, the fad.
Now, that doesn't mean to say that a cryptocurrency won't participate on a global scale to maybe rival or as an alternative to the US Dollar, but the current iteration is a fad.
Sean Donahoe: What say you, Andrew?
Andrew Page: So, I think that I have to agree with Phil. The fact that most of these currencies are a joke. Most of the cryptocurrencies are a complete joke. They're just there to get on the hype train, but I think the technology it, the blockchain technology is already proving very useful.
I think there will be some cryptocurrencies that survive, but will they actually function as a currency, that remains to be seen. Mostly now, it looks like an asset double. It just look like
Phil Newton: Just to interject, Andrew, you can compare what's happening with the experiment that was the Euro.
Sean Donahoe: That's the analogy I was going to make, is it's kind of like the Euro experiment in a lot of ways, without actually being backed by anything.
Phil Newton: I am actually pro-single currency. It's an interesting and almost perfect example, but then so is communism. Everyone's equal, but some people are more equal than others. And that's what happened with the single currency. It was doomed to failure before it started.
Andrew Page: Yeah, I mean, you don't have everybody on the same page. It's really hard to make that one. You have a country like Germany on one hand, and then Greece on the other.
Sean Donahoe: Exactly.
Andrew Page: It's like asking somebody to pick up the slack for a whole other country
Phil Newton: Now take Euro out of the equation and insert your favorite cryptocurrency in its place. Let's just use Bitcoin just as an example, because everyone's probably heard of that. If we saw in the Euro zone, wild swings in fluctuations, the euphoric highs and the dramatic lows and the swings in price, you'd be thinking what on Earth is going on in Euro zone to cause those swings in price.
There would be wars, there would be borders being closed.
Sean Donahoe: It would be riots, yeah.
Phil Newton: Maybe the riots in the streets. Maybe wars being built between countries and nations, no pun. Not a little dig there, anyway. But that's what you'd be thinking would be going on when you talk, put the Euro zone in place of cryptocurrency. So, that's not a stable economy, that's not a stable environment, because when you want a currency to replace the US Dollar, the reason why it was replaced is because it was a stable currency, it didn't widely fluctuate in price, at some point in history, it was gold backed.
I appreciate that that's not now, if anymore, but you could literally go and metaphorically speaking, go and knock on the US Government's door and say please pay the bearer ten pounds or ten dollars worth of, you know, there was someone responsible and someone accountable for the valuation. They were backing what you could do with that piece of paper.
Again, and you could do with that Europe, but now we don't have that. You don't have that with the cryptocurrency. Again, I'm not against cryptocurrency or the ideology of a single currency, or an alternative currency, or a digital currency, but as I keep saying, the current iteration, it's a fad. It's doomed to failure, because of what it represents. It's not a stable is the argument I'm trying to present.
Andrew Page: Yeah, and to me, there's nothing backing it. It's B
Phil Newton: It's a beanie baby.
Andrew Page: backed from the US Dollar, I mean it's B. The US Government is going to meet its obligations and that the United States is going to continue to prosper as it has.
Sean Donahoe: Well, but it's backed by a government which is, even if it's a promissory note, and you can't go into Fort Knox and see the gold, but it's allegedly backed by the government is liquid. It's basically, and someone argued with me recently, that, well you can say that the US Dollar is a digital currency, because all they need to do is go to a computer and put an extra zero on and it's digital.
And the printed presses.
Phil Newton: But there's someone accountable.
Sean Donahoe: But it's sovereignty.
Phil Newton: It's entirely different.
Sean Donahoe: Well, here's the thing, this is why I don't think, and I agree with you in a lot of ways in its current iteration, but the problem is the fact that it's not backed by sovereignty, and the problem is the even with the, and you used Euro as a prime example.
It's a very good example, is when you have a single currency, you have independent countries that have their own independent governments, agendas, biases, needs, wants, requirements, that are going to say no, that's not going to suit us, because we don't want riots in our streets like they were in Greece.
You've got the Deutschmark, which used to be the measuring stick and still is to-
Phil Newton: Yeah, it was a power house.
Sean Donahoe: It was. The Deutschmark was the power house of Europe, and everything was kind of measured in Europe against the Deutschmark, and it was the strength of the measuring stick for European Union, before the Euro came in.
But then the Euro came in and it kind of screwed it all up, but in that type group of countries that make up Europe, each one of them has their own sovereignty. When basically the UK said no, we're going to keep our pound and everything else we're not going to, there was a lot of resistance.
Exactly, there was no commitment to it. It was, but it was again, because of that sovereignty, that want to be independent. You never, even on a global stage, to my mind, especially when you're dealing with the bigger economies like China, the US Dollar, the Ruble, or anything like that, and this is where the globalization falls down is, you've got that desire for globalization, but also that independence, and no one person is going to sign on to a single cryptocurrency and decentralize and give away that power or that option of sovereignty.
And I really think that's the biggest hurdle for any global acceptance of any cryptocurrency, because ultimately it's going to be who's in control of it and where's our influence. So, that's my opinion on it.
Now, okay, let's wrap up this conversation here, because-
Phil Newton: Sounds like I've brought you round to my way of thinking.
Sean Donahoe: Well, no, I've always had that way of thinking. I've always had that way of thinking in regards to it as an application.
