Rebel Traders 051 : Bang That Drum Hard

The Rebel Traders are always giving their insights, strategies and taking a wry look at the markets and the trading industry but in this episode it’s time to beat the war drums just a little harder to give you the edge...

Phil and Sean are going hard and loud as the look to give you the Rebel Trader advantage and recap some of the most poignant lessons and insights that they have shared and why you need to add these strategies and tactics in to your trading arsenal to level-up your trading now…

If you are serious about your trading and want to add a few percentage points to your monthly numbers then this is one show you cannot miss...

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Sean Donahoe: (music) Grab your guitar. Grab some drums. It's time to get hard and heavy. Ready to rock? Let's do it.
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 Mister Phil Newton.
Sean Donahoe: Hey, hey, hey. This is Sean Donahoe, and welcome to another Rebel Traders podcast. We have got a lot coming at you today. As always, I am joined by my partner in podcasting, the man with a semi-plan, his head is in the clouds ...
Phil Newton: I'm glad you qualified what the semi was.
Sean Donahoe: It's all good fun, but Mister Phil Newton, how are you doing, Sir?
Phil Newton: I'm doing just fine and dandy.
Sean Donahoe: Fine and dandy, and we'll leave it at that.
Phil Newton: Leave it at that, yeah, short and sweet.
Sean Donahoe: Short and sweet. Anyway, we are going to be basically ...
Phil Newton: Saving it for later, that's what it is Sean.
Sean Donahoe: Yeah, there you go.
Phil Newton: I know what's coming today. I've read the show notes.
Sean Donahoe: Lovely. Well, someone has to. We are going to be giving away our insights, our strategies, as we do every week. We always take a wry look at the markets and the trading industry, but this episode we are going to be beating the war drums just a little harder to basically give you the Rebel Trader advantage. We're going to recap some of the most poignant lessons and insights that we've shared over recent months, and why you need to add these strategies and tactics to your trading arsenal, to level up your trading right now.
Phil Newton: We've also got our usual Rebel Trader mail bank. It's your trading questions are answered, and the "my continued section of the week" is Bullshit of the Week. We call out the hype, the hype world, the shenanigans, the nonsense, and we already know that Sean's a nuisance, so we'll just move on there.
Sean Donahoe: Move swiftly.
Phil Newton: Where amongst all of our own shenanigans, we're going to try and ask the core question of where is the trade? There's going to be lots of that, I think, in today's show, Sean.
Sean Donahoe: I think so.
Phil Newton: And where's the trade, because it's kinda like a ... here's a quick tip for ya. Here's another one. Let's bang that drum.
Sean Donahoe: Absolutely.
Phil Newton:
Sean Donahoe: I think we need a ... get out the Las Ulrich set, the Nicko McBrain set or just a great big bass drum and a big hammer, because we are gonna be smacking some percussion instruments. As we often do in this show, we do bang a few drums that are, I would say core tenants of being a Rebel Trader. And what we do and what we ... basically the knowledge-
Phil Newton: What were about.
Sean Donahoe: What were about and what we impart to our students to a lot of our students, as well. Coaching students and everyone else who basically is a Rebel Trader. And it is a big ... there's a big, big difference between what we do and what most retail traders. Because, we are not what you technically call professional traders. Were not big institutionalized, hedge funds, I mean-
Phil Newton: Technically were retail traders.
Sean Donahoe: Yeah.
Phil Newton: But were not novices.
Sean Donahoe: Exactly. And I mean-
Phil Newton: So I think that leads in quite nicely to the first one. Which was a nice little surprise bonus. Novice trader, the difference between a novice trader and a professional trader. We're gonna qualify professional trader, not from the institutional point. But qualify a professional trader as someone who's successfully doing it. Who's making it work and profiting on a regular and consistent basis. A novice trader is focused on how much money they can make. Shocking as it may be, but that's not the path to success. What do you think?
Sean Donahoe: Absolutely. One of the things we talk about a lot is that it's not about the money you make, it's about the money you keep. And that's one of the problems-
Phil Newton: Yes, how little can I lose. And that's what the professional trader, the people who are successfully doing this, is there. Again we phrase it Sean, as I wanna be in business tomorrow.
Sean Donahoe: Yes.
Phil Newton: If the snowy stuff hits the fast rotating round thing.
Sean Donahoe: That's a very well annotated-
Phil Newton: I like that.
Sean Donahoe: Yes, I like that.
Phil Newton: I like that.
Sean Donahoe: I like that, yeah.
Phil Newton: If the brown stuff does hit the revolving thing, then we want to be in business tomorrow. Because I've been in that situation a few times. I know you've had that happen. That's just good life lessons. Protect your downside. Another way of perhaps saying the same thing, well if you're always focusing on how much money you can make, then you always gonna try leverage up to the eye balls. Then it only takes one small hiccup, one little speed bump, to go, oh shit, where did my account go.
Sean Donahoe: Exactly. We see that happen a lot. But yet there is a ... I mean the big drum I want to beat first is treat trading like a business. Now Phil just skirted around that by saying we want to be in business tomorrow. But it really comes down to, we treat trading like a business. You'll hear us bang this drum-
Phil Newton: It's got to be.
Sean Donahoe: a lot.
Phil Newton: It's got to be.
Sean Donahoe: Because you gotta be serious. If you want a take up a hobby, if you want a-
Phil Newton: Play golf.
Sean Donahoe: Play golf. Go fishing.
Phil Newton: Put a little of your balls in the rough. (laughs)
Sean Donahoe: I like that.
Phil Newton: No, it's fine, what's the worst that could happen. Well you just lost your balls in the rough, that's the worst that can happen. But your right, it's like, it isn't business. But, I was gonna say, very few novice traders start out thinking that this is a business. They might get there eventually, but they don't make the transition usually because they've not considered it a business. It offers an interest, a passionate hobby. What's this stock market thing all about. At some point it will transition from a passionate interest to a, I need to take this seriously and start treating it like a business. But most people just don't get there. And that's the point where it gets really interesting, when you do.
Sean Donahoe: Yeah. And before that it can be really expensive. Because if you treat it as a hobby, you're not treating it with the respect, to be honest, that it deserves and needs, because there's plenty of people, honestly like me in the markets, that love hobbyist being in the market, because that's where that's where I make my money. Because the people who . I hate to say it, and this is-
Phil Newton: In your other business interests, I might say Sean, in your other business interests.
Sean Donahoe: Yes, indeed. It's not in trading. (laughs) Well here's the-
Phil Newton: I just want to draw the distinction, because it wasn't too clear. But it's true. I mean the easy trap to fall into to go and buy another course, go and buy another course. And there's lots out there. And to be fair, although we've got our own thing Sean, we quite regularly say make sure what we do is right for you.
Sean Donahoe: Absolutely.
Phil Newton: We're not just trying to .... we're not trying to make you buy the thing we got. If it's right for you, then yeah, let's talk. That's all were asking.
Sean Donahoe: Well why risk it just to clarify it is-
Phil Newton: I'm just trying to draw a distinction between make sure it's right for you. Because the hobbyist is constantly looking for the next course that they can buy. And not trying to figure out, well let's use the stuff, the information that I have got, and make that work.
Sean Donahoe: The problem is that the markets will swallow up hobbyist traders because there throwing the money into the markets, with no strategy. They've got no basis for what their doing from a serious point. And it's just like going to Vegas. And there're some problems ... one of the problems with hobbyists is there very much like gamblers-
Phil Newton: Use the golfing example, there just hitting the golf, as hard as they can down the fairway, to see how far they can get.
Sean Donahoe: Yeah. Hitting the ball. Absolutely.
Phil Newton: So were not going down the gambling road again.
Sean Donahoe: No, no were not.
Phil Newton: To stick with the theme. We've banged that drum already. (laughs)
Sean Donahoe: Yes we certainly have. We're not gamblers, we are in business.
Phil Newton: Their just trying to whack the ball as hard as they possible. Yeah.
Sean Donahoe: Yeah. This is not a ... this is why, again ... trading is not gambling. It really is not. It's a strategic approach to, again, put in a certain amount of money, get a positive return on that money, which is your standard profit. That's how businesses operate. That's why we use this business-
Phil Newton: It's like every other business. Yeah.
Sean Donahoe: Exactly.
Phil Newton: It's why we flippantly say that. It's just we're all, all we're doing is the financial trading equivalence of any other business. We got our product, let us strategy, we deploy our strategy on a regular basis. I compare it to a conveyor belt, the way that I do it, because I got this production line. And when I've assembled all the pieces, it spits out the end of the production, and I put the trade on.
Sean Donahoe: Absolutely. That's what we are. We are a trade factory. I like that. Now, next drum I want to bang is why are you actually trading? Do you actually know your personal why. We've all got different reasons, why we're trading. I mean, Phil, what would you say your why is? Just as an example.
Phil Newton: Again, I would say what it's not, to make money. Yes, of course I do.
Sean Donahoe: It's a byproduct.
Phil Newton: It's a byproduct. I've always thought that. And my personal objective from day one, again I'm just have a little flashbacks, when I first went full time. I knew that to be consistent with my application of the process, a strategy. I knew that was the most important thing. I knew that even way back then. And you know, twenty years later, give or take. And I still think that. That's why ... why I trade is to apply a consistent methodology. That's not right, I think the wordings not right.
But when anyone asks me a question like that, that's the first thing I'm thinking about. To apply consistent methodology. A byproduct of applying that business process, yeah, I make money. But I'm also gonna keep the risk small. From a personal point of view, from a lifestyle point of view, that has changed many time over the years. I think that's why I was kinda skirting around it. 'Cause there's two possible answers. There's the why I operate the way that I do and how I operate that business. But the why I do it is to ... I want to do it as little, from a time point of view, as little as possible. So allow me the freedom to do the other things I enjoy doing. I've gotta, to be fair, I've made no qualms about it. I'm not shy. I've got a lotta free time Sean. And I'm not afraid to say it. I do very little, yet get paid very well for it, because I'm very efficient with my time. So that's my objectives, there kinda two-fold. Apply a methodical system with precision, that allows me time freedom. And that's what I'm buying.
Sean Donahoe: And that is the most valuable resource that we have in our lives. Because you don't know how much of it you actually have.
Phil Newton: It was not always like that, to be fair.
Sean Donahoe: No it wasn't.
Phil Newton: It wasn't like that. I went from one extreme to the other, as you know. Well, we've banged that drum before. (laugh)
Sean Donahoe: Not surprising, there's gonna be a lot of drum banging as you kind guessed ladies and gentlemen. But for myself, my why is very simple. I want my money to work harder. Now again, as Phil said, he trades for the time freedom. I trade because I have lots of other businesses interests, and I want my money to work harder. And one thing that I've talked about in the past, I want my money to operate and grow by itself. Basically what this does is, it infinitely magnifies my profits, of the business ventures. I then put my reserves into the markets, let it grow, I make it grow with my trading activities, my investing activities, and everything else. And, thus, every dollar I make in one of my other businesses, I now worth three, four, five, ten, twenty, however over a period of time. Now again, because I'm an absolutely obsessive, compulsive tracker of return on investment. Which-
Phil Newton: Nerd.
Sean Donahoe: Yes, I am a complete bloody nerd. (laughs)
Phil Newton: Sorry did I say that out load?
Sean Donahoe: But here's the thing, I know that any profits that I make on the businesses, even if it's a slimmer profit, I know that at the end of the day, by the time that has now transitioned from one business into my trading, then I know that is still infinitely more profitable, then it is on the balance sheet of my other businesses. And if I'm really successful with some of my businesses, which again, generally I am. Then again, that's infinitely magnified by the smarter approach to trading and efficient use of trading. I'm not throwing it into the market as a hobby, my intent is to make every dime grow. And again because I'm not time intensive in the markets, it's not becoming-
Phil Newton: It's efficient, yeah.
