Rebel Traders 053 : Leveling Up

Tired of feeling like a rookie trader? Feel like it’s time to step up to the plate and play some pro trading ball? Well, in this week’s Rebel Traders we’re talking about leveling up your trading the smart way...

There’s a stage in every traders career where they feel they need to take the leap to the next level. Well, Sean and Phil break down what it takes to make that leap and the considerations you need to have to make that ACTUALLY happen.

Not only that, they share some ideas, strategies and insights in to the Rebel Trader approach to trading that makes life infinitely, consistently profitable and easier to trade on your terms and your schedule...

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Sean Donahoe: Tired of feeling like a rookie trader, feel like it's time to step up to the plate and play some pro trading ball, 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. Now here are your hosts, Sean Donahoe and Mr Phil Newton.
Sean Donahoe: Hey, hey, this is Sean Donahoe and welcome to the Rebel Trader's podcast. I am joined as I am every week by my tittering partner in crime. We were just joking about our-
Phil Newton: We were quite literally tittering before the show.
Sean Donahoe: Indeed, we were cracking each other up with double entendres and everything else, which we won't share here because absolutely bloody irrelevant to trading, but bloody good fun nevertheless. How you doing sir?
Phil Newton: Irrelevant to trading but why break the habits of a lifetime?
Sean Donahoe: Absobloodylutely. Basically there's a stage every trader gets to in their trading career, they feel like they need to take a leap to the next level. Today we're kind of going to be breaking that down a little bit and basically look at what it takes to make that leap and the considerations you need to have in place to actually make it happen.
Phil Newton: We've also got the Rebel Trader mail bank where it's your trading questions are answered. As always the bullshit of the week, we call it the hyperbole, the shenanigans, some nonsense somewhere as always and amongst all our our own idiocy we shall try and find an answer. The core question of where is the trade?
Sean Donahoe: Bloody good job. Leveling me up eventually we'll get there. It's a long journey but we'll get there. One of the things that we always talk about is the journey of the trader. Obviously we've been there, we've done that. We've bought the the-shirts, sold the t-shirts, sold stock in the the-shirt, create annualized-
Phil Newton: the the-shirts.
Sean Donahoe: Yes, and Sean sold the t-shirt, absolutely. I actually like that. We could use this.
Phil Newton: If you are going to there, why not.
Sean Donahoe: Absobloodylutely. But here's the thing, while we've been there maybe you haven't. A lot of the people listening to the show are starting traders or they've got at least some level of experience under their belt or they may be we got every aspect years, have been trading for years and every level of experience, but there's always a point where you look to what is the next level for me, what is the next goal, what is the next barrier I have to cross?
The thing is a lot of people look to that without first of all, considering where they are right now. The question you got to understand that in yourself is before I level up and you take this to the video game references, like you start off at level one, "Okay, well I need to get level two, level three, where am I right now and what do I need to do to get?" First of all, where are you right now? Now, Phil, we talk about this a lot with coaching students and everything else, but a lot of people have to have that definition of the ground, the foundation they're currently standing on it. What do you think about that?
Phil Newton: As you were just kind of introducing the idea, I was kind of mulling over. We often talk about the transition from the hobbyist to, okay, this is now this is now serious. I want to try and commit. I think that's the first thing to jump over from a hurdle point of view, but it's more of a mindset shift. The hobbyist versus the okay, this is a serious business a part time or full time thing. I think when you've made that transition, it's from that point onwards, I think we're going to be kind of focusing on today and that's what we're talking about is where you are right now 'cause at some point it starts off as an interest. It might start off as a hobby, a passionate hobby that, but it's when it transitions from, okay, I think I've got something here or I think I'm really interested in taking this to the next level.
It's that mindset shift when you go beyond, it's from that, where are we right now? Okay, this is serious. What do I do next? Type of philosophy. In my mind that type of person, they've got some experience, it might be several weeks, several months, maybe even several years for some people, but they've got the knowledge and they're now figuring out, okay, well what do I do with that knowledge? That's the absolute kind of you're out to use your gaming analogy. You're out of the training and-
Sean Donahoe: I was going to use that exact reference.