Phil Newton: Again, I'd just like to, before people fall off their chairs, which I'd like to restate, in its current iteration.
Sean Donahoe: Yes.
Phil Newton: it won't change for something better or something in the future.
Sean Donahoe:
Phil Newton: Ironically, I'm actually pro the idea of a single currency. It's just never going to happen in the way that we're trying to do it, because there's too many chiefs all trying to take control, and no-one's going to take responsibility for it. That's really what it comes down to.
Sean Donahoe: Absolutely.
Phil Newton: Look at the US Dollar when they unified the states. No offense to our American friends, but then the same things happen in Europe 300 years later. We decided we wanted single currency in Europe and we did exactly the same thing, and look at the farce that it's turned out to be again there.
Whether you're pro or anti-single currency, look at the mistakes that are being made. They just keep repeating the same thing, that's why it was doomed to failure. And we're seeing exactly the same thing with cryptocurrencies now. It's doomed to failure for a lot of reasons.
Sean Donahoe: Absolutely. So, there you go. Anyway, lot of different talks there, lot of different interesting points raised, lot of opportunities if you're looking in the right places.
But that is the Coriolis effect, that is the rotation year of the trajectory that might influence where that bullet is going to land. So again, nice job. I think that was a good conversation, guys.
With that being said, let's rock the hell on.
Automated: And now it's time for the Rebel Trader tip of the week, brought to you by tradecanyon.com.
Ready to take your trading game to the next level? Discover where smarter traders come to get coached by the best, and learning to trade just got way easier. Tradecanyon, smarter traders live here.
Sean Donahoe: Okay, so, the Rebel Trader tip of the week. And we kind of circled around this one a lot, because we were talking a lot here about focusing on awareness, but don't let that turn into OCD. It's too easy to fall into the trap of always being overly informed about every little thing.
A broad awareness of the world is good. What's happening in different parts of the world, what's happening with, basically in the news, that may have an effect, like you know, we've seen missiles, missiles flying, missiles landing, and all sorts of other things.
But also, understanding and having awareness of how markets interplay. A lot of the things we've been talking about here, and why things matter, and the opportunities they can present. But, being obsessive about every little detail just creates a ton of static and noise in your trading.
You could dial up the awareness, but dial back the obsessive nature it can lead you to, because it can become addictive. Let it become like the radio in the background. You listen to a favorite song, and awareness through osmosis, if you will, as by doing that.
But gents, I'll start with Phil, because I know exactly where he's going to go with his intentionally ignorant, but what would you say about that real quick?
Phil Newton: Too much information is a bad thing. That's the non-flippant answer. I know we always kind of joke around this, but too much information creates inaction. I was chatting with a, not necessarily even at a high level with the news and the global economic situation, but you're also going to have, at the micro level, if you're looking at much information.
I was talking to a trader yesterday and he was basically commenting on a stock he was looking at, and he sent me a message all excited, there's been a big block order of 24,000,000 shares has just gone through on this stock that we were looking at. And he was all excited, and he's like can we do this? Is there a trade here?
I said, well, which way's the chart going? He said it's going down. I said why do you want to step in front of that bus? Why do you want to be the only buyer? There's a whole host of reasons why $24,000,000 of shares of this stock were bought at that point, but the trend is down, not just in the long term, but the short term. It was falling like a brick. Do you want to be the one that steps in front of the bus? No. That's money flow.
And I don't believe that looking at the individual block orders, you know, just one block order going through was not enough to stop the price movement. The point, and there is a point here somewhere, Sean. There is a point, and I'll think of it in just a moment as I catch my breath, is you know, it's too much information.
That, even at the micro level, you're looking at too much information and it's going to influence your decisions, and often it's going to be the wrong influence. So that's really what I'm trying to get to.
So, the way that I deal with it, is I'm intentionally ignorant. I shut off the big news, because personally, I find it very frustrating. Not just financial news, but world events. I don't care what Kim Kardashian, I don't care what handbag she's bought or who she's shagging this week, I really don't care.
Similarly with the financial markets, it's not going to influence the way that I trade. By the time it's being reported on, it's already been translated into the price, most of the time. I appreciate there's a very small percent of the time where it's gone overlooked, but it doesn't happen often enough for me to go out of my way to look at how many million shares one random trader's bought, or a particular headline that's gone overlooked. It's not an often enough occurrence.
So, have a strategy, have a plan, trade the plan, trade the strategy, and just shut everything out, and just focus on the only thing that matters, which is a positive expectancy strategy. Just push the button.
Sean Donahoe: Fair enough. Andrew, on the flip side of that, what do you say as more of the fundamentalist?
Andrew Page: As a fundamentalist, I mean, during normal trading, basically when the market is trending up, or somewhat sideways, the news cycle is pretty mundane. Everything isn't a huge deal. As we see in the last couple of months, every piece of news has been, I quote, a huge deal, for two reasons.
One is because most of people that own equities are in it for the long haul or they're major firm managers, and all they do is really fundamental analysis. And when that stops working, every body at the same time says, what the heck is going on? I need to know.