Sean Donahoe: That's one of the problems with a lot of traders, they're glued to the screens watching every single dam tick. I don't want to be that person. I trade for about 30 minutes a day-
Phil Newton: I've done that, it's horrible.
Sean Donahoe: Yeah, exactly-
Phil Newton: Horrible experience.
Sean Donahoe: Totally, as a day trader, Mister Phil Newton over here.
Phil Newton: (laughs)
Sean Donahoe: But, for me, I just wanna be in, out, done, for the day. And then I'll get all the rest of my day. Well indeed. Do the hokey cokey and trade around.
Phil Newton: Shake it all about and gone. (laugh) Is that (laughs)
Sean Donahoe: Oh, dear me.
Phil Newton: Oh, but it's true. I suppose it comes down to what you want from your day again, is what we're trying to say here.
Sean Donahoe: Yeah, what is your goal, what is end goal.
Phil Newton: How do you ... so one way I like to think about it now, we're kinda chewing around the idea a little bit more. How do you envision you life as a trader? Is it a part of your life? Which it would be where you ... a line ... the side of the line that you fall on, Sean. It's part of what you do, whereas for me it's all of what I do. How do you see yourself, doing it? What do you need to do to get there, in the first place? My issue was I was day trader and spent twelve hours a day, twelve years, doing it. And it wasn't a pleasant experience. It was longer than that. But I think, twelve hours a day for twelve years, sounds a little bit better. Anyway, it was longer than that. There was many all nighters pulled, because I was primarily trading on 24 hour markets.
The point I am trying to get to, I've gone from one extreme, a lifestyle of work, work, work, grind, grind, grind. And suddenly I thought, what have I done to myself. I was making myself ill. I didn't have the .... it was, again, an unpleasant experience. So going to the other extreme, I thought, when I made the transition, how do I want my life to look, when I made that change, made that difference. I stopped doing a lot of things, that I didn't enjoy and didn't like and maybe I was struggling to do. And cut all the wheat from the chaff. And just focus on the things that you do best. And how can I spend as little time doing that, to get the result that I want.
Which for me at that point, was to free my time up. That would be an example of the objective. How did I want it. I answered, change a lot of things in my life to make that happen. And now it's a great life. I've enjoyed the sunshine, I've read a book, I've had a coffee this morning Sean. I've been out and about and just enjoyed the rare UK sunshine. I had a very nice, leisurely, carefree morning, if I'm gonna be honest.
Sean Donahoe: Well, that's great. And the sun does come out at least once a year here in the UK.
Phil Newton: Once a year, yes.
Sean Donahoe: You've got to take advantage of it while it's out.
Phil Newton: Yeah. But that's the point I'm trying to highlight. That's what I want at this moment. That's what I want from life. Design the life that you want. And if trading can produce that for you, then, yeah, do it.
Sean Donahoe: Absolutely. Now one of the things we talk about and have mentioned a lot, is the 90, 90, 90 rule. And this is a big cautionary lesson, as far as I'm concerned, for the average retail trader. The 90, 90, 90 rule is 90% of retail traders lose 90% of their money, within the first 90 days of opening up their trading account. That to me is one of the scariest numbers out there. It's one of the scariest considerations. And I lot of the stuff we talk about her is going to keep you out of that horrible statistic. That's like the roadkill numbers, right there. Because when you think about it, suddenly retail traders going into this market-
Phil Newton: That's what happens to the hobbyists.
Sean Donahoe: Yeah.
Phil Newton: That's why we said the things we said so far. Because the hobbyists, that's the trading equivalence of losing your balls in the long grass. Blowing your accounts up in the trading world, you've just blown up 90% of your account because you traded like a hobby.
Sean Donahoe: And it's a scary, scary-
Phil Newton: And it's very short space in time. Because its so easy to kinda click the button, and put a trade on, and treat it like a Nintendo game. I've seen people do it. And, why did you do that? Because I could. (laughs) Really.
Sean Donahoe: Yeah. The problem is that people don't think about the, "what they're doing"-
Phil Newton: Consequences.
Sean Donahoe: The consequences, because it's so easy, and the money is just numbers on a screen. It's not real. It's very much, I hate to even use the comparison, it's like the gambling with chips-
Phil Newton: It can be addiction to some people. Yes.
Sean Donahoe: Yeah, it's like the chips on the table.
Phil Newton: It can be an addiction to some people.
Sean Donahoe: They don't see it as denominations of real money. It's just these innocuous little colored chips. It's not real money, once it's transferred to that. Which is why casinos use that. It's the same thing in a trading account. It all looks virtual. There's no actual ... your not like taking out a hundred dollars bills from your wallet and actually giving them to someone. It's just pressing a button. And that's so simple, it does encourage that kinda unfortunate mindset. You gotta be aware of that. One of those-
Phil Newton: Interestingly, the opposite is happening as well. You cannot trade and not lose all your money for exactly the same reasons.
Sean Donahoe: Because your afraid of it.
Phil Newton: You're not, exactly, you're not growing your money by the same notion, that you're not putting the trade on. Because you're so scared of the being wrong. Again, it all comes down to an enormous lack of strategy. It's quite amazing how everythings-
Sean Donahoe: And experience. So I want to say experiences, is a very big factor as well.
Phil Newton: Yeah, I think-
Sean Donahoe: You gotta learned those lessons.
Phil Newton: Exactly, yeah. I think it's, as were talking about this Sean, the thing that occurs to me so far, how interrelated a lot of these things are.
Sean Donahoe: Oh, yes.
Phil Newton: Particularly the problems of the experiences that's most people who ... have not quite figured out how to it yet, to be polite about it. I suppose that begs the questions of how can people overcome some of the challenges that we've talked about so far.
Sean Donahoe: Well one of the things we do, and this is one thing we recommend, is some people ... one of the biggest problems we see, is people trade to larger positions. Put a lot of their eggs in one single basket. And take it up a large percentage.
Phil Newton: And that's the "how much money can I make", type of attitude.
Sean Donahoe: Yeah. So one of the things we talk about is trade smaller, trade more often and sleep. The problem is a lot of people get hyper-stressed. There putting too much money in the markets. They get really, really stressed out. They can't sleep. When they blow up their accounts, it's because they've put to ... they've not analyzed the risk.
Phil Newton: Emotional reaction to the situation that they find themselves in. And root cause of most things is position sizes to your book. Yeah, reduce your position size. Trade smaller. Trade as small as possible, is something that I always typically advocate. Think about that, I mean, it doesn't matter what your personal net worth is, everyone's gonna number they're happy with in their head.
Whether you got five grand, fifty grand or five million, in your trading account. Everyone's got a number they're happy with losing per trade. And I've seen multi-millionaires cry over a $50 loss, because it was just too much for them. They might have has some success elsewhere in their life, but they're at ground zero for trading, just like everyone else. It's still brand new for , they're still a novice, they're still learning.
And just some time a small dollar amount can be the one that puts you in the corner of rocking and crying gently. So always trade smaller. Think of that number in your head. What is it for you? That's the number your happy with. Because, a lot of people, text books, authors, they advocate, use a certain percentage of risk per trade. But I would argue that's often ... and usually it's 2%, somewhere around 1% to 2%. I would argue for most people that's still too much.
Because while your physical bank balance might be able to cope, your emotional bank balance isn't there yet. That's what I'm talking about trading smaller. But not just practically from your net worth and a percentage of your accounts point of view. Trade small from your capabilities point of view. Your psychology's point of view. It's not psychological bank balance, it's something that never considered and often overlooked. So what's your number? Is it $50, are you happy to lose that, is it $100 dollars, is it 200, it it 2000.
Everyone's got their number. Trade small be comfortable with that figure. And if you put the trade on, and you've got that emotional reaction, emotional response. You might say, I'm happy with this much risk. And that's still elicits "holy shit", type of experience moments. Then reduce your position size. Again, the next trade you put on, reduce your position size. And keep reducing it, so as you said Sean, you can sleep at night.
Sean Donahoe: Yeah, absolutely, because ... the other thing is, if something bad happens to one trade, it doesn't matter because you gotta-
Phil Newton: You've got a tomorrow, surprisingly. (laughs)
Sean Donahoe: You've got a big basket of ... we're portfolios traders primarily, because it allows us to look at our overall basket and see what all of little employees in our business are doing. Are they succeeding at making us more money? Is it working right? Are they doing and performing what they should be doing? Okay, a couple of them aren't, okay, basically close the trades, close the positions or let them close themselves or what have you. Fine, okay, those employees are fired. Okay, let's bring in some new employees. Let's bring in some new employees. Okay, new trades. Again, you see we're using a lot of these business analogies.
Phil Newton: So trade more frequently. Now what's interesting, just to kinda bridge the gap there. We're suggesting trade more often. Significantly more often than probably most are experienced to. Now by trading smaller, it allows you to trade more often.
Sean Donahoe: Absolutely. It doesn't ties up all your capital.
Phil Newton: Yeah, so for a lot of ... I'm just kinda trying to bridge the two things, they're are not separate issues. So trade small because that allows you to then trade more often. So trade more often and more frequently. On the assumption that you've got a good strategy. Like what we have.
Sean Donahoe: Absolutely. And the good grammar there, yes indeed.
Phil Newton: Yes, it's like what we got. (laughs)
Sean Donahoe: Dam you.
Phil Newton: It's ... so trade small, trade more often. But what that allows you to do, is to then have that freeing experience. So you're now not stressed. So then you can take it to the next level of the experience. And now instead of worrying and stressing over one or two positions, with a larger position size, you've not got small position size and you're trading more frequently.
And maybe you've got 5, 10, 15, 20. I advocate one trade a day and that gives me, on average, around 20 new positions every month. It does sound like a lot, but it's only one a day. And you when you get kinda into double digit positions, it starts to liberate minds, because, as you kinda scout around Sean, before I wrestled the idea back. (laughs) Is that your got this portfolio experience and now your not focused on losing money on one position. Or hoping that one of them works out. Now you've got this portfolio experience and you're, kinda like got this ...
The idea you stumbled across Sean, of having all these positions, like employees. Instead of one employee, if that employee doesn't turn up work, your business might be screwed. The business might not open up. There's no one at the checkouts to process the customers, if it was a real world business. But if you've got 20 employees all working for you, one employee phoning in sick is not that detrimental to the success of the business that day. And that's what we want in our portfolio. So all these positions, they're your employees.
The more you have, the risk you have in each of them. And if one of them doesn't turn up for work that day, if that one doesn't work for you, then it's not detrimental to overall performance of the business or the portfolio, with the analogy that we're using. I like that Sean, you came up with that, cracking idea the other week, didn't you.
Sean Donahoe: Yeah. And it's again the way I like to think about a lot of these things, is the efficient use of my capital. And if that capital is treated like and employee of the business, or my trades are like the employees in the business. They better be doing their dam job. If they're not, what can we do to manage those positions. What can we do to manage those employees. Because at the end of the day, you are a manager of your own portfolio. We talk about portfolio managers in our professional trade in hedge funds and what have you. But really at the end of the day, that's exactly what you are in your business of trading. You are a portfolio manager.
Phil Newton: We could take this a little bit further.
Sean Donahoe: Go ahead.
Phil Newton: And we can get all Donald Trump. They're like our little apprentices. You're fired. (laughs)
Sean Donahoe: Do we have to wear the toupe?
Phil Newton: For the international audience, whatever, and over here it's Alan Sugar, is you're fired guy.
Sean Donahoe: Oh okay. But yeah that's absolutely fantastic. They tried to replace Trump in that show with Arnold Schwarzenegger. You're fist. (laughs)
Phil Newton: You're fired.
Sean Donahoe: I can't even do that in an Austrian ascent. (laughs) You're dared me.
Phil Newton: You're fired, includes firing from the hip, literally and AK-47, from the hip. (laughs)