Phil Newton: ... the training level and you're now onto the kind of like level one is it where essentially, the training wheels are off and now it's okay, well how do I put all of the information I've got into a structure, into a format that I can use to progress through the stages of successful trading? At that point I would imagine that you have a strategy, you've got some competency, you know which buttons to press and kind of in the right order and you're seeing some results and maybe your break even your positive.
You're starting to see the successes that you were kind of promised by all the advertising that you've seen over the years. But you've realized it's not press this button or use this indicator and you're going to make a fortune. It's not about the tools and you've had that realization. I think just having some clarity on that where you are right now 'cause we've often talked about getting up to that point in many of the previous episodes. But I think when you've got past that, okay, this is serious. I think that's where the journey really begins.
Sean Donahoe: I absolutely agree with you. This is one of the things that we try and encourage everyone to take that step, whether they're somewhat ready or not because-
Phil Newton: It doesn't matter when it could be day one. It's more of a mindset thing. It's like I need to treat this seriously. Again, if we use the real world comparison, you're starting a business, it starts off as I think I've got an idea. What'd you think? You explore the idea. You get some information, you get some knowledge. You might find out how the business plan and all the other stuff that kind of goes along with just kind of kicking the can down the road. I'm just chewing this idea over and it's all that stuff that goes in.
Then at some points you go, I think I've got something here and then you take it seriously, But few people do that in the trading world because they don't have that realization and that's where it gets interesting. They stop at that point. I can't make it work and they give up and it's such a sad thing to say and it really is just a mindset shift.
Sean Donahoe: It really is and one thing that we kind of need I think to focus on for a second is what it means to treat trading like a business. Where you kind of make that mental shift, that mindset shift that we talked about to, "Yeah, okay. I better take this seriously." Like you said, most traders don't. We encounter that almost every single day and it's one of the core reasons that most retail traders and retail traders being those that trade at home on their phone, on their laptops or spend a little time in the markets, what have you, they fail and throw their money back into the markets and brokers get very wealthy from taking the other side of those foolish bets so to speak.
But at the end of the day, when you make that transitional shift to becoming a business, everything becomes infinitely more serious because it's not so much gun against their head, but hey, you got to make it work.
Phil Newton: You start to see things from a different perspective. I think that's really what happens. Again, trying to give you a visual image, it's like that scene in the matrix where Neo is being spoken to by Morpheus and he's like, "No one can describe what the Matrix is. You've got to see for yourself." It was that red pill, blue pill type of scenario. You've got to have that shift in viewpoint. It's bit of an over exaggeration, but that's the mindset shift. Like, okay, I know what it should be like. Well, it's only when you truly see it for yourself that you go, "Oh." Again, the Wizard of Oz example, the common idiosm is that we look behind the curtain. You pull the curtain back. It's just some little guy with a loudspeaker who is the Wizard of Oz, the all mighty speaking wizard.
There's no big secret behind the curtain of trading. It's just you've got a systematic approach to find filter and sort stocks. Then you go and push the button every day. That's it. While we always kind of play down the act of trading, from my perspective, it's a conveyor belt or one way of trading, can be very much like a conveyor belt. But it's not that distinction of I've gone from, I'll try mark III today, I'll try this tactic today. I'll try point and figure charts instead of line charts.
It's you're not so worried about the tactics and you just focus wholly on the kind of the principles behind operating your business. 'Cause those principles don't change from any business.
Sean Donahoe: Absolutely. One of the things that we talk about is not only the consistency of the results 'cause if you're in business, you've got a mechanical and we'll the conveyor belt reference here, process to whatever you're doing in the market at any one time. You're looking for not only the consistency of the results which is consistently grow your portfolio. But to do that, you've got to be consistent with your approach to trading in the first place. One of the things that we talk about is, "Hey, can you consistently apply whatever strategy you're using or are you still learning?"
If you're still learning, then to use the video game reference, you still in those tutorial modes. You're not ready to actually jump into the main game at level one. But you've got to think, okay, if I want consistent output, I've got to be consistent with the input.
Phil Newton: I suppose the big hangup is that sometimes someone looks out on kind of a live version of the training mode.
Sean Donahoe: Exactly.
Phil Newton: We've seen quite a few people. Just to bash on bitcoin. Again, why break the habit of a lifetime, but lots of people have looked out on Bitcoin, but they can't replicate that process. They're on the training mode and they've literally locked out. They've just hit the right button at the right time and it's gone in their favor very quickly. Because of that, it sets the precedence that, "Hey, you can do that." That's what you're seeing the advertising, the overnight riches because one person's done it, it suggests that hey, everyone can do it.