Sean Donahoe: Where's the technical, yeah.
Andrew Page: Yeah. The technicals become important and every piece of news becomes very important, and there's a lot of overreaction. So, if you're not trading fundamentals and you're just doing the technical, yeah, it's important to ignore that.
If you're an event trader, which is what I like to do, it's a lot of fun, because these overreactions are really good opportunities. But it is important to put some blinders on.
I think a category that a lot of newer trades and even experienced traders walk into it here on message boards.
Sean Donahoe: Oh my lord.
Andrew Page: I think that really have to take whatever you see on message boards with a serious grain of salt, because-
Sean Donahoe: A bucket.
Andrew Page: Other people are thinking. Yeah, it's nice that every once in a while to see what other people are thinking and doing, but you have to realize that this is an internet community. People are not going to be always faithful about the trades they're posting.
Phil Newton: Surprise.
Andrew Page: Yeah, I see three or four people posting. Yeah, exactly, it's common sense knowledge, but you know.
Sean Donahoe: This is the trade they placed a month ago, look how well it went.
Andrew Page: Yeah, exactly. And it's like, well you didn't place the other five that you lost, probably, because who wants to post losing breaks on a message board. And so, I think that, looking at those, especially as a newer trader, can really cloud your judgment and make you second guess yourself.
When in the end, maybe you were right all along and didn't put that trade on, because some other people were doing something different then you, and that's the market.
Phil Newton: That's the key point there. It's doing something slightly different, because-
Andrew Page: They're going to have a different strategy.
Phil Newton: Exactly, yeah.
Andrew Page: You know, I subscribe to a couple of message boards, just because I like to see what other people are doing, but don't let that affect your trades.
Sean Donahoe: Yeah, very, very good stuff. The amalgamation of both of these things that we've been talking about here, having a general awareness without the noise is very important, or you can just focus on your positive expectancy strategy, which is what we do a lot here at Tradecanyon, we do have that where you can cut out pretty much all the noise, and just have a little bit of osmosis in the background.
Be intentionally ignorant with one ear open, maybe. A little fusion there. So, love that. Well done. Alright, so with that being said, let's 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 Traders quick fire round.
Sean Donahoe: Okay, so the Rebel Trader mail bag. And I'm going to fire this one at Phil first of all, because we had some really good questions this week, and kind of detailed questions. So, can one accurately, with any degree of success, predict the future of the stock market by using charting techniques, or is it like trying to look ahead by using the rear view mirror?
Phil Newton: No.
Sean Donahoe: Would you like to explain upon that?
Phil Newton: No.
Sean Donahoe: Okay.
Phil Newton: To be fair, I believe history repeats itself, so yes, I believe that looking at the charts helps me to figure out is history repeating itself, but the truth is, no-one knows what's going to happen next. To be honest, no-one. Zero people in this world truly will understand or know what will happen tomorrow in the markets.
Sean Donahoe: Oh you've met Mystic Meg.
Phil Newton: No-one knows.
Sean Donahoe: Yeah.
Phil Newton: However, I have bought into the fact that history repeats itself and that's been proven, surprisingly through history. Not just in charting, but in every form of life.
You know, humans are the way that they are, and they behave in quite recognizable patterns, but they don't behave in the same way every time. And this is why some people believe that either, and again, the argument for charting is that it doesn't always work, and they argument for fundamentals is that it doesn't always work.
But if you do it enough, on average, it does work the majority of the time with whatever tool, whatever method you're using.
In the short term, there might be certain-
Sean Donahoe: You'll get above random. Yeah, you'll get above random.
Phil Newton: Exactly. Now, so can it be used with any degree of success? Yes, it can, but, the but is what I've just said. You've got to have something that has a positive expectancy. And then you've also got to trade it frequently enough to make it worthwhile. That's what I firmly believe.
So, yes, it can be done, but you need to understand that it's not going to happen exactly the same way it did last time, because everyone believes that a moving average crosses and magic happens, and we all make loads of money and gold just appears on trees, and all sorts of stupid things.
It's just a way to help you measure, is history repeating itself, and that can be true with any tool or any indicator, technical or fundamental. It's just a way to help you figure out, is this an event that I need to be involved with. And it might not unfold exactly the same way as the last 50 times, but it might unfold in a similar way to the average of the last 50 times, and that's what I'm betting on.
Sean Donahoe: Fair enough. Okay. Now, Andrew, you got any comments in regards to that?
Andrew Page: Yeah, I agree with Phil that human nature is not going to change any time soon. And there are patterns that do seem to repeat themselves, and I agree that it's definitely possible to take advantage of them.
I think the technical analysis does work, and like Phil says, it's not going to work the same way every time. It's an area. It's like a zone you're trying to nail down. You're not going to get pinpoint accuracy, that's just not how it works.
There's way too much going in the world for something like that to ever work, and if it did, the market would be pricing out.
Phil Newton: It would cease to exist.
Sean Donahoe: Exactly. That's a valid point right there as well.
Andrew Page: And I think that, yeah, and with trading, and I really think that Phil brought up a really important point earlier in the show, is that area's opportunity change. He was trading currencies 10 years ago, now he's trading options, because that's where the money is.
And maybe in another 20 years, currencies are the big thing again. Who knows.