Sean Donahoe: There you go . My god. Anyway, yes, so-
Phil Newton: I think we got off the beaten track there.
Sean Donahoe: I was gonna say way off the tracks there. That was just the third rail moment. But anyway. So coming back to what were talking about here, is consistency. We're talking about business stuff. We want to be in business today, tomorrow, next week, next week, next year. We want to have consistency in our business. It's a critical aspect of everything we do. We're not Babe Ruth here, hitting for the outfield, get the home run or the grand slam.
We're happy with singles and doubles. And again that's as far as that baseball analogy goes, because I don't actually follow baseball. But at the end of the day-
Phil Newton: Might it be that you ... might be that you do hit a home run and that's fine, but you're not trying to get one.
Sean Donahoe: If you get one, yeah, you will get one every now and then.
Phil Newton: But you're not trying to get one every time.
Sean Donahoe: You'll get them every now and then, and that's absolutely fine. But it's not our practice.
Phil Newton: I had one yesterday as it happens Sean. With Macy's.
Sean Donahoe: Woof.
Phil Newton: It took off like a rocket. I was thinking I was gonna have to do the you're fired thing. But it turned into a racer. I'd almost given up on it. It turned around and around-
Sean Donahoe: Produced the goods.
Phil Newton: So yeah, it's nice surprise when it happens, I've got to admit Sean. But I'm not aiming for it every time.
Sean Donahoe: No, absolutely. Because our strategies that we use, we have core strategy that we teach. But at the end of the day, it's the consistent application of any strategy that has a positive aspect tendency, is important. It's when you start going off the beaten track, like we do in this podcast every now and then. But when we have a strategy that you can methodically apply time and time again, it's very important that you are not only consistent in your application, but consistent with everything else you do, in and around your strategy, to get those consistent results. It you start throwing in speculation-
Phil Newton: Phrases, set yourself up for success. Not just with the strategy but maybe there's light ... I consider what we do, certainly in my case it's a lifestyle, it's a life choice. And the way that I operate my business, is quite ... my viewpoints are very similar in life as I operate my business. And We've banged heads many times on this, because you've got different viewpoints. It would be a boring world if we both thought the same way.
But my perspective, it's a lifestyle and I've set myself up for success, with not just a routine for business, but a routine to live the life, that will allow me to operate the business.
Sean Donahoe: Absolutely.
Phil Newton: I thought that kinda made sense there Sean. You know what I'm saying. You set yourself up for success, to add on to what you were saying.
Sean Donahoe: Exactly and that's exactly what we both done from different angles. I mean me it's amplifier, because I am very, very active in what I do.
Phil Newton: You've got a lot of things going on.
Sean Donahoe: I've got my fingers in many, many pies. But that's my lifestyle choice because that's they way I am. Also it keeps me entertained and to end every single day. But again, it's by design. But it's also consistent. Everything I do has to be consistent, has to be efficient, because again, time is our most valuable resource. Money is just a byproduct of all of that activity. At the end of the day, we gotta have consistency in everything you do. Now-
Phil Newton: I suppose were talking about mindset now.
Sean Donahoe: Yeah.
Phil Newton: It's kinda, again just to go down another little rabbit hole, were off the beaten track of things that we agreed to talk about. But it is, it's like mindsets. I mean, I've always thought, this where we both agree, but a mindset, is probably the last hurdle, probably the only hurdles to actually overcome is your mindset. And we touched on it a little bit with the-
Sean Donahoe: Being the manager.
Phil Newton: Yes. You got to operate your business efficiently, and there's a little bit of mindset involved. But it ... I think to try and not shake the beads too loud for the people at the back. It is the mindset, the psychology of the trade, it's the only thing to over come. Because the way we run our business, and certainly the way I run mine, the trade with small position size, allows me to put the trade on. Because if I trade with too big a position size, and I can't put the trade on because I'm fearful, I'm nervous.
And that's psychology. It's ... how do we over come the challenge of being, struggling to put the trade on. To just keep talking about it. Again, reducing position size has an impact on my psychology, my performance, my ability to put the trade on. And that's and inner demon. It's not practically sensible, because I could use a percentage my position size on every position size like the text books say. But I find that uncomfortable.
It's like a little tickle at the back of my mind. I just ,,, it doesn't sit well with me. So trade small, trade frequently. All these things that we do, help apply my strategy and that application of it, is only to do with psychology. To put the trade on. We're skirting around a little bit of a flowery subject there, Sean. But there's a method in the madness, and hopefully that's coming across.
Sean Donahoe: No, absolutely. It is a vital aspect. I see a lot of people dismiss the psychology of trading. But you know what, here's the thing. We are human beings. We are not machines. I try, and one thing we talk about lot is, trying to eliminate as much of the speculative or discretionaly aspects of trading as possible, by making it very mechanical, to remove the emotion. Because one thing I'm very much ... I advocate for is the divestment of influence of your money.
The divestment of concern, and stress and emotion from your money. Because that is one of the big hurdles from a psychological aspect, is the fear of loss. Which again is an innate human cave man aspect of human behavior. It is. I mean, despite how advanced we are as a species, and in civilization, at the core of it, we are still animals. We still have the lizard brain.
Phil Newton: People do things based on emotions and then try to justify with facts and figures, later on.
Sean Donahoe: Yes, absolutely.
Phil Newton: There is a whole industry surrounding that. And it's the only reason why have commerce and business the way most people are associated with. Because people buy with emotion. That's it.
Sean Donahoe: That's exactly it.
Phil Newton: I don't need a 10,000 inch plasma TV. But you know what, I can just see it there on my wall. (laughs)
Sean Donahoe: Ha, ha, So you know what I purchased this week, dam. Okay, so-
Phil Newton: But there's no practical reason why you want a 80 inch plasma TV or whatever the latest thing ding dong TV is.
Sean Donahoe: Yeah.
Phil Newton: There's no practical reason for it. So the only reason why you've done that is because of an emotional reaction to something. Somebody said or did or keep up with the Jones's again. That's another cliché phrase. And these are all cliché for a reason.
Sean Donahoe: Because they exist.
Phil Newton: Exactly. Yeah. But it's an illustration of the mind and the influence that your surrounding in your environment has on you. So the things that we do, the strategy that we have, the way that we live, experiences that we have, there all set up I such a way, to allow me to put the trade on. And that's the psychological barriers. And that's the only thing I'm trying to challenge myself. To be able to put the next trade on as consistently and methodically as I post the last trade. And the trade before that, and the trade before that.
Sean Donahoe: And that's why we developed a lot of the strategies that we talk about a lot. It's what we teach to our students. It eliminates a lot of that need for concern about the mindset, because it's methodical. It removes a lot of the speculation. There is a discretionary element to it, obviously because we are not 100% mechanical. But we remove as much of the emotion as possible. Basically, if you imagine it, it's almost like a three step check box. Does it meet this criteria, does it do this, does it do that. We ask these yes, no binary questions. If it checks all the boxes, then put the trade on.
Phil Newton: Do the trade.
Sean Donahoe: If not, move on. Find another one that does check all the boxes. And it's as simple as that. And if you're removing that kind of discretionary element, and you not double questioning, well it kinda, sorta, maybe. It's either yes or no. That's it.
Phil Newton: Exactly. And that's what creates the emotional uncertainty and reaction and the sleepless nights, by having that, well could. And you listen to the, and again you know me Sean, I'm very fussy with the wording, when I'm talking about a certain things. Because I want to be very specific. This trade needs this criteria. Yes, great.
Or what reason are you not putting a trade on then. But if you start using the wishy washy, well maybe, it kinda looks like it's doing this, and maybe I can put the trade on. Or it's stating to move, maybe I'm going to miss the boat, and click, click, click. But it didn't meet any of your criteria. Your reacting emotionally to the markets. Where as we have logical process to allow us to put the trade on, to try and avoid those knew jerk reactions. And while we're in the trade to try and minimize the emotional response. So that we don't do stupid things.
Because the reality is, if you follow a system, any system, with a positive expectancy, you will make money. And the only reason why people don't and this is so difficult, is because their not following a proven system. And they're listening to their emotional reactions and responses. Whether you want to believe in those things or not, it's irrelevance. You are having those reactions and responses and not doing the things you're supposed to do, because of psychology. It's all in your, sad to say, but it is all in your mind.
Sean Donahoe: And I just wrote down another one that I thought would be very poignant here. It's just a drum we have banged on before, but I didn't have it in my notes. It's we trade on behavior, not opinions. Now this is something that's very, very important because-
Phil Newton: That's not a drum Sean. That's hop on the soap box side. (laughs)
Sean Donahoe:
Phil Newton: Brings your drums, Sean. You didn't say bring your soap box. Bring the podium for this one.
Sean Donahoe: Absolutely.
Phil Newton: (laughs)
Sean Donahoe: Here's the thing. We, yeah, just looking at the charts, we are technical traders, but we look at the numbers, we look at what price is actually doing. We look at what the stock is actually doing. And Phil skimmed around it there for a second. But I wanted to kinda put the spotlight on it. Lots of people have opinions. You might be like, or well I heard this or pundit on the television said this was a good buy. And then you go jump in-
Phil Newton: You send a tweet out. And the stock goes crazy.
Sean Donahoe: Absolutely. And so something happens, you jump on it and you basically jump right in front of a train. And you wonder what happened? They said it was gonna go up. Well did you do you analysis? Did you do, did it look like that to you. Did it trigger all, or did it check all the boxes. No it checked someone else's boxes maybe, but there not you.
Phil Newton: Sean.
Sean Donahoe: Their trading interests are very from yours. Their methodology-
Phil Newton: That's it,
Sean Donahoe: their strategies are all based around their why's, their reasons, and they might even have conflicts of interest. And it's not really something they would trade, they're just saying it on television because it makes them sound good.
Phil Newton: It makes good entertainment. Yeah. 'Cause that's the thing, I mean, on the talking heads side of it, is they're there to sell advertising. And talking about whatever hot button, hot topic, whatever is worth commentary. They're not, probably not trading themselves. And to be fair most of the talking heads can't trade because of a supposed conflict of interest.
Sean Donahoe: Yeah. And that's to my mind in-
Phil Newton: They're not putting the money where their moth is. (laughs)
Sean Donahoe: Exactly. That's exactly the phrase I was gonna use. But at the end of the day, we're looking at behavior. We're looking at what is in front of us, what is going on and why. So yeah, that is kinda soap box territory. I'll step off for moment. But I think we have to come down to one very, very fine detail thing. Do you have an actual strategy? Is it a strategy you can rely on?
Phil Newton: That's the elephant in the room, isn't it really. We talked, yeah.
Sean Donahoe: It really is. And is it a strategy you can document, systemize and bullet point? Is it one that you can actually define the parameters? Is it a rules set? Is there something that you can actually say, okay, do this, than this, then that? If this, then that. This is what a lot of people do not have. They say, oh, well I look at this and if it kinda does this, then I'll do this.
Phil Newton: Kinda, maybe, looks like it's going up. Maybe I'll do something resembles this.
Sean Donahoe: (laughs)
Phil Newton: Yeah.
Sean Donahoe: It's the wishy washy. Because those blood line are, it's like having a safety net, but it's got a big hole in it. And you gonna go on the trapeze and there's a big hole in your safety net. Your hoping that maybe, kinda, maybe you gonna hit the right part of that safety net-
Phil Newton: It's like watching a Dragon's Den. And you get that guy. You know the Dragon's Den. What's the-
Sean Donahoe: Oh, Shark Tank. The US version.