The reality is it's not. Not every business. Again to use the business examples Sean, not everything is a unicorn. We've spoken about unicorns in the past. They are an outlier. Yes, it happens, but you can't create a unicorn business everyday. What would I rather do? I would rather have a nice consistently full restaurants with a nice flow of people coming in and ordering meals and sitting down rather than hoping that I'm going to get the place booked out every night by one giant party. It could happen, but it's not gonna happen everyday.
Sean Donahoe: Absolutely. That's one of the critical aspects that we want to talk about a lot is making it, can you do it tomorrow? This is one thing we say-
Phil Newton: Replicate it. Why I often talk about it's a conveyor belt 'cause I can replicate that process.
Sean Donahoe: Yeah, absolutely. We did a show well, many years ago, many months ago. Let me just kind of redefine that.
Phil Newton: with you sometimes, Sean.
Sean Donahoe: Absobloodylutely. But we talked about those that do the trading competitions and take insane risks. One of them winds up says, "I am a trading champion. I did this. I did x number of hundreds of thousands of dollars in five days." That's 'cause you put it all on red got lucky and now you're using that as the benchmark for everyone else. It's absolute bullshit. But again, unfortunately in the finance world, bullshit sells. In the real world it's not realistic.
That's why we treat trading like a business. Trading basically like a pro. There's a core difference between the average retail trader and trading like a professional, and in this case, we're not talking about the-
Phil Newton: Institutional professional.
Sean Donahoe: ... institutional. We're talking about treating it like a damn business and professional.
Phil Newton: We consider a professional, someone who's consistently making money. They've kind of made it, they've seen behind the curtain. They found that transition, they're seeing consistent results, they're making consistent returns is what we consider someone who's professional 'cause that's the true definition of a professional. Someone who's making money by that chosen specialized thing. Again, professional tennis players, they make money playing tennis. They're that good. That's what we consider. It's not necessarily an institutional trader, which is normally the professional trader or the non-professional distinction legal.
Sean Donahoe: With that, we got to flip it around as well, which is, are you tracking and measuring your performance? Because every business-
Phil Newton: Has a set of accounts. Exactly. We need it.
Sean Donahoe: It's a measuring stick and I don't mean just. Okay, we could go really, really-
Phil Newton: My gains borough.
Sean Donahoe: Yes, indeed. We're not talking Viagra either here, we're talking about knowing where you were, where you are right now, where you're going. You've got to have that track record that you can see exactly what's going on inside your business at any given moment. Like Phil mentioned, a set up accounts. It really is, "Hey, okay. I'm seeing that my portfolio is increasing greater than it was six months ago and it's consistently increasing. Thus I'm increasing my skill level thus." It allows you to make and measure your decision making processes.
Phil Newton: More of what works, less of what doesn't work. That old adage, it allows you to do more of what works and less of what doesn't. It might help you identify other things. We've spoken about also keep a track of the mindset. I was overconfident after a period of time on many trades and it turned out that because I was monitoring when I was my emotional states. The times where I was overconfident and jubilant about the trade, they were the worst performance, who would have thought it. The ones that you are most confident with turned out to be the ones that you consistently underperforming on.
Because you can track and monitor and measure it and you can improve the performance, that's what we're trying to get here. Its most basic it's, am I making money today? Yes. Okay, well that's a good strategy. As far as I'm concerned, that is genuinely a good strategy. If you're making money, then that's a good strategy. But that comes with its own problems. The journey, the peak, the valley, experience, 'cause it's not going to go up in a straight line. You're going to make some money, you're going to lose money. Like that it should be two steps forward and one step back.
But what if your P&L curve is two steps forward, three steps back, four steps forward, two steps back. It's very wide swinging, up and down. Blood pressure is going to have wild swings in both directions. What we're for helps you to find those times where maybe your performance is a little bit of erratic. You might be seeing deep draw downs, but if they're slow and steady and the upswings are greater and by comparison consistent on regular basis. Like you've got a nice up trending chart on a stock graph and you want to be seeing something similar on your P&L curve.