Phil Newton: Maybe it's Beanie bears. Who knows.
Andrew Page: Yeah, Beanie Babies. Who would've thought. 30 years later.
Phil Newton: We did have brief stint of those crypto versions of the Beanie bears, didn't we.
Sean Donahoe: Yes, indeed. Yes, what was it? The monsters-
Phil Newton: Crypto kittens, or whatever.
Sean Donahoe: Yeah, crypto kittens. Yeah, there's the other one. Dear me. But, yeah, I mean there is a lot certainly going that can be, well done. We wouldn't be here if it wasn't-
Phil Newton: The short answer. Yeah, the short answer, history does repeat itself, but it's not going to exactly unfold in the same way. Again, charting, fundamentals, flipping coins, asking Mystic Meg, whatever your thing is, history repeats itself. That's all you need to know.
As long as you understand that it won't be exactly the same way every time, which is what people expect with technical analysis, as long as you understand that it won't happen that way, then you'll be alright. And again, it's the average we're looking for, surprisingly, just like every other business in the world, an average of profit.
Sean Donahoe: Absolutely.
Andrew Page: And I really think the key is to identify when it's the most successful, like during what time periods, like bare markets, man, technical just works so great in bare markets, I think.
Sean Donahoe: Oh, very much so.
Andrew Page: A little bit of volatility kicks in, every one goes technicals and I think that's a really important time to use them.
Sean Donahoe: Perfect, perfect, perfect.
Phil Newton: You heard it here first. We'll come back to you in the bare market, Andrew. You can tell us your big secret. Which big red button should I be pushing to place the trades?
Sean Donahoe: There you go. Okay. So, what else is in the mail bags?
Phil Newton: The question then, Sean, is I have $400 in savings in my bank account. I'm only 18, but I want to get involved in the stock market. How do I start? And how do I keep my money growing?
So, there's like a multi-faceted question, but it's a reasonably common question, or some variation of it. I've got a small amount of money. I'm only young. Where do I start?
Sean Donahoe: Well, first of all, you've got the right attitude, is that you're not spending it all on the whatever the latest games console is, or going out on the Skype and getting some beer.
Which you can't do if you're in the US at 18, but you can in the UK.
So, first of all, you've got the right attitude. Second, you don't want to put that money in markets. You want to start learning how to trade. So, you've got the right attitude. You've got the imputes to learn, but you need to start with learning some strategies so that you're not risking your initial $400 trading.
Now, obviously with $400, it's a very small amount. We do recommend significantly more than that to get started, but the fact that you've got a little bit and you want to get your feet wet, you can certainly do that later on, but what I would say is, if you are learning, you're going to start developing the strategies, the experience and everything else, before you put real money on the table, because if you've got a small amount and you start investing or trading, you are going to feel a lot of the motions and you're going to make mistakes, and you're going to watch that $400 disappear, because it's a very small amount.
That means you can't do too many trades, and you can't have too much initially. However, what I will say is, you get that skill developed, you start developing experience through say, a demo account, paper trading, you'll at least get an understanding of the fundamentals. So that when you eventually put skin in the game, then you are doing it with at least some experience and some knowledge in advance, and increasing your probability of success.
Now, on top of that, as you get going, and you're developing those first forays into trading, I do suggest that you compound your capital by taking whatever you've got as a job or income, and taking like 10% and putting it into your account, so that you can trade it.
Because your $400, while you have the potential to grow, it's a very small pool right now. But you're very young. You've got time, so that you can work towards always increasing your base that you can then invest later on, and increase your opportunity. And even if you watch that $400, say you made a couple of mistakes, you're first starting out and you lose that $400. Okay, worst case scenario, you will have developed some of those skills that you can build on and compound on, so you can build more.
Now, thankfully, $400 might seem like a lot of money right now to you, but in the future, it won't be. It will be something you can build up, compound, and if you have all your focus around that, at your young age where you are right now, you have a very bright future ahead of you if you stick at it.
I wish I was trading when I was 18, because it would be a vastly different scenario now than when I actually did get started, which was 20 years ago when I put my first trade on, but again, I'm getting my son to start trading right now. I told him I was going to give him $1,000,000. It was a $5,000 chunk of change I put in an account for him. I said yeah, you've just got to turn it into $1,000,000.
That is an educational thing, because it gives them the impetus to say, here's the skills, here's the training and here's $5,000 to get you started, go trade. And I'll guide him every step of the way, but I said, no it's $1,000,000. I'm giving you $1,000,000. You just have to turn it into it first.
So, again, where you've got started, you've got the right attitude. You've got the right interests and obviously you haven't stepped your foot in the water yet, but yeah, go ahead, get started, but do it with paper trading first.
What say you, Phil? I'll let you take this one first.
Phil Newton: Well, I did start trading when I was 18 with a similarly small amount of money, but prior to that, I was at 15, so unbeknown to me, I didn't realize I could get someone, an adult, to open an account for me, but I spent a few years on and off doing that apprenticeship of learning and practicing, and reading, and putting the knowledge into place. So that when I did place my first trade, I had some knowledge. I kind of knew what I was doing.