Phil Newton: US version Shark Tank. It's like watching Shark Tank or Dragon's Den or whatever your local equivalent is. You've got a panel of business investors and you get the guy that comes on, who's an absolute Muppet. And he's got a blue widgets and he wants to sell it to everyone. Because why wouldn't everyone buy one of his blue widgets. And then it cuts to the dragon's cuts to the-
Sean Donahoe: Sharks.
Phil Newton: Investors, the sharks, yeah. And then they're just looking at each other and they're looking at him and looking around. What planets this guy on? You've got this widget, do you have a pulse? Yes, right then you definitely need to buy my. There's just no reason for anyone to do anything. You kinda hoping on a prayer, that's someone gonna do something. And inevitably the people don't invest in his blue widget idea. Because, hey, he's not got a business plan. He's not got an idea, he's not got a proven methodical system to produce these products and he's not got a target audience. So he's gonna get laughed out of the Shark Tank.
Sean Donahoe: And did.
Phil Newton: And you know the one's runabout, don't you Sean.
Sean Donahoe: Yeah.
Phil Newton: It's like they're the ones that don't get the investments. Because they've not got a process, they've not got a system, they've not got definition on what they're doing. And that's what were trying to talk about here. When you've got absolute clarity on what you're doing, when you're doing it and the why you're doing it. Putting the trade on is real easy.
Sean Donahoe: Mm-hmm. And again, if you wanna to learn about this, we actually got some long demand training. I'd thought I put a little shameless plug in there. Because we want to show you some of the strategies that we use that we actually have training on it. Won't cost you a dime. Just go to TradeCanyon.com.
Phil Newton: And maybe you're looking for your strategy. Yeah.
Sean Donahoe: So go to TradeCanyon.com/on demand, you can have look at what we do. But at the end of the day, you've got to have a strategy that you can systemize and you can repeat consistently. Again that word. And methodically, so every time you approach the markets, you can see those consistent returns on your investment.
Phil Newton: Talking of consistency, it would be a shame not to bang on bit coin. (laughs) Since it's likely to come up. Talking about consistency, if we think about all that the messaging that we saw around latest ground floor opportunity. Ergo, some type of Crypto thing. Surprisingly Sean, all that stops because, hey, there's no consistency with what they were selling. And how they were going about doing it. And suddenly all these ground floor opportunities have disappeared because bit coin taken a swan dive off a tall building.
Sean Donahoe: Absolutely.
Phil Newton: What a surprise Sean, what a surprise. You heard it here first, you heard it here every week.
Sean Donahoe: (laughs)
Phil Newton: Every year. (laughs) What a surprise. Me especially Sean, because you were on the other side of the fence for most of the discussions. I was the naysayer when it came to it. It's not my first bubble. Surprisingly it popped. And there's now no consistency with the latest ground floor Crypto opportunity, because it's gone. (laughs)
Sean Donahoe: Well, yeah.
Phil Newton: What a surprise. My point was, my point was Sean, is if you got something, don't buy into the hype and the hype about it, like we say on every show. Apply some consistency. And if you got something, that's great. Do it again tomorrow. And then we'll have a conversation. Then do it the day after. And we'll have a conversation.
The thing with the Crypto thing is that because it was it was in a bubble and because it was only going up. And you could buying the dip was a great strategy. And from a lot of people, it made a lot of money. I'm not going to deny that. But it was going to be short lived. You can't replicate that strategy. You can't apply some consistency. Because the next bubble, they happen a couple of times every decade.
Every ten years there's a bubble somewhere. Two or three bubbles, again the last couple I saw, the last decade there was an oil bubble, there was a housing bubble and there was something, what am I ... something else. I know I'm missing something. But the point is, there's two or three big bubbles every ten years. This decade we had Crypto, that was the biggest bubble. There was a few little minor ones, every now and again. But you've got to wait ten years for the next one, is kinda what I'm alluding to.
There's no consistency in the application of buying on the dip when there's a bubble. You've got to identify... you can't identify them for a start. So that's what were talking about with consistency. Jumping on the latest hot button trend, is not a strategy, is all I'm trying to get to here. If you got something and it works or you need help with it, give us a call. But I wanna be able to apply my methodology tomorrow, next week, next month, next year and ten years. Maybe we can have a similar conversation in twenty years time, about the consistent success that you're seeing.
Sean Donahoe: Absolutely.
Phil Newton: That's it, be consistent.
Sean Donahoe: Okay, I'm gonna put-
Phil Newton:
Sean Donahoe: And yeah, just for clarification, what Phil was saying, because I was on the other side. Yeah, I was invested in bit coin from 2014, right up until the bubble. But-
Phil Newton: You, you were kinda pro, you were pro and-
Sean Donahoe: Pro investing.
Phil Newton: Investing. On the Crypto.
Sean Donahoe: Not pro trading. Which a lot of people were going
Phil Newton: Relevance.
Sean Donahoe: But we were saying-
Phil Newton: Because it was relevance.
Sean Donahoe: oh my god, get out, get out, get out, for a while. Because we were saying this is a bubble, get out, get out. We would on the way up.
Phil Newton: We almost called it up in December.
Sean Donahoe: Yeah, we did that right up until mid December.
Phil Newton:
Sean Donahoe: When I said I made my Scrooge McDuck prediction.
Phil Newton: Scrooge McDuck, yeah. (laughs)
Sean Donahoe: Yeah, that was exactly what bloody happen. But I cashed right when I made that prediction from 2014, up to the end of 2017. Made a healthy profit, but that was investing and not trading. And we were just banging on that a lot with people who were saying, oh this is the big new thing-
Phil Newton: I would
Sean Donahoe: Get in now-
Phil Newton: You were
Sean Donahoe: mortgage your house and all this other bull shit that was going on. We were calling that out.
Phil Newton: Well, that leads onto ... I can just sparked another thing again to bang the drums. Sentiments.
Sean Donahoe:
Phil Newton: Just another kinda like little tip, how'd you know things like this are over.
Sean Donahoe:
Phil Newton: Not to go all Donald Trump, but I'll be quick this time. But sentiment, when people who are talking about something as if there an expert, or regularly telling you that this is the best thing since sliced bread, that's usually the time to do the opposite.
Sean Donahoe: (laughs)
Phil Newton: I couldn't ... But whether it's the guy in the street. I mean I couldn't go and sit in a coffee shop, which I do on a daily basis, without hearing, not one but multiple conversations about this bit coin opportunity. Let me tell you about my bit coin, and let me tell you about. And they were always talking about a guy in their office or guy here, or someone else that they know. That for me was just, that's sentiments. The general public is the last to know anything. And if there excited about it, that's the time to do the opposite.
And I experienced the same thing with the housing bubble. Just so I'm not bashing bit coin. The housing bubble, I had a guy, I'm gonna call him Dave. Dave was not the sharpest tool in the box. And he asked my opinion on my ... he was buying a house, and was it to live or an investment. If it was to live, any times a good time to buy a house to live in. But he wanted to do it as an investment. So now's not the time to buy a house if you're thinking of it as an investment.
We've have multiple year bold run, I gave him all the reasons. Surprisingly you could have the same conversation, insert your thing. We could have been talking about bit coin, we could have been talking about oil, this time we were talking about housing. Is it a good time to invest. No. He was the last person on the rung, just before the housing bubble burst and he was left carrying the bag, when the bubble burst. So when the little guy on the street, people are talking about things that they shouldn't talk about.
Again from the news point of view, when the Daily Enquirer is saying that the housing market is the best opportunity to go invest your money. When the regular rag tag newspapers, who, consider it fake news, if you like it, for lack of another description. They're talking about investments, as if they're experts. And they don't normally comment on such things. Why would you believe ... that's the time to do the opposite. And that's what I mean by sentiment, Sean. I'm not sure if my description kinda made sense there, 'cause, I did try to be quick. But it turned out that I wasn't and I ended up rambling. (laughs)
Sean Donahoe: Yeah, no that's all good, because it's exactly right.
Phil Newton: It's sentiments. That's the sentiment shift. And that's what we were talking about back in December, to say, hey, everywhere you turn, there's someone in the coffee shop talking about this now and then. I think it was some headlines we were talking about and said, you know what, now's the time.
Sean Donahoe: Absolutely.
Phil Newton: The people who should not be commenting on this were starting to say, hey maybe you should pay attention to bit coin. And that's the time to do the opposite. And six weeks later, it was good bye Vienna.
Sean Donahoe: Well indeed. When Time magazine's talking about it, when your Uber driver talking about it their recent Crypto investment and how wonderful it is, That's the times like-
Phil Newton: That's the time to do the opposite. Yeah.
Sean Donahoe: That's the freight train coming right there. But they
Phil Newton: Yes. Sentiment shift. That's how you identify. Just because it was relevant to what you were talking about. Another thing we can bang on the drum about. (laughs)
Sean Donahoe: Here's the other thing I think is very interesting in regards to this. And it co-relates a lot, is trading plant. This is big drum that we bang on a lot. But a lot of people are not guided by their own methodologies, they're guided by other people's sentiments. They're guided by what's being talked about on the television. They're guided by things ... that are not within a plan. Now we talk about this-
Phil Newton: I got to admit, I caught myself doing this the other day, Sean. I heard someone talking about some oil and drilling related stock. And guess what I did Sean? I caught myself typing the ticker and looking at the thing. This looks like a great trade. It's my usual buy the dip in an up trend opportunity. And I was thinking, fantastic. And I was about to put the trade on yesterday.
Sean Donahoe: Uh-huh.
Phil Newton: And then I caught myself doing the thing that you're talking about.
Sean Donahoe: (laughs)
Phil Newton: I was following someone else's advice. But I used it to raise my awareness.
Sean Donahoe: That's awareness is important.
Phil Newton: Yes. But then I almost bought into their viewpoints. And one of the things that we talk about, and we spoke about this last week at length, when we banged the drum about it then. Which was we want at least twelve months of data to be able to make a sensible decision of what the trend is. And I only had six to eight months of chart data. Because it was a relatively new issue on the exchange. So I didn't have enough data to say definitively. But in the last twelve months, the trend is up. Note the wording. I can only say in the last seven or eight months. I can only say in the last seven months, that the trend is up.
And that wasn't enough for the things that I need.
Sean Donahoe: Yes, see that was important.
Phil Newton: I had to back peddle. Yes, I had to back peddle. And as much as I actually really liked the trade, as much as I didn't, it pained me to leave it. It didn't meet the criteria, because, drum roll, trading plan.
Sean Donahoe: Yeah, now explain what a trading plan is relation to business? Because I know you actually pretty much like to bang this drum. I let you do this one.
Phil Newton: (laughs) All right. I like to just bang every drum, Sean. (laughs) And, trading plan, a trading plan takes you from one place, one state to a future state, and a future better state. The bitten between is the plan, how you gonna get there. So that's it. So a trading plan should lay out how you get to your destination. If you imagine a train ride, train journey, it's gonna take you from your current destination to a future destination. And the plan is the route that you take to get there.
So the financial trading equivalent of that is a very detailed, almost like a checklist, is how we described it. We spoke earlier about it being like a conveyor belt. At point "A", adds part "A". Maybe an IKEA. IKEA is probably a bad description because they don't really give good instructions. But you get what I'm saying. Point "A" slots into point "B", point "B" slots into point "C". And in your building this strategy, and it goes along the conveyor belt, and you add the pieces of the set. And you end up with, hey, there's no reason not to put the trade on now.
So that's what a plan is. It's just a detailed list of things to check. Another way to describe it to you it to use an analogy, might be, if you car needs to go in for service, the mechanic goes through 140 point check to make sure that your car is functional and legal to drive on the road. They're gonna check the depth of the tread on the tires. They're gonna check the oil, the water, the spark plugs. All the things that need to be checked, to make sure that it is road worthy. And then, the next, I don't know what it's like in the States, but over here, for the next twelve months, you've got a road worthy vehicle. It's all legal and above board.