But if you've got those wild swings in between, it might help you recognize, is it market conditions, is it strategy? If you're monitoring your mental performance, is there something going on in your life? Personally, I've had a few life experiences recently and I'm very conscious that, that will have an impact on my performance because I'm aware of how the mind is going to influence my trading decisions. I'm very vigilant on making doubly sure that I'm applying my methodology to the letter and that I'm not making stupid rush decisions because I've got some things going on in my life that are for most people, very disturbing.
Sean Donahoe: Absolutely. Now, one of the things we also talk about is obviously I'm not going to cue the bongos, but they could be inserted here.
Phil Newton: Insert your own bongos.
Sean Donahoe: Insert your own bongos. Absolutely. Yes. trading requirement that you have to set of bongos on every time we say cue bongos, you can bang them.
Phil Newton: Do that Jumanji soundtrack.
Sean Donahoe: Absolutely. One of the things ... My God I'm seeing a combination of the Rock and Robin Williams here now and bloody big rhinos running through the office. It's going to happen. It's just going to happen. But keep the trade law. This is one thing we do talk about a lot because it becomes the measuring stick, but one thing that we also talk about, which I never used to do until I met Phil and we started and we were talking trade blocks is the emotional state that you're in as well. Not only the actual trades themselves.
Again, I always was why I got into the trade. What made me trigger that trade at that time, but also the either what Phil refers to as the dear diary, your emotional state. What were you going through? What might have influenced it from the emotional side? I don't want to say stone cold in terms of emotions because I have a-
Phil Newton: Exterior versus interior. 'Cause you could be a mess inside, but externally you look just fine. We always joke it's dear diary, just one word, feeling excited, feeling jubilant and just be consistent with how you're interpreting your emotions. Just have a little one word, excited, happy, frustrated. Just jot that down at its most basic and you'll start to see common trends and it's interesting when you start to monitor that side of it. Again, don't get me wrong, I'm not like rattling woo woo rah rah.
We always joke about that. I'm not bashing it, but at the same time, that's not my personality, but I understand equally that the mind will play tricks on you. Just keep an eye on it. Just understand that you will have influences both internally, externally that do influence your decisions. It's been proven time and time again, whether you believe it or not, psychology is a major factor in everything that you do.
Sean Donahoe: It really is. Just to give you a reference so call today. I had some very difficult phone calls I had to make. I've been up since five o'clock this morning 'cause I had to make calls to the eastern bloc. It's the Russians speaking over here. But I also had to make a call to the far east so I had to jump on some very difficult and frustrating and riling calls. They're not easy calls that I had to make. They were very difficult and ones that certainly to use a gambling reference, we'll put you on full tilt. Just pissed me off. Very frustrating. Then on recognizing that-
Phil Newton: You could be in Star Trek, I might dock out on an engineer.
Sean Donahoe: Basically.
Phil Newton: It's that sort of a reaction, isn't it?
Sean Donahoe: Yeah. I keep my trading log in an excel file or one of them and so for what I do is I have the date, I then have almost like an opening sentence or paragraph that reminds me of what is going on. It kind of is a little bit dear diary, but it's usually one sentence.
Phil Newton: Just a quick phrase.
Sean Donahoe: Then I have my actual trades that have either closed or opened and why and everything else, but then I can go back and look, okay, if I see a failure rate or trades that are not working out, I can go back, look at the day it was like, you know what I probably was because I was pissed off that morning. It helps me identify where I make a mistake. Now I'm very big on the divestment of emotion regards to business and I treat trading like that. But-
Phil Newton: What it also is make you just take a break before you actually go and put the trade on as well. 'Cause as you're filling this out, I would imagine that it's like, okay, trade on and I'm feeling blah, blah blah, and because you've put that at the no consistent like angry. It might just be a one word thing. Angry is the kind of notes that you put. You can have excel color coordinate, that sort of thing so it comes off and then when you look at what you filled in, it's like, okay, angry red, okay. The response to that for me would be, okay, that's the time I need to go for a walk round park and go for around the park.
Sean Donahoe: Take a break. Walk away. Shake it off.
Phil Newton: Go and smile. Surprisingly, what I've started doing Sean as well is because of you things going on in life, I've started watching a lot of comedy clips and I find that really elevates my mood so that I can get back to some of type of normalcy. Getting into feeling a little bit normal without letting the external influences cloud my judgment. I find that that really helps. But why do this? Ultimately this is what we're coming onto. Because if you don't do this then you're going to blow your accounts up because you're going to think, "Ah, fuck it. Let's just put the trade on that."