Compared to what I know now, I still didn't know that much, but I knew more than the average person. So, again, if I had a small amount of money, again, I think the key phrase here is invest. I never wanted to invest. I wanted to be a trader. I wanted to be quite active in the markets. I knew what I wanted to do.
So, if you want to invest, then invest is a lesser activity, or a lower activity of involvement. So, you want to think about something that you want to invest in, and you're looking at two, three, five years down the line. I would suggest indexes or ETFs, put your money in an ETF.
Is now the right time to do that? No. You want to be waiting for a correction, a dip, a retracement, a time where, the phrase that's commonly used for investing is, find a time where the stock or the instrument that you're looking at is on sale.
That usually means somewhere between a 5 and a 10% retracement. Most commonly, that's called the bare market. So, if you're after the bare market, broadly speaking, that's usually the good time to start investing. It might mean that you have to wait 6 months, 8 months, 12 months longer to see that next big retracement, but it's the timing of that's worth waiting for.
And if you want to pick one stock, or one instrument, or one index, and then wait for that larger correction, then that's usually the good time to invest. Put your money there and then forget about it for a couple of years.
Sean Donahoe: Perfect. Okay, Andrew, what say you, sir?
Andrew Page: Yeah, I think the invest word sounds like more he's looking for longer term. So, yeah, what Phil's said is spot on. Most of the gains in the stock markets over the last 100 years have been made directly after bare markets. So, I know it might sound counter-intuitive to wait, but with only $400, it's really hard to divide that up to buy a guess over any kind of time period to try and smooth out the equity curve for the rising and falling of the market.
So, I think your best bet is to save as much as you can, and wait for a correction. And then just start putting it in ETFs. You can't go wrong with SPY, tracks at SNP500, and that's a broad measure of the US economy. I think that putting money in the SPY and the Nasdaq, and then your Russell 3000, as far as getting a pretty wide breadth of what the US economy is doing. Don't think you can beat that.
Sean Donahoe: Perfect. Okay, so, here's another question. And I'm going to fire this one at Andrew. What are the dark secrets of stock markets that are unknown to the ordinary trader?
Andrew Page: I can't say anything or the Illuminati's going to come after me.
Phil Newton: You mean to tell me that there's not a secret that you can just tell? You know, just between you, me and these four worlds?
Andrew Page: Secrets I know, I've been bound by blood to never disclose.
Phil Newton: Who told you these secrets, Voldemort?
Andrew Page: I don't know why, but I think it's really ridiculous, and I guess it's not so secret, but maybe people don't know about it, is that congress can't get into trouble for insider trading. I think that's pretty ridiculous.
Sean Donahoe: That is insane.
Andrew Page: That's complete bullshit. Excuse my French, but the fact that the controlling interests of the government, who know of business dealings, because they have a lobbyist coming to them all the time, can't get into trouble for taking advantage of that knowledge, when every body else does, that's a little fickle.
Sean Donahoe: That's an interesting little secret.
Andrew Page: I remember there was a bill coming to the floor, I think it was a couple of years ago, to try and stop that and make it illegal, and it didn't pass. Low and behold.
Phil Newton: Surprise, surprise.
Sean Donahoe: Do you want to take away our advantage and uncover it. Oh my God. It would explain why some of these senators and congress people who have an annual wage of about $100,000 have accrued millions of dollars in wealth, somehow, we don't know how, but-
Phil Newton: Because they're perhaps privy to extra information that the general public's not aware of. What a shocking surprise.
Andrew Page: I think another secret that may is not such a secret. I don't know any really dark secrets. I don't think the whole game is rigged. I'm not a conspiracy theorist like that, but I think that obviously, it's definitely tilted in the advantage of big banks, but stop running, that's a real thing. These algorithms can really tell when it's in their trading another algorithm, versus when they're trading a smaller trader.
And running stops take your money, especially if they're really right, that does happen. You place a stop, it's 10% out, and you get hit, that's not stop running, that's just the market moving.
But you're placing those titan stops, yeah, the market's definitely going to try and take you out. That's
Phil Newton: Do you mean I can't put a stop what's on the future, so there's two ticks away.
Andrew Page: But I think that's kind of more common sense than a dark secret. I guess the last one would be that there's probably definitely some collusion in trying to move markets between larger players. I think that, again, that's
Phil Newton: People will always try and get away with it when they've got the big name behind them. If everybody can get away with it.
Nick Leeson in the 90s, he had a getting away plane, two books. What was the banks including with the, manipulating the liberators. Yeah, it does happen, it does happen.
Andrew Page: Yeah, so, as far as every facet in the market being manipulated, I don't think so. But yeah, there's definitely a lot of opportunities to make your money, like the larger institutions have. So, you've just got to protect yourself and not risk more to lose.
Sean Donahoe: Common sense.
Phil Newton: Yeah.
Sean Donahoe: That's it. Common sense. And we did an entire show about the stock manipulation which was a really good show. A lot of the different aspects and things in that regard, but well, I guess, with that being said, let's rock on.
Automated: Don't forget, if you have a question you want to ask Sean and Phil, just go to Tradecanyon.com/rtquestions and your question may be featured on a future show.
Uh-oh, what's that smell? It's time to call out the Wall Street shenanigans, mainstream confusion and outright hi jinks and so-called experts, yep, it's time for bullshit of the week.
Sean Donahoe: Okay, time for the bullshit of the week. And I'm sorry, it's a crypto-bullshit this week. And I can't help it, because this one just had me jaw dropping and just like, are you frigging serious right now.