So we're doing the financial equivalent of making sure that our car is road worthy. It meets all the criteria, and we can go and put the trade on. And that's all a trading plan is. Some people like to get fancy with it and say, hey it's an algorithm. So I have an algorithm. It's not a computer algorithm, a computer is not running my trades. But I have a series of Yes, No questions, that I ask, to get me through to that, that conveyor belt, that production line for the trade. Has this happened? Has this condition been met? No.
Well, let's stop there. I can't proceed to the next step, if point "A" doesn't go into point "B" or part "B". If we were building this trade. And that's all a trading plan is. It's what criteria do you need, do you consider a successful events to have happened, to then eventually put the trade on.
Sean Donahoe: It is.
Phil Newton: Does that make sense?
Sean Donahoe: It's
Phil Newton: We're saying the same thing.
Sean Donahoe: Yeah.
Phil Newton: Exactly.
Sean Donahoe: It's truly a business plan. At the end of the day, it's not just for your strategy. It's for your way of trading. Okay, let me check my portfolio. Are there any positions that need management? Are there any of this? Okay. What are my trades for the day? Are they meeting these criteria? Am I gonna put this on? Okay, did they meet, bum, bum, bum, bum? Check, okay.
Phil Newton: Yeah, preflight check. Yeah.
Sean Donahoe: Basically it is.
Phil Newton: In some ways it's
Sean Donahoe: Yeah, exactly, there's lots of ways to look at it. It is something that should be written down, clearly defined, and again, it aids in that consistency.
Phil Newton: You can be as detailed, as loose on the detail as you want. As long as it's clear, it could be as simple as when the short period average moves over a long period average. If it crosses up, that would be what I consider a bicycle. And I will buy it at market with a 50 point stop or whatever it is. You get what I'm saying. You're laying the foundation of when this condition happens this is the action I'm gonna take.
It could be just really simple. My first strategy was move an average cross. When the short moving average crosses over a long moving average, and price is about to pull back, I'm getting to enter on the pull back. I'm going to add very specific criteria, for what I consider a pull back. I had a description of that. Then from that description, the business plan, I can go through my daily standard operating procedure. Which is checklist. And that's the conveyor belt. Which is based off the over arching plan of how I'm gonna run my business.
Sean Donahoe: Absolutely. It really aids in that consistency-
Phil Newton: And it's that simple.
Sean Donahoe: It is. It's very simple.
Phil Newton: It's that simple.
Sean Donahoe: Now, co-related to that is tracking our progress. Now like I said at the beginning, I am very much OCD about tracking metrics, tracking everything else. Because I do it in my businesses. I am a nerd. I am a numbers guy. But one thing you need to do in your business is keep a trading log.
big bass drum on that one. Bang. Because you need to be able to record, not only the trades, what you're doing, why you placed the trade. But also, this is kinda back to the bead rattling and feather waving. Your state of mind, when you are placing on that trade. What was going on? Phil calls it the "Dear Diary" moment. Mister Adrian Mueller, 13 3/4's.
Phil Newton: (laughs) But dear diary, I was feeling sound when I placed this trade. Was I gonna wave another piece of money good bye. No it was, not quite dear diary, yeah, it's just what I identify, just kinda, add on there and clarify. And was the ... if you're frame of minds is what you need to control. Because I was a very emotional person when I was learning how to trade. I still am a very emotional person. But I recognized that is something I needed to work on.
So when I start doing, is keeping a, not just a diary to trade, but also a general of my state of mind, before, during and after the trade. So I can recognize common trades. So I can identify those emotional reactions and responses that were either fateful, biased or undesirable. What I noticed, in a bizarre plot twist Sean, I noticed that the ones that I was most confident with, the ones I was most satisfied with, the ones that I was most "this is gonna be a good trade", really confident with this trade, dear diary. And they were the ones that were the duffers. They were the ones never worked out because I inevitably got excited and missed.
Sean Donahoe: Yeah.
Phil Newton: And if I wasn't tracking that and keeping a trading log, then I would have never had noticed. Again to use a business example, this would be like keeping records, keeping your receipts, to make sure you don't overpay your tax. Because what I was doing by putting unnecessary trades on that I shouldn't been placing, that's like paying the tax man too much money. And I'm not gonna get a refund in this case. At least, in the business you can possibly get your tax back. But I'm not getting that money back ever again. It's a write-off.
So I'm trying to avoid those situations by keeping trading logs.
Sean Donahoe: You know that's the first time I've ever heard the tax being used as positive comparison.
Phil Newton: Well mark this day (laughs)
Sean Donahoe: As I said, I'm stunned, I'm stunned.
Phil Newton: Well that's what were trying to do. But it's the truth, it is a good thing. We've got to pay taxes, it is the certain expenses that we have to pay. But I don't want to write this off. But that's what you're doing if you don't keep a log and you put trades on there necessarily. You might as well just burn the house to the ground. You've got a liability. You've got a write-off. You can't ... You'll never get that back.
But you can avoid it in the future, with some creative bookkeeping. (laughs)
Sean Donahoe: We're not advocating cooking the books. I just want to clarify right there, for disclaimer. (laughs) But there you go. Any way, so one of the other drums we like to bang, and this is kinda, one that Phil touched on briefly, but we're gonna shine another spotlight on it. Is look left.
Phil was just talking about the one trade that he was tempted, but only has several months of history. But we like to look left for at least twelve months, or 200 plus data points, to see what has happened previously. Where things are trending. You want to be able to look at a chart very quickly and know landscape of where you are and where you've been. And what exactly is going on with that stock. To many people focus on the right side of a chart. They want to see what's happening right at this minute, and they make their decisions based on that.
Phil Newton: Look at the live price. And you catch so many people doing it. Again, I would argue, if I could turn today the live bar off and the live price off my charts, I would. So I'm really looking at completed pieces of information.
Sean Donahoe: That's a very good point.
Phil Newton: That would be a great day. I have tried doing that. I can't do it with the software that I use. I don't think anyone actually does it. But if you could turn live feed off, and just look at, okay, well is this trade . Because I'm looking at the chart right now, and I'm looking at today's price activity. And the live price. And I'm watching it tick up and down. I don't need that information. It doesn't matter what timeframe you trade, you do not need a live bar.
Arguably to place the trade, all you need to know is has the setup developed. And it's the last piece of information. If you're on a sixty minute chart, you can't do anything with the live bar, until that's completed. Come back in sixty minutes. You can't make a trading choice off the number dancing up and down. So why should we look at it. That's why I am telling you, don't look at the right side, look left. Look all the way left. And appraise the situation.
It'll be like taking in a view. You not gonna sit in the car. If you've driven into the mountains, driven into the country side. You're not going to sit in the car. Although the kids these days might. You're not gonna sit in the car and dick around on Facebook, are you. You gonna step out at your destination, after arriving at your destination. And you gonna go and take in the view. You gonna go for a little walk around the trail. You gonna enjoy the panoramic, a little bit of nature. You gonna enjoy the scenary, is all I'm trying to say.
That's what we're trying to do here. We want to enjoy the view, we want to see what's going on, you want to be able to recognize very easily, you know what, the trend is up. Notice the wording again. The trend is up. I need enough information on the charts to be able to make a very clear put statement. Notice the wording. I'm banging that drum, Sean, I'm allowed to get away with it.
Sean Donahoe: You are.
Phil Newton: If this was a show that I could get away banging every down drum that I came across, I'm gonna bang those bongo's Sean. (laughs)
Sean Donahoe: (laughs)
Phil Newton: So it's going up so I need enough data, twelve months or 200 candles or bars if you're looking at intra days. Hey, what is going on? What's the scenery? What does the view look like? It is going up. Therefore, it's in an up trend. Great. Maybe, just maybe, Sean, it'd be a good idea to buy the dip in an up trend.
Sean Donahoe: Maybe indeed.
Phil Newton: Because I know now what. Maybe, I can't say for certain, maybe's the best. I'm fortunate every time ever vague Sean, because I can't say for certain what will happen next. But maybe based on history, that 65% of the time, it's usually a good idea to buy the dip in an up trend. (laughs)
Sean Donahoe: Absolutely.
Phil Newton: And sell the rally in the down trend. And all the rest.
Sean Donahoe: Absolutely.
Phil Newton: But if you can't see the scenery, if the fog has descended, in Chen Valley, maybe you should go look at the chance. Because if you can't figure out what is going on, then don't look at the chance, don't worry about it. There's fog on this chance, don't worry about it. Go look at something else.
Sean Donahoe: I love it. I love it. That's absolutely bloody brilliant. So guys I mean-
Phil Newton: It's not on the time Sean, it's fog on the charts. (laughs) I'll be in the charts next week. (laughs)
Sean Donahoe: Dear me, it sounds like topping a pop survey here. But there's a lot of different things we have covered. And we banged drums on over the years. And I really want to make sure, that we cover a lot of the different ground here with this. These are things that we have talked about a lot over the last few months that we've been doing this pod cast.
But there's one last one I want to cover here, and that is levels of interest. And removing the bias, that a lot of trader trading, a lot of the text books have given. Now I'm gonna give this one back to Phil while he's on his soap box here. Because, in full credit and fairness, I got from Phil. I really like this perception. Points of interest, levels of interest and everything else. Explain this one a little bit.
Phil Newton: Yeah, it's more to do with in neutral in the wording. We have kinda touched on this. I want to be able to make a distinct and definite statement when I'm talking about things. But also part of it is to stay neutral in my view points. So what I'm trying to accomplish is to have an unbiased appraisal. So part of it is to not worry about how things are described in the traditional text book.
So when were talking about levels of interest, traditionally that might be referred to as support or resistance. Now because of the way the author has to explain the concept of the idea, because to some people it's a brand new idea, or a brand new concept. If you reading a book, the idea of support, the idea of resistance, might be new. And it was new to you at some point in the past. And it's gonna be explained a certain way.
But that doesn't make it practical to use that information in the real world. So now that you're aware of what support or resistance is, and support, for example, is a point where prices come down to, and resistance is where prices move up to a certain point. And in both instances, that stopped that location. It's a temporary barrier point. And that's referred to as support or resistance.
Now the text books describe that you should be a buyer at support. Again to explain the idea, to explain concept, they're just giving you one idea and one concept. But the reality is very far from the truth. The reality is that support doesn't always hold. And neither does resistance. So if you just simply buy support, then it's not always a good idea. Because support doesn't always hold the way that the text books describe.
Because of that idea, because of that concept and the way it's written down, I'm now at support, I'm looking at the charts and I've recognized to what I believe to be support. And prices move down to supports, because the text book told me to buy supports, I'm buying supports. But I'm never gonna consider doing anything else. So if support breaks, I'm not going to consider doing something different and other than buying supports.
And I continue to be a buyer, even though prices broken that level of support and continues to go down and down and down. And before you know it, you're trying to catch a falling knife, as the phrase goes. You keep buying lower and lower and get stopped out maybe. You've not changed you're viewpoints. You've got a biased opinion on what's happening. So what I'm trying to accomplish, by trying to be neutral in the way that I word things, is a level of interest or a logical stopping point.
It helps me remove an unnecessary bias, so when I look at the charts, and I can see that price is maybe in a down trend and at supports. It allows me to rephrase it and call it a level of interest. So okay, it's at an interesting points. What's happening? I can now then take the next logical steps. Okay it's at a point on the charts that I would consider interesting, a level of interest, a logical stopping point, perhaps. I can now , has that level broken or is it reacting off it.