That's what we're trying to avoid. That's why we're doing this to avoid that. "Ah sod it, Let's just put the trade on. Ah, it kind of looks okay." Then suddenly you've itched 50% of your account in 20 minutes. I've seen people do it. I've experienced that myself. It's not a pleasant experience. That's what we're trying to avoid by trying to keep a balance in the force. If you'll excuse the Star Wars.
Sean Donahoe: There is always room for Star Wars references. Funnily enough, I actually did get that in the happening now report earlier this week. I was talking about Darth Vader during the whole cloud city prayer don't alter the deal further and there's always room for Star Wars references.
Phil Newton: Well, this just kind of proves the point 'cause like I wrote one of my daily emails that was influenced also by Star Wars. Now I've not listened to the happening narrow port, but we did have a meeting on Monday didn't Sean? We just randomly were talking on Star Wars. All this week we've inserting Star Wars themed comments into and this is just an example of influence.
Sean Donahoe: Absolutely. It's just completely random.
Phil Newton: There was a really random one line comment and then we carried on with our meeting and then for the rest of the week, Star Wars has been on our mind. Plus it is the movie and all the advertising, all the rest that's going on at the moment. It's just an example of influence. If you have a negative influence and that's going to impact you in a negative way. Now obviously we're talking about it in a positive way, you can probably think of many expenses. But I think just to get back on point, monitor that stuff, because when you're feeling sad, you're going to make bad decisions.
Again, this is things that have been proven time and time again. When you're happy, then you're going to make perceivably good decisions. You're going to make sure that you follow the strategy that you have, the process that you have. You going to do all the things that you supposed to do, but you're not if you're in a bad mood. That's what we're trying to get to. Keep a track of that stuff.
Sean Donahoe: Now, the one thing that also we need to talk about is, and again this is a professional approach to trading, but it's also professional approach to business is are you protecting your downside, not just looking to increase the upside. What we mean by that is-
Phil Newton: Prophylactic on your positions.
Sean Donahoe: Wow, okay. He had to go there.
Phil Newton: I had to go there.
Sean Donahoe: Absolutely. Jesus, okay.
Phil Newton: You've got to protect your risk. You've got to protect yourself.
Sean Donahoe: Got to have protection. We got to make sure that, again, you're as equally focused, if not more so on keeping the money you've made rather than growing the money in the pot. One of the things that Phil mentioned earlier is the two steps forward, one step back. If you're doing that consistently, you're still making progress. If you've been doing one step forward, four steps back, three steps forward, another three steps forward, and then five steps back.
Phil Newton: Your protection of the risk is not great.
Sean Donahoe: Exactly. That creates-
Phil Newton: It might a problem in strategy. It might highlight a problem somewhere that's going on. It allows you to identify is everything's going as smoothly as it normally is? It allows you to reevaluate things.
Sean Donahoe: One thing that we do a lot is we're very risk averse, but a lot of the stuff that we do is very comparable to aggressive strategies, but we very much focus on risk mitigation because we want to keep the bloody money that we've built and made without just putting it all on black and hoping for the best to use a roulette reference. At the end of the day, again, we want to make sure that we are not only consistent in our returns but consistent in maintaining and keeping that money in the pot because it allows us to put bigger positions on grow that portfolio, test different strategies and we're going to get into that a little bit.
But at the end of the day there are some major core differences between the philosophy of growing that nest egg or protecting that nest egg. What do you think about this? 'Cause this is a conversation we have a lot.
Phil Newton: On the assumption that you've got a positive expectancy strategy, which is just a fancy way of saying on average you're making money. On that assumption, I've always said you should not focus on how much money you can make because that suggests that you're gonna try and have as bigger position size as possible every time. You've kind of got your eyes on the greedy pile, the big pile of gold at the end of the rainbow. That's what you're focused on. If you think about that logic, it's more hopes, dreams and aspirations of a big pot of gold at the end of the rainbow.
That can cause problems and that's what the amateur does. The folks on how much money they can make. Whereas the professional trader, the one who's consistently looking at this as a business is thinking about the risk as you were just saying, Sean. It's how little can I lose? If you focus on that on the assumption you have a positive expectancy strategy, you will get the pot of gold at the end of rainbow. It's such a contradiction because by not focusing on the pot of gold at the end of the rainbow, get the pot of gold at the end of the rainbow.