So, this one cannot be helped. It was the top story on Market Watch yesterday above the fault. And I quote "Time to cash in on this crypto, according to a 13 year old son of a money manager."
I'm just going to let that sink in for a second. So, big story, top of market watch, and it's according to a 13 year old son of a money manager. Well, according, to my 20 year old son, Transformers are still cool, okay.
I mean, yeah, okay, yeah, great. Good on this kid. I'm all for-
Phil Newton: I think Beanie bears are going to make a real big comeback.
Sean Donahoe: I'm all for kids and entrepreneurs. And I'm not discouraging this kid and this entrepreneurial spirit. Good on him for getting into some form of trading, but a top story and recommendation for other investors and traders who are serious, on a serious website, and they're recommending trades from a 13 year old.
I mean, good on you, kid, but seriously, Market Watch. I mean that's definitely a hashtag WTF. What say you guys?
Phil Newton: I think Andrew's sigh says it all for us.
Andrew Page: It's like oh, really.
Phil Newton: Where do you start with it? How do you comment, without ripping a piece out of this 13 year old kid? I think the money manager should know better. I think it's just attention grabbing headlines, because the money manager's got something to say, and it's a little bit controversial, the 13 year old son of a money manager's getting into the headlines. Maybe just a little bit of attention grabbing to put some awareness on their fund, or whatever it is that they're doing.
There's an ulterior motive for this. I wonder who's got the brown envelope for this arrangement.
I think nefarious is going on there, other than the actual headline.
Sean Donahoe: Yeah, it maybe just like, okay, why would you put that. Okay, yeah, it got attention, and that's exactly what it is. It's an attention-grabbing headline.
Phil Newton: Exactly. Yeah, it's done its job. We're talking about it.
Sean Donahoe: Exactly. And I'm not bashing on the kid at all. Good on you, but news worthy? No.
Phil Newton: It certainly isn't.
Sean Donahoe: No. And if, I won't mention the guy's name, but the link's in the show notes, you can take a look at it, but it's just one of those, either A) you're taking advantage of your kid for leverage, and that's not cool, because you don't do that to kids. B) You're an attention whore and that's just not cool. Or C) -
Phil Newton: You're a dick.
Sean Donahoe: Basically, yeah. That's it. So, anyway, Andrew, what say you? Other than the site, do you have any other comments?
Andrew Page: I just can't believe that they printed that. I mean, it's impressive that a 13 year old is learning about the markets, but-
Phil Newton: But it's less impressive that Market Watch is still at the cutting edge of financial journalism.
Sean Donahoe: That's exactly it.
Andrew Page: That article, it just seems like such a crypto-currency BS kind of thing. It just doesn't give it any kind of great answer. It doesn't lend to it actually becoming a useful currency when they have articles about children commenting on it and saying that now is the time to make money on it. That doesn't-
Sean Donahoe: Yeah, and they're talking about Litecoin as the thing. Saying oh it's prime to pop and everything else. It's just like, okay, yeah, you can argue, probe it, whatever, but-
Phil Newton: Was that the bandwagon that just rolled past?
Sean Donahoe: Yeah, I think the kid fell off the bandwagon. That's not what it was, but Anyway, yeah, not bashing the kid, just bashing the stupid bloody over hype desperate attention whoring that Market Watch is perpetuating, and they probably won't be invited on this site anytime soon to comment on stuff, but there you go.
But that's okay with me, because I prefer making money in the markets. What about you guys?
Phil Newton: No, I agree, yeah. I'd rather be doing something, then talking about what I may or may not be doing.
Sean Donahoe: Reminds me of the House of Cards when you said that. It's like some may say that, but I couldn't possibly comment. So, anyway, with that being said guys, that's it for this week's show.
Thank you for listening. Hope you enjoyed it. But please remember this show is not free, it will cost you a 5 star review. Just go to tradecanyon.com/rebeltraders
You can subscribe and review us on the favorite way to hear the show. And this helps us more traders and investors out there just like you.
Phil Newton: If you value your privacy, you can send us a postcard. If you don't value your privacy, you can contact us on Facebook. You can reach us at tradecanyon.com/rebeltraders in either of those two methods that you prefer.
Sean Donahoe: I just love that. Brilliant.
Phil Newton: What have we got in next week's show, Sean?
Sean Donahoe: Well, next week, we're going to be talking about that big grey thing in the corner of the room. The big elephant that no-one likes to talk about, but we're going to.
We're going to go poke it, prod it, and see what the hell is going on. So, with that being said, thank you very much, gentlemen, for being part of this.
Thank you ladies and gentlemen for listening to the show. Any last words, Andrew?
Andrew Page: Just keep your cool out there. And again, especially with the message board. Keep your own castle.
Sean Donahoe: Absolutely. Phil, last comment.
Phil Newton: Last comment. Oh, trying to think of something witty, but it's far too late to go past that. So, I'll just bid everyone a very good week's trading in the markets and hopefully have a fantastic time.
And remember. Just remember. It's a good thing. Having a good memory is always important.
Sean Donahoe: You got me. Like, remember what? Okay. Done. Ladies and gentlemen, that's it. That's the insanity. Even little Bill has a few comments and we'll go from there. Take care. See you next time.
Phil Newton: Bye for now.
Automated: For more cutting edge trading advice and a free trader workshop to help you build a personalized trading plan, and to make smarter trading decisions, go to tradecanyon.com now.
Automated: Features options and features, stock and stock option trading involves a substantial degree of risk and 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're awesome. Congratulations and well done.
Notice, this product may contain nuts.