Can I sell the break of support in a down trend or can I, buy resistance in that same down trend. What's happening? I can start to make those types of evaluations and appraise the situation. But if I just see that price is at supports, I'm only gonna consider being buyer. I would never consider selling the break of supports in a down trend, because it's at support and I should be a buyer, according to the text book.
Sean Donahoe: Okay, that's good. I like that and that's a very clear definition of this for everyone out there. Because, again, people talk about support and resistance all the time, and how it's bouncing off this, it's doing this. Again it's the pre-defined bias. And that's the real big thing here, removing the bias, being open to, okay, something could happen right at this point. The possibilities increased.
Phil Newton: Well the possibilities. I want to be open to what's next. Yeah.
Sean Donahoe: Yeah, so what is going to happen and what will happen-
Phil Newton: You can't remove, were human.
Sean Donahoe:
Phil Newton: We can't remove bias 100%. Just because it's human nature. But if I can eliminate, the point where it's not significant to make that much difference, in my decision making process. That's what I'm trying to do.
Sean Donahoe: Yeah. Absolutely. I love it. So there you go ladies and gentleman. A lot of drums being banged right there. A lot of things that we have kinda taken out the previous shows and kinda created a little more focus. Kinda turned the spotlight on them a little bit. But if you start applying some of these things in your trading, you will see a lot of changes and that's all good.
So with that being said, let's rock on. (music)
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 coached by the best and learning to trade just got way easier. Trade Canyon, smarter traders live here.
Sean Donahoe: Okay, so the Rebel Trader tip of the week. What are your drums? Are you adaptable to change the rhythm and bang on those bongos loud and hard? Because here's the thing, we've given you a lot of framework in today's show. We talked about a lot of different aspects of what we do in trading. And it-
Phil Newton: I would argue that we've given you the keys to the kingdom, on today's show.
Sean Donahoe: We really have.
Phil Newton: Our job here is done.
Sean Donahoe: Absolutely. (laughs) The thing is, how many of these are you going to implement? Are you open to implementing these in your trading? In your overall business of trading. Are you going to change? Because we can give you all the strategies, we can give you all the insights, we can give you the keys to the kingdom, as Phil just said. But if you don't apply them, it's a complete waste of time. And you're just gonna go back to your old habits.
So be flexible. Be adaptable. And start looking and applying this. And bang on those dam bongos as hard and as loud as you can.
Phil Newton: Maybe want to put a different perspective on this. Consider that. If what you're doing already isn't working, maybe you should consider the fact that, maybe what someone else is doing, maybe what we're saying, might-
Sean Donahoe: Absolutely,
Phil Newton: will work for you. Because we already know that finding what works for you is a big part of this. But if what you're doing is already, if what you're already doing isn't working, maybe you should just look over the fence, and take a look at what were suggesting. Because I've given a lot of quality, actionable information, that you can take and apply quite quickly, in most cases.
Sean Donahoe: Absolutely. So there you go. Rebel Trader tip of the week, short and sweet. Time to rock on. (music)
Automated: If you've got questions, they've got answers. Sean and Phil dive into the virtual mail bag for this week's Quick Fire Round.
Sean Donahoe: Okay. So diving into the mailbag here a little bit. I want to fire this first one to you, because this one is one of the most poignant questions we've had. And it is I think a lot of people go through, because, a lot of, we talk about the business of trading. Very much, a lot of traders solopreneurs here. They're doing it by themselves. And I see this in other businesses, and other areas where I help people. Especially with entrepreneurs, oddly enough.
But how do I get my significant other, my partner, my wife, my husband to support my trading? Okay. I lost some money in recent weeks, but I know I can make this work. Help.
So how, and this again I think a psychological thing, how do you get the person who's the non-trader in your life, to support your trading and what your doing? Especially when they have maybe the psychological. I guess I'm reading kinda between the lines of this one. The fear of that loss. They don't have the investment world trading mindset.
Automated: said to support the decision to trade and not to support your habits of trading. (laughs)
Sean Donahoe: That might be a better way to phrase, re-phrase it. Yes. Gamblers Anonymous.
Automated: I've heard this a few times. I would point out that, I'm thinking of a recent conversation I had with a guy called Greg . And he asked me, he actually asked me this very question Sean. What I said to him, I said, do you consider this a business or a hobby. The immediate response, there was no thought, it's a business.
I've already spoken to him about the business of trading, and the way that he spoken about it, made me assured, that he was thinking about it in the right way. He just, I hadn't quite gotten it to work for him yet. So I understood that he thought about it in the right terms. I just wanted him to understand, is this a hobby or a business? Because if it's a hobby, you can stay in your man cave, do whatever you want.
It's like losing your balls playing golf, as it were. But if you're serious about this, and you're treating I like a business, then you need to sit down your significant other and say, hey look, I'm trying to get this thing to work. And I just want you to understand what I'm doing here. I'm doing it for us, I'm doing it for our family, I'm doing it for our future. It goes back to the why, that we were talking about earlier, Sean, surprisingly. But just bringing the person into the loop.
Just say, hey look, I'd not asking for your permission, but I'd like your support. I'm making this decision, I wanted share this. But I want you to understand I'm approaching it as a business, and I'm learning about it. And I'd just like some flexibility, while I'm figuring things out. And when I'm ready, I'll keep you informed. When I'm ready, we're gonna invest some money in this. If you want to join me with it, I know couples that do it together. So if there is some involvement there, that would be great. But just sit your partner down.
Again, surprise me Sean. Just like you would sit someone down, I'm thinking of starting my own business. You gonna have exactly the same conversation as you would about trading. Because you're starting a business.
Sean Donahoe: Absolutely. I couldn't agree more. And you know what that would be my exact answer. If you were trying to start a business, you'd have that same conversation. It would be serious, sit down and everything else. Even if you're losing, like he was talking, I guess his qualifier what-
Automated: Yeah, I'm not asking for permission. But it'd be great if I could have you on board. I'm gonna do this. I don't want to hide it from you. I don't want to be secretive about it. It's gonna be a tough road. But I just want you to know what I'm doing. I'm gonna be spending some time away from my usual family time. I'm gonna try to keep that to an absolute minimum, but I want you to know, I'm starting a business. And this is what it's about.
Sean Donahoe: Yeah. And I think the fact they lost some money, might have prompted this questioning. A little bit of, ah, and everything else. But again, you've got to take it into those real business terms. And I think if you do that, you're straight forward, you're are direct, you're open the lines of communication. It's when people don't know what's going on, that's gonna cause more of a problem.
Automated: Yeah, if you start to hide it, you're creating other problems. I think you need more support than we can offer in a very short space of time.
Sean Donahoe: You're gonna do a little more than lose your balls in rough playing golf. Put it that way. Right.
Automated: Yes you might literally lose them, metaphorically speaking.
Sean Donahoe: Yeah, they you go. Any way. So what other questions are in the mailbag .
Phil Newton: And why do investors have a hard time trading? How can you switch that mindset?
Sean Donahoe: Okay, I'm taking this as, it's gonna be timeframe. The first thing that comes down to my mind is investors have a very passive approach. They tend to more of the long term mindset. Or they just want to buy and hold.
Phil Newton: You've got plenty thinking times, as I like to say, with investors. And just like Sean's, the same word as you Sean. You've got a lot of time to kinda think, what should I do here? You don't have to make an immediate knee jerk reaction, if you were perhaps day trading. I think it's the other extreme.
Sean Donahoe: with changes. Yeah.
Phil Newton: You've probably got plenty of weeks, or even a couple of months to think is this the right thing.
Sean Donahoe: Yeah.
Phil Newton: investments.
Sean Donahoe: From an investor stand point. Because I actually came from the investors side to trading, because I wanted to be more active. And I wanted less risk, in terms of the unpredictable variables. The known unknowns, unknown knowns, and all the rest of it. That can affect your long term investments. I wanted to be, a lot more. I could see there was a lot more I could do as a trader. So kinda came to this from a sideways angle, into the trading side. Because I wanted to be, I wanted my money to work smarter and faster and more efficient. And I found on numbers and on paper, that it was going to be more profitable in the long run, by being more active with a strategic and consistent approach to trading.
But I think for lot of people, it's the mindset shift that they have to be active. That they have to be a manager, not taking a silent partner, in a business.
Phil Newton: You're gonna be doing, clicking buttons and yeah.
Sean Donahoe: Yeah, I see investing as a silent partner in a business. Rather than managing the business. And I think that's a big shift in mindset. And you have to be able to step up to the plate and do that. To be active, to dedicate the time and resources to become more of more of the managerial rather, than a passive silent partner in a business.
Which again, at the end of the day, an investor, is okay I made enough money but it's now not making me that much money. That money could be better elsewhere. I'll take my money out of that business and put it passively into business, and let it grow there. That is the same kinda thing but it's on a much quicker time scale. And I thinks it's the, it's just the commitment, to be honest. There is a commitment between being an investor at what are you committing money. But it's committing the time and the effort to manage more actively, rather than the passive side of investing.
And what would you say, in regards to that?
Phil Newton: There's a couple of ways I can answer this. I think just to kinda to link to things we already spoken of. I think this is more of a mindset issue. I'd like to point out, the way that the business of trading is operated, is very different, then the majority of other traditional businesses. And form a society point of view, we're told if we work hard, we'll get paid.
So were always, as you touched on, if your doing something, you'll get paid, essentially another way of saying it. The reality is most successful people in the most successful businesses, it's not usually necessary to be doing a lot of busy work of example. You actually get paid really well. This is especially true in the business of trading. We get paid to wait, whether were day trading, short term swing trading, or long term investing, if you like.
It doesn't matter where you are on the spectrum. You get paid to wait. An investor has the longest wait for rewards. Because, hey it's investments. I would consider anything beyond two years waiting, would be investments. So that's the mind shift. That's the mentality of that slightly longer approach is, you're gonna get paid out in the future. And especially If you're, maybe your starting trade might be, I'm looking to get dividend payments and built up that type of portfolio.
Again a very different, very exceptionally long term, life time long term investments. Because your looking to get paid over multiple decades, from a dividend payment. Again on this it's a very different mindset because by applying, by doing the active trading, it's about the wait, not the doing.
Sean Donahoe: Yeah, that's-
Phil Newton: That's what I'm trying to get to. Whether it's society has told us if do something, we'll get paid. Where as trading, if we don't do something we'll get paid. The actual physical act of trading, I mean I put a trade on while we've been here. What we've going at this for an hour and half now?
Sean Donahoe: Yeah.
Phil Newton: I put a trade on for the opening bell. And I'm getting paid to wait. I'm not getting paid to put the trade on. I did, it took me 30 seconds.
Sean Donahoe: That's funny, because I did the same thing. I had a trade that I was putting on with Facebook, for example. And just doing that, we get paid to wait. We also get paid to podcast here. It's just well written.
We're seeing things in the markets, as we go in, bum, bum.
Phil Newton: I'm gonna put it out there, because I like to talk about things in advance. Whether it works out or it doesn't work, only fate will say. I call everything out before the markets are open usually. Our subscribers knew about this, before the markets were open. And usually 5, 6 hours prior to the market. Anyway, PPL, at papa papa lena, at PPL Corp. And surprisingly Sean, I saw the break of support in a down trend. (laughs)