Whereas most people who then I'm aiming for the pot of gold at the end of the rain, I'm not going to use as much position sizes as possible to get as much money as possible, as fast as possible and only takes hitting one speed bump along the way for it to go in the opposite direction and to lose the money and you blow your accounts up. It's a very frustrating experience. Again, I'm chewing around this, Sean, I don't know why I'm struggling. I have articulated this many times in the past, but it really is focused on how little you can lose and the money will follow.
Sean Donahoe: Absolutely. This is something that I tell a lot of people in many of the businesses that I run and kind of is something that I instill in a lot of my teams.
Phil Newton: Exactly. It's not just trading, it's just have a consistent plan. Have a plan, follow it. It's a process, it's the process that if it's a positive expectancy process, do more of it and that's it. Especially if you're not throwing money away willy-nilly hoping for the best. You have a consistent positive expectancy. It is like I said, consistent.
Sean Donahoe: It's replicated.
Phil Newton: It allows you to continue to do it and gain some more. I think the other reason why perhaps people are kind of chasing the pot of gold at the end of the rainbow is 'cause they've not got that confidence or a positive expectancy strategy where they can have some predictability with their expectations. Is the next one going to be the one? The only fools and horses for the British reference is, this time next year Rodney will be millionaires.
That's the get rich quick mindset. Whereas if you've got the business mindset is you're focused on risk, it's your keeping again, to use the real world business example, it's you're keeping your overheads low and your profit margins high, that's what we're doing. We're doing the trading equivalent of good solid business practices. Full Stop, exclamation mark. After all those words
Sean Donahoe: Underlined big neon sign arrows the whole thing.
Phil Newton: For the transcription.
Sean Donahoe: There you go. But now one of the things that we also talk about a lot is the daily trading routine. We're not talking about day trading, we're talking about daily what is your routine? One of the things that I really try and drill down to is set x amount of minutes a day aside for your process of trading. We do it every day ourselves.
Phil Newton: We practice what we preach.
Sean Donahoe: Absolutely.
Phil Newton: Everyone says, most of the emails I get from our students are sorry to disturb you, or I know you're busy and I always reply back. You would laugh, but I'm not. I'm literally in a coffee shop reading a book as you've emailed me. Well, I'm a product of my own thing. You're product of your own system. But because we want to do the things. I think that's good advice. I know I can do what I need to get done in certain amount of time, so just set yourself that certain amount of time that you need to get your job done.
Not just with trading, but it's just that with life. It just saves you dicking around unnecessary thing. My whole philosophy is you get what you need to do done and then you can go and enjoy life like you're supposed to.
Sean Donahoe: Absolutely.
Phil Newton: Well, cue Sean.
Sean Donahoe: The violence.
Phil Newton: 12 years a day trader spending many hours in front of the computer looking after chart, after chart. It is a horrible experience. I created a more than a full time job for myself doing it. Now I want the other experience. I don't want to be at the computer all day. I can get everything I need to do done in 20 minutes and that's all. That allows-
Sean Donahoe: That's exactly it so you can set your own daily routine.
Phil Newton: Exactly. That allows me to goof off and Sean, I know you roll your eyes every time, but that allows me to goof off and enjoy doing podcasts and talking to people and helping other traders get a leg up on the ladder as well so that you don't have to spend 20 years trying to figure it out. You can just go straight into the fast lane and say, "Okay, well I want what you've got and if you want that then we can show you how to do it." I'm sure we've got a link somewhere.
But if it's not for you, if you want to be in front of the computers looking through all the chart after chart, day after day, trying to figure it out on your own, do it the hard way and spend 20 years doing it and that's fine. You go and do that. When you realized that's a silly way of doing it, then you know you can come and see what we've got beyond the curtain as it were.
Sean Donahoe: Absobloodylutely. 'Cause at the end of the day, here's the thing, like I've got my fingers in a lot of pipes. Like I said, it's early in the morning here. I've been up since five o'clock, so I had calls to some of my other businesses overseas and my other interests. I am busy. I'm busy but I work out.
Phil Newton: I've had an exceptionally lazy day, Sean.