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[0:08] Show Introduction

[01:35] Sean: This week we are wrapped in our ghillie suits, looking through the scopes of our snipers, picking off targets with pinpoint accuracy at a great distance in our portfolios and accounting for what is called the Coriolis Effect.

[02:10] Sean: If you’re not familiar, it’s to do with trajectories, and the curvature, and the rotation of the earth. When talking about ballistics - this is where I’m making the trading analogy - the Coriolis Effect refers to the deflection on the trajectory of the bullet generated by the spinning motion of the earth.

[04:45] Sean: We are in this case talking about global economics.

[05:15] Sean: So what happens in Asia could affect what happens Europe and then conversely the US markets as the day progresses.

[06:15] Andrew: We are a globalized economy now. This isn’t the 1920s, everything is instantly transmitted around the world. We’re so reliant on foreign entities and in a day-to-day business cycle that everyone goes through.

[07:12] Sean: There’s a common phrase, ‘When America sneezes, Europe catches a cold.’

[07:48] Phil: Whereas it was once a one-way street, it’s now a two-way street. If you’ve got a small country that has a major economic impact, that can have a reverse flow of information and might impact decisions in the wider economies around the world.

[11:10] Sean: A lot of commodities are measured against the US Dollar and that in itself is a real highlight of how connected these economies are.

[11:39] Sean: What did you see in terms of influence when one had an issue? The ramifications for the rest of the currency markets?

[12:30] Phil: Currency, from a trading point of view, I like that slight instability because that creates volatility from a price point of view.

[14:15] Sean: Now, from the devaluation of the US Dollar, what do you see as that having an affect on other currencies? A stable decline isn’t the same as a monumental price crash.

[15:00] Phil: If you look at any benchmark against the US Dollar, usually they’re a precursor to a significant economic shift. It’s a cycle that happens regularly.

[17:00] Sean: There’s a lot of big moves away from the US Dollar being that measuring stick. How do you think that bodes for the future of the US?

[17:20] Andrew: I think that obviously, the US Dollar is just going to have less weight. Going forward, the other economies have caught up. I’m not saying the US is going to move off the center-stage, but we’re going to have to share it.

[21:12] Sean: What do you see as opportunities? I do my planning for the next day’s trades in the evening because I like to see how the Asia markets are opening, what’s happened through Europe, is it going to have any influence on what’s going on over here?

[22:30] Andrew: I think, even for more local markets, there is a lot of that interdependence still. It kinda shifts the whole supply and demand balance pretty dramatically.

[23:25] Sean: You could look at anywhere in the world and see what’s moving, what’s not moving. It can potentially give us quick information. How do you see that affecting in the future?

[24:02] Andrew: I think that is going to be a real game changer. The larger institutions are really going to reap the major benefits from it. But this technology will eventually be available to the average joe.

[25:02] Sean: Phil, what’s your take on the micro-level?

[25:52] Phil: Maybe it gives you an opportunity to hedge your exposure. It gives you a bit of a heads-up to plan to do something at the opening bell.

[28:26] Phil: I was twelve years a day trader, currency was the opportunity that arose. There was an explosion of the markets, prior to that I was trading the Spanish Index.

[29:29] Phil: I believe the coming bare market is going to be the opportunity. I think there’s going to be a slowdown in the economy, impacted the most in the US markets.

[32:43] Sean: My portfolio is about 60% buying options and 40% selling options, especially with all the recent volatility it’s been very lucrative.