Sean Donahoe: I'm just looking at that. Oh, look at that. That's a nice little tear away.
Phil Newton: That might explain why I gave the example that I did. But yeah, it sell the break of support, just tying it back to something we talked about earlier. You never gonna consider the break of supports, if you got buy support in your mind. Going back to that wording, that psychology, that were talking of. Where I'm interest in level and then we're in a down trend and maybe if it's breaks. You're doing the air fingers thing, supports, all this logical stopping point, this level of interest. You'd never consider that, because you believe in what the text books tell you.
And it's not their fault. Sorry, kinda circling back to what we've already banged the drum on. Hey, that's what this show is about today. (laughs)
Sean Donahoe: Indeed. Well there's somebody, because I was short, I was, I'll call out one as well. I was short in Facebook, based on yesterday's numbers and what I was seeing, kinda touching all time highs. I was talking about this, oddly enough, in fact we're gonna be talking about them in the Bull Shit of the Week, in a moment. Which is what prompted me to place the trade. When I wrote these notes and everything else, and looking at it, and sure enough, money's in the pocket today, so far. But again that was one that I was looking at last night that I was gonna put on this morning.
Phil Newton: I know you like those counter trends trades. I've said many times, this is what separates us. Sean's is to take the counter trend. What from my perspective what would be a counter trend trade. There's nothing wrong with it. If it meets your criteria, I've done it many times in the past. I just prefer not at the moment. And the only thing that separates that decision is personal preference.
Sean Donahoe: Yep, and that's
Phil Newton:
Sean Donahoe: I know this is going to be short term-
Phil Newton: And there's nothing wrong with it.
Sean Donahoe: This is a very, very short term play. And it's already profitable, so I might take some profits in a little bit, we'll see how it goes for the rest of the day, or how close to the end of the day.
Phil Newton: a little bit of a gap, just a special boost, any way. But, yeah, I'm trying to, like to get out, let's see, because we are just after the opening bell trades. There just on. The point is that, what we're trying to highlight more than anything, because you were talking about a few trades, but you mentioned them. We get paid to wait. The actual act of trading, the little bit of research part.
If I got a production line, that identifies an opportunity, that takes, to be fair, they way I do it, it takes 10 minutes. To kinda identify it, put the details in the spreadsheets, then for me, I'm waiting for the markets to open. Usually have the order prepared. The actual physical act of trading doesn't take that long. To actually physically do it.
So the perception of what you do, needs to adjust be successful. I think that's what we're talking about here. It's that perception of what actually happens. It's getting the traditional world of business and making money from more traditional businesses. It's you've got to physically go and do something. If you do that well enough people will pay you for it, on a consistent basis. Doing nothing is how I get paid.
Sean Donahoe: That's exactly it at the end of the day.
Phil Newton: And that's what's difficult. (laughs)
Sean Donahoe: Oh yeah. It is.
Phil Newton: My first trade, and a little bit of a flashback, I put the trade on. It was two hours pain going into the bank. I peddled my ass down to the local bank. It was back and forth with various brokers. They were on the phone. Multiple 10 way conversation, to get a price quote and all the rest of it. Bought some shares. post within the post. I know I can hear everyone rolling their eyes. I didn't know any different back then.
Sean Donahoe: (laughs)
Phil Newton: I got to posted it out of there eventually. But you know what, I don't think I slept for eight months. And that's how I knew. I got paid to wait for the opportunity to kinda boil over it and kinda do what I hoped it was gonna do. But it was ... paid to wait. And it was the most painful eight months. Maybe that explains why my time horizons on my own trading is a lot less than, well certainly a lot less than eight months Sean. (laughs) I want to get paid a bit quicker than that these days. The only reason why I got paid, was I waited. I sat and didn't sleep and stressed for eight months.
Sean Donahoe: Absolutely. No I completely agree. So last question here. Have you guys ever considered creating a newsletter for traders, who want to see what you actually do? Well, yes, absolutely we've been doing newsletters, and we got some new, newsletters that we're gonna be doing fairly shortly. I mean Phils been doing newsletters for quite a while. And we're gonna be opening that up here to everyone. Phil, how long have you been doing newsletters.
Phil Newton: In one form or another, I've been letting people look over my shoulders for the better part of 17 years. Sean. This has been my main stay business for a long, long time. And again, I've helped many people over the years. People would go and sit with me, look over my shoulder or in video form, or written newsletter. Again, I've been, it's not my first rodeo, I think the popular phrase kids like to say these days. (laughs)
Sean Donahoe: Indeed.
Phil Newton: proven track record is all we're really strutting around here.
Sean Donahoe: Absolutely. So we're going to be opening those up to Rebel Traders very soon. Keep on I on this space, we'll actually make a big announcement about that later, very, very soon. So there you go. That's the Rebel Trader mailbag.
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.
(music)
Oh, oh, what's that smell.
(cow mooing)
It's time to call out the Wall Street shenanigans, main stream confusion and outright hi jinks of ho cum of so called experts. Yep, it's time for Bullshit of the Week.
Sean Donahoe: Okay so Bullshit of the Week. As I mentioned just now, in the last segment Facebook has been giving out data like its candy at a parade. But their still hitting all time highs. This just shows to me, it's a perfect case of how quickly markets forget transgressions. We had the big Cambridge Analytical bull shit. And all the other stuff that's going on.
Aboard, Facebook actually collects data.
Automated: We called that out as bull shit. I can just kinda recap on it very slightly. More for the farm boy in the room, Sean. It was multiple years ago. And it been dealt with. As far as I'm concerned.
Sean Donahoe: Yes. And you know what, it's not shock that Facebook tracks your data. You give them access to everything your life. You tell them what you had for breakfast, you tell them what you eat last week, you tell what bands and TV shows. Guess what, you're giving them all the information. Why are you surprised they sharing that with advertisers. Okay.
Phil Newton: Yes, so I think the point is it was known, known.
Sean Donahoe: It was a known, known.
Phil Newton: To steal your own . It was a known, known. So from my perspective it was a no news starter. The media was hyping at all proportions. We're seeing something similar again, today. Another drum is being banged with the bull shit.
Sean Donahoe: Absolutely, because Facebook gave data to a Chinese device company. That is Hwang, I think is how you pronounce it. But their flagged by US intelligence as a danger.
Phil Newton: (laughs)
Sean Donahoe: Yes, That's it. You defined it right here. The Sean Donahoe dictionary. But also we got a ... last week there was a big who ha ha, about Facebook giving all device partners users and friends dat, as well. So here's the thing, this is another little, kinda kick in the Facebook, the Zuckerberg's nuts, so to speak, with this going on.
But at the end of the day, people have shrugged if off. Or our data gets shared. I didn't know they do that, well you do now. But their still reaching all time highs. Now again, for one my particular strategies that's set up as quick short, for a very short term. As a counter trend trade, as Phil mentioned earlier on. But again at the end of the day-
Phil Newton: To be fair, as a side bar, I can just see reasons for it, in fairness, because it kinda links into the sentiment shift. It's the, the kinda the news brought your attention to it. Which is why it's addressed in our Bull Shit of the Week. It's just pinging off resistance. And it's responding off a level of interest, in a way that you recognize. It's hiding with the news it's gonna hunt peoples interests in doing something. Ergo, we can see a reaction. This isn't rocket science.
Sorry I'm just, I took the opportunity. I decided to bang a drum. It's the only show I can get away with. But I can see, I can see the logic. The point is, is the counter trend elements is something you frequently like doing. This is part of your style of shorts and trading. Now I've don't that. I just don't feel like doing it, because the reason, just kinda clarify the reason why I don't want to do it.
Because I want to be in a coffee shop after we wrapped up here or be doing something else. Whereas this type of trade, it leaves a little bit, you gotta keep half an eye on it. It's not time intensive, but I like to turn everything off after I've traded and come back tomorrow. Whereas you're around so this type of trade allow you to keep an eye on in it.
Sean Donahoe: Absolutely. This is again, this one is a speculative one. It's one of the small basket I have of speculative ones. And the only reason that trade went on, because I am around today. Where I'm gonna be in the office most of the day, I can keep half an eye on it.
Phil Newton: Yeah, there you go.
Sean Donahoe: So that's purely it, but a lot of that trade-
Phil Newton: bull shit. (laughs)
Sean Donahoe: That trade was based on this Bull Shit of the Week. Which we are seeing, fondly enough, reflected, because I wrote these notes last night, for today's, this morning's show. But I also-
Phil Newton: I can confirm and verify.
Sean Donahoe: Which I put my money where my bloody mouth is. And that's exactly it. So again, rock on, that is it for this weeks show. And thank you for listening. We really do appreciate it. Please remember this show is not free, no matter how many times we bang this drum, it is not free. But it will cost you a 5 star review. It's just a nicety, it's polite.
Phil Newton: And It's just a little thank you.
Sean Donahoe: Absolutely. So go to TradeCanyon.com\rebeltraders, where you can subscribe, review us on your favorite way to hear this show. As always, this helps us reach more traders and investors. Just like you. We want to help as many traders as possible. It's what we do. You'll also find some links to free trading on there as well. If you want to go see in more detail what we do, why we do it, how we do it, etc, etc. And we'd love to hear from you.
Phil Newton: And thinking back Sean, to a time where I was in Europe, and I saw a street performer, a group of street performers. It was the first time I heard this phrase that we use. And it was this show wasn't free. So at the end of there performance, they did wonderful street performance. As street performance go, it was fabulous. And at the end of it they started their kinda wrap-up.
And the head honcho was basically saying this show wasn't free, we need your help and support to keep it on the road as it were, quite literally. Which gained a little bit of a laugh. What I'd like you to do take out some money, fold it up, and place it in hat, the in the basket. In the UK, sorry in the US it might not mean much, but in the UK anything with a large denomination is always paper money. In the UK we have lots of coinage. So up to around about the $5 level, just to put it into context. So I just thought it was quite funny, if you missed it, so take out your money and fold it up. So he's assuming you gonna tip him large amounts was all I was trying to say.
Sean Donahoe: (laughs) I like it. Well it ain't gonna cost you a dime guys.
Phil Newton: (laughs) it's merely cost you the click of a mouse, a 5 star review. That's all were asking.
Sean Donahoe: I love it.
Phil Newton: Anyway if you'd like to connect with us on Facebook or the Twitter machine you can get to us at the same link. It's TraderCanyon.com\ ,take a breath, rebel traders. Surprise. And what do we have coming up in ext weeks show, Sean? Is there anything of particular interest or noteworthy that we might be doing next week?
Sean Donahoe: Wells here's the thing. This is episode 51. Next week is 52. Which means it is one year anniversary of the Rebel Traders Show. We gonna be doing a look back, look forward, for Rebel Traders, Rebel Trading in general. Basically covering a lot of different ground. Looking at what was relevant then, what is relevant now, has anything changed? What is rockin' and what is rollin'? So with that being said, we look forward, you bring your party hats. Bring your kazoos. Bring your own single malt whisky, that's always appreciated. And a big fat cigar. We will celebrate next week with the one year anniversary. So-
Phil Newton: Sounds like a plan.
Sean Donahoe: I think so as well. So take care guys, see you next time. Rock on.
Phil Newton: Bye for now.
Automated: (music) 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: Futures, options on futures, stock and stock options, involves a substantial degree of risk. It may not be suitable for all investors. Past performance is not necessarily indicative of future results. Trade Canyon Incorporated only provide training and information. If you actually understood and listened to this, then that means you are awesome. Congratulations and well done. Notice, this product may be contain nuts.