Sean Donahoe: Yeah, bugger off.
Phil Newton: I actually had a little bit of sleep in and I'm actually an early riser, believe it or not, but I had a little bit of sleep in. I had a quick phone call. I did my morning routine. I find out what I was going to trade today and this is many hours before the market opens. I went to the gym. I had a coffee, goofed, I had a second coffee, read the book and brought my wife but she is not well today. Got her some feel good food stuffs. We had a little bit of a picnic on the couch and that was it. It's been a nice day for me so far.
Sean Donahoe: Beautiful.
Phil Newton:
Sean Donahoe: Exactly. Whatever your lifestyle is. I trade the way I do, it's a short number of minutes per day because that that's my thing. I need to block out that time.
Phil Newton: Same way for different reasons.
Sean Donahoe: Exact same way, different reasons, but again, the thing that I want to underscore, even though Phil got his easy day, I've got my crazy days. I block out that dedicated time every day for the same amount of time. In fact, it's on my calendar every day. Nothing else happens during this time except trading. That's my routine. I have my trading plan, which is my process, which is specific to me because of what I do. Again-
Phil Newton: Just want to interrupt you there Sean. I just want to intentionally this time, not just for the sake of it. I just want to pick up on what you said that I think the overarching thing that you mentioned there is it's on the calendar. It just occurred to me, although I can do whatever I want, whenever I want, I put the things that I want to do done on a regular basis on the calendar. Like I know that I'm going to get up a certain time. I know that I'm gonna spend some time going to the gym. My coffee time is blocked off, 'cause I go and read a book.
I intentionally get out though 'cause I have a home office. I intentionally go out to avoid cabin fever. I think the point of all of this is it's on the calendar. There's time set aside for a specific activity, in this case that I enjoy doing, or in your case that requires businessy type stuff. There's phone calls, there's meetings to attend to, there's other things that you want to do. It's all on the calendar. I think in business life and personal life, block it off on the calendar.
Sean Donahoe: Absolutely. You've got to be consistent with that.
Phil Newton: Have date nights on the calender if that's what it takes.
Sean Donahoe: I would be lost without that because otherwise other things would encroach on that. I wouldn't be able to focus on that. These different things would knock be off course and I found very early on in my career as a trader that if I didn't dedicate that mental resource, time resource and focus to that, that it was seriously hurting my trading. By doing that, I'm locking in a daily routine, it's infinitely more efficiently. It really is and that's what we're about. We're about consistency, efficiency because our most valuable resource, whether you like it or not, is your time.
Phil Newton: It's time. We've all got the same amount of time. We've all the same amount of time. I think just on that note, I think if someone wanted to go and have a look at this in more detail and an explorer, I think it's become popularized as time blocking. That might be a good kind of go and Google if you want to invest. But essentially it just involves just how much time does it take you to do something and without dicking around or getting distracted by cat videos on YouTube. As I found out this morning it was lock stock and two smoking barrels this morning for me, wasn't it Sean and snatch?
Sean Donahoe: Absolutely, I sent him a-
Phil Newton: I got a little bit distracted.
Sean Donahoe: Guy Richie movies, not porn movies, just for reference. I don't know, I wasn't there. It might be, but we have a good Guy Ritchie reference.
Phil Newton: Say no more I'm just as good as wings or a blind man.
Sean Donahoe: Absolutely. I sent him a brick top video based on something he said to me this morning before we were getting on a call, sending them off on a path of watching three minute segments of a Guy Ritchie movies.
Phil Newton: 20 minutes later of snippets of movie, I could have sat down and watched the movie. Anyway, the point is, is get on the calendar. Figure out how long it takes you to do something realistically without the distractions and block that time off. Put five minutes either side for you to get into and you block yourself off. If it's going to the gym, I have 90 minutes blocked off for the gym. I have 60 minutes blocked off for my lunchtime coffee and read, which includes kind of travel to and from and a cake and consumption of caffeine.
Block it off in the calendar. If there's family time with the kids, if that's top priority, make sure that you're sat down with a meal with your kids, you to help them do the homework. Doing all the things that you're supposed to do as good parents, create that family unit. It sounds crazy, but block that time off on your calendar so no one else can take you away from your family.
Sean Donahoe: Absolutely.