[34:13] Sean: Cryptocurrencies, do you think that’s going to break down the barriers of those sovereignties?

[34:58] Phil: At the moment, I believe the current iteration of cryptocurrencies is the modern quality of the 90s beanie bear, the fad. That doesn’t mean to say that a cryptocurrency won’t participate on a global scale to maybe rival, or as an alternative to the US Dollar.

[35:45] Andrew: Blockchain technology is already proving very useful. There will be some cryptocurrencies that survive but will they actually function as a currency, that remains to be seen. Mostly now, it looks like an asset bubble.

[39:15] Sean: Someone argued with me recently that you can say the US Dollar is a digital currency.

[39:26] Phil: But there is someone accountable. That’s the primary difference.

[41:15] Sean: You’ve got that desire for globalization but also that independence. No one person is going to sign on to a single cryptocurrency, and decentralize and give away that power or that option of sovereignty. I really think that’s the biggest hurdle for any global acceptance of any cryptocurrency.

[43:38] Rebel Trader Tip of the Week

[43:55] Sean: A broad awareness of the world is good but being obsessive about the detail just creates a lot of static in your trading.

[45:00] Phil: Too much information creates inaction. Often it’s going to be the wrong influence. Have a plan, trade the strategy and focus on a positive expectancy strategy.

[47:28] Sean: Andrew, what do you say as more of the fundamentalist?

[48:56] Andrew: You have to realise this is an internet community and people are not going to be always faithful about the trades they’re posting.

[50:45] Quickfire Round

[50:57] Sean: Can one accurately with any degree of success predict the future of the stock market by using charting techniques or is it like trying to look ahead by using the rear view mirror?

[51:11] Phil: No. No one knows what is going to happen; however, I have bought into the fact that history repeats itself. If you do it enough, it does work the majority of the time.

[53:25] Andrew: Human nature is not going to change any time soon, and there are patterns that seem to repeat themselves and it’s definitely possible to take advantage of them. It’s not going to work the same way every time.

[56:01] Phil: I have $400 in my bank account. I’m only eighteen but I want to get involved in the stock market. How do I start and how do I keep my money going?

[56:36] Sean: You’ve got the right attitude, you need to start learning some strategies so you’re not risking your $400. So when you eventually put some skin in the game, then you are doing it with some experience and knowledge and increasing your probability of success.

[59:25] Sean: I’m getting my son to start trading right now. I told him I was going to give one million dollars; it was a $5,000 chunk of change I put in an account for him. Yeah, you’ve just got to turn it into $1m. I’ll guide him every step of the way.

[1:00:32] Phil: When I did place my first trade I knew more than the average person. I think the key phrase here is invest, think about something that interests you and you’re looking at two, three, five years down the line.

[1:02:15] Andrew: Most of the gains in the stock market over the last hundred years have been made directly after bare markets. With only $400 it’s really hard to divide that up. I think your best bet is to save as much as you can and wait for a correction.

[1:03:10] Sean: What are the dark secrets of stock markets that are unknown to the ordinary trader?

[1:03:38] Andrew: I’ll tell you one I think is really ridiculous is that Congress can’t get in trouble for insider trading.

[1:04:52] Andrew: Another secret, obviously it’s definitely tilted in the advantage of big banks. Stock running is a real thing. You just got to protect yourself and not risk more money than you can afford to lose.

[1:06:31] Sean: Common sense, and we did do an entire show about the stock manipulation which was about a lot of the different aspects in that regards.

[1:07:10] Bulls**t of the Week

[1:07:13] Sean: It’s a crypto bulls**t this week. It was a top story on Marketwatch yesterday and I quote ‘“Time to cash in on this crypto”, according to the 13-year-old son of a money manager.’ I’m all for kids and entrepreneurs, but a top story and recommendation for other investors who are serious on a serious website?

[1:08:40] Phil: I think the money manager should know better but it’s a little bit controversial so it’s a bit attention-grabbing. There’s an ulterior motive and something is going on other than the headlines.

[1:11:22] Sean: That being said guys, that’s it for this week’s show. Please leave us a five-star review at tradecanyon.com/rebeltraders. You can subscribe and review us, or connect with us on social media from the same link. This helps us reach more traders and investors just like you.

[1:11:45] Phil - you can also connect with us on Facebook. What do we have in next week’s show Sean?

[1:12:00] Sean: Well, next week we’re going to be talking about that grey thing in the corner of the room. The BIG Elephant that no one likes to talk about but we’re going to.

[1:12:21] Andrew: Keep your cool out there.

[1:12:35] Phil: I’ll bid everyone a very good week’s trading in the markets.

[1:12:55] Sean: Ladies and gentlemen, that’s it. Take care, see you next time.

Resources & Links Mentioned in This Week's Show

3 Key Takeaways From This Show

  • Looking at other markets can give early warnings of major moves in the US markets
  • With many markets measured against the US Dollar you can see the effects of other markets being influenced by currency moves
  • China's growth, infrastructure plans and opening up more for investment is a huge opportunity for the next 10-20 years but concerns continue about stabilization and currency manipulation

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