(Click the time stamp to jump directly to that point in the episode.)

[00:07] Show Introduction

[01:24] Sean: In this episode we are going to be beating the war drums just a little harder to give you the Rebel Trader advantage. We’re going to recap some of the most poignant lessons we’ve shared in recent months and why you need to add these strategies and tactics to level up your trading right now.

[02:43] Sean: There’s a big difference between what we do and what most retail trader do. We are not technically what you’d call professional traders, we’re not big institutionalised hedge funds.

[02:50] Phil: Technically we’re retail traders but we’re not novices. We qualify a professional trader as someone who is actually doing it, who is making it work. A novice trader is focussed on how much money they can make.

[3:30] Sean: It’s not about the money you make, it’s about the money you keep.

[04:36] Sean: We treat trading like a business. If you want to take up a hobby, go play golf.

[05:00] Phil: Very few notice traders start out thinking that this is a business.

[08:12] Sean: Why are you actually trading? Phil, what would you say yours is?

[08:26] Phil: Firstly, I’ll tell you what it’s not - to make money.

[08:31] Sean: It’s a byproduct.

[09:37] Phil: I want to do it as little as possible to allow me the freedom to do the other things I want to do. I’ve got a lot of free time because I’m very efficient.

[12:09] Sean: I trade for about thirty minutes a day.

[14:47] Sean: One of the things we mention a lot is the 90/90/90 rule. This is a big cautionary lesson for the average retail trader. It’s 90% of retail traders lose at least 90% of their money within the first 90 days of opening up their trading account.

[16:06] Sean: People don’t think about the consequences because the money is just numbers on a screen, it’s not real.

[21:26] Phil: By trading smaller, it allows you to trade more often on the assumption that you’ve got a good strategy.

[23:57] Sean: If my capital is treated like an employee of the business, they better be doing their job and if they’re not, what can we do manage those positions or ‘employees’.

[26:28] Sean: We have a core strategy that we teach but it’s the consistent application of any strategy that has a positive expectancy that is important.

[27:26] Phil: I’ve set myself up for success, not just a routine for business but a routine to live my life to allow me to operate my business.

[30:10] Sean: I see a lot of people dismiss the psychology of trading but we are human beings, we are not machines. One thing I advocate for is the divestment of concern and stress and emotion from your money.

[33:30] Phil: I want to be very specific, this trade meets this criteria - yes! Great, well what reason do you have for not putting the trade on?

[35:49] Sean: It checked someone else’s boxes maybe but they’re not you.

[41:00] Phil: Don’t buy into the hype. Apply some consistency, do it tomorrow, and then the day after.

[47:06] Sean: A lot of people are not guided by their own methodologies, they’re guided by other people’s sentiments and what’s being talked about on the television.

[52:23] Phil: My first strategy was a moving average cross-over, so when the short moving average crosses over, the long moving average pull back I’m going to enter on the pull back and then I had very specific criteria for what I considered a pull back.

[53:11] Sean: One thing you need to do in your business is keep a trading log. You need to be able to record, not only the trades, what you’re doing, why you placed the trade, and also your state of mind.

[1:00:15] Sean: These are things we’ve talked about a lot over these last few months. There’s one last one I want to cover here and that is levels of interest and removing the bias that a lot of the textbooks have given.

[1:01:00] Phil: What I’m trying to do is have an unbiased appraisal, part of it is to not worry about how things are described in textbooks. If you’re reading a book, the idea of support or resistance may be new to you, it’s got to be explained a certain way but that doesn’t make it practical to use that in the real world.

[01:04:13] Sean: People talk about support and resistance all the time. It’s the pre-defined bias and removing the bias.

[1:04:58] Sean: There you go ladies and gentlemen, a lot of things we’ve taken out of previous shows and created a little more focus. If you start applying some of these things in your trading you will see a lot of changes and that’s all good.

[01:05:20] Rebel Trader Tip of the Week

[01:05:41] Sean: What are your drums? Are you adaptable to change therhythm? Bang on those bongos loud and hard because we’ve given you a lot of framework in today’s show and what we do in trading.

[01:05:58] Phil: We’ve given you the keys to the kingdom.

[01:06:08] Sean: Are you open to implementing these in your overall business of trading. We can give you all the insights but if you don’t apply them it’s a complete waste of time. So be flexible, be adaptable, bang on those drums as loud of you can.

[01:06:40] Phil: If what you’re doing isn’t working, consider what we’re saying might work for you.

[01:07:23] Quickfire Round

[01:08:00] Sean: How do I get my wife to support my trading? I have lost some money in recent weeks but I know I can make this work… HELP!

[01:08:35] Phil: I’m going to say, it’s to support your decision to trade and not to support your habit of trading. If you’re serious about this and treating it like a business then you need to sit down with your significant other and say I’m trying to get this thing to work and I’m doing it for us and our future.

[01:11:23] Sean: Yeah, open the lines of communication.

[01:11:49] Phil: Why do investors have a hard time trading and how can you switch that mindset?

[01:12:02] Sean: Investors have a very passive approach, tend to be of a more long-term mindset.

[01:12:18] Phil: You don’t have to make an immediate, knee-jerk reaction.

[01:13:20] Sean: It’s the mindset shift that they have to be active, they have to be a manager, not taking a silent partner in a business.

[01:21:42:] Have you guys ever considered creating a newsletter for traders who want to see what you actually do?

[01:21:52] Sean: We’ve got some new newsletters that we’re going to be doing very shortly. Phil’s been doing newsletters for quite a while.

[01:22:02] Phil: In one form or another, I’ve been letting people look over my shoulder for the better part of seventeen years in video form or newsletter.

[01:22:40] Sean: We’ll make a big announcement about that soon.

[01:23:00] Bulls**t of the Week

[01:23:18] Sean: Facebook has been giving out your data like it’s candy at a parade but they are still hitting all time highs. It’s a perfect case study in how quickly markets forget transgressions.

[01:23:47] Phil: it was multiple years ago and it had been dealt with.

[01:23:53] Sean: It’s not a shock that Facebook tracks your data, why are you surprised they’re sharing that with advertisers.

[01:24:35] Sean: So Facebook gave data to Chinese device company but were flagged by US intelligence. Last week, there was a big hoohaha about Facebook giving all device partners and friend’s data as well. People have shrugged it off.

[01:25:41] Phil: The news maybe brought your attention to it which is why it’s addressed in our Bulls** of the week ergo we can see a reaction.

[01:27:17] Sean: That is it for this week’s show.Thank you for listening!Please remember that this show is not free.It will cost you a five-star review on just go to tradecanyon.com/rebeltraderswhere you can subscribe and review us on your favorite way to hear the show.This helps us reach more traders and investors just like you.

[01:29:09] Phil: If you’d like to connect with us on Facebook and the Twitter machine you can get to us atthe same link tradecanyon.com/rebeltraders. So, Sean what do we have coming up in next weeks show?

[01:29:30] Sean: Next week is the One Year Anniversary of the Rebel Traders Podcast. Look Back and Look Forward For Rebel Traders.

Resources & Links Mentioned in This Week's Show

3 Key Takeaways From This Show

  • Know your WHY for trading
  • Start implementing a lot of these tactics and strategies we share in your trading and you WILL see improved results
  • Consistency is key and it always will be. If you’re not consistent your results never will be either.

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