Phil Newton: Put it on the calendar. I think I can't stress that enough. I've got to admit that really has helped me and it obviously helps you to keep on track and organized 'cause you've got a lot of things going on.
Sean Donahoe: Absolutely. It really does. The other thing that as a professional approach to trading is also considered can you take a draw down in your portfolio for capital, but also from an emotional perspective? Now this is very important. This is an area I talk about a lot 'cause again, despite what anyone says and back to something Phil said earlier on, mental toughness and psychology is an essential part of trading. It is a resilience because this can be an emotional arena. Anything to do with money. The fear of loss and the elation of game can have-
Phil Newton: It's an emotional rollercoaster. It really is. Whether you believe it or not, it happens. End of story.
Sean Donahoe: Absolutely.
Phil Newton: But the frustration is some people naturally have that emotional capacity. I've always felt this is an emotional bank balance, haven't I Sean? When I started out trading, I had a low emotional bank balance and I had to kind of build that up from a trading perspective. Over the years, I've got a very large capacity for risk in that regard. I've got no problem putting the trade on, but it took time to get there. The way that you do that yourself is practice what you preach.
You trade small and you trade a smaller position sizes as possible until you can not only build your fiscal trading account balance up, but you've got your emotional bank balance. That's the thing that prevents you from putting the next trade on because you're not stressed over losing in x number of dollars per trade because hey, it's only x number of dollars per trade. It's small enough to not hurt.
Sean Donahoe: Yeah, very much so. You do build up that mental toughness and resilience over time. I was very fortunate because in a lot of ways I'm almost like a bloody Cyborg as my wife reminds me every bloody day.
Phil Newton: We have to know about your private life.
Sean Donahoe: I love her very dearly for that, because if it is true, I am very much because of what I do in business. I bring that same business discipline to my trading.
Phil Newton: You've got a chance for every skill.
Sean Donahoe: I've been very fortunate.
Phil Newton: Whereas I didn't have that. I got into this very early, I'd no transferrable skills in that regard. I hadn't built that up in other areas of my life to bring it into the trading well. That's probably why I struggled. Now you've raised the points, but you'd had success elsewhere in your life already and that's something that it didn't happen overnight. You build that emotional.
Sean Donahoe: Oh no. When I first started, it was a nightmare. But yeah, it's something that I did transfer. Been through the same process.
Phil Newton: Exactly. You can transfer it over.
Sean Donahoe: Been through the exact same process, but from very early on in a business mindset and everything else just broadly across. But it doesn't matter where you're doing it. We're trading like a business. You're going to have to develop that and again, monitor it as well.
Phil Newton: It's the only thing we can't give you, it develop over time.
Sean Donahoe: Absolutely. That's one thing that, again, and just to kind of wrap up this segment is not only can you gain experience but never stop learning. Never stop learning and developing new skills, monitoring and tracking those skills and hey, one last kind of thing I want to cover is you can also learn new strategies, new approaches to trading, but only allocate a small portion of your portfolio and your capital to those new techniques so that you can prove stuff to yourself without risking your overall portfolio. 'Cause one thing we we have talked about is the strategy tango where people jump from strategy to strategy. Thinking this one one's gonna be the-
Phil Newton: This will be the one.
Sean Donahoe: This will be the one. This'll be the one. This will be the one that makes me a millionaire. This is the one that's going to turn me into Warren Buffett or Bobby Axelrod or something like that. This is it. You're going to develop your own style, your own flavor. You'll take any strategy and adapt it to your specific needs, whether that structures your work for you in your environment based on your specific requirements.
Phil Newton: Test. If you're going to look into the new, don't drop what you're already doing that's been proven to work. I think that's what you're trying to say. You jump from one strategies to the next. If you going to dd new strategies and techniques and methods, test them out first like you're trying a new pair of shoes. No, this pair is a little bit tight. The shoe shop again, Sean, I've got a fetish. I'm sure I have.
Sean Donahoe: I know you have.
Phil Newton: These shoes are a bit tight. These ones a little bit, you try it on for size and see, "Hey, I'm not too comfortable." Because you don't need to stop what you're already doing and it's already working to explore the new and just integrate it. I think just to kind of finish on this is keep an open mind. I've always thought about having a child like mindset. I've always thought about it in those terms 'cause that child like mindset to me means that you're open to the possibilities, you're always exploring, you're always asking questions, just like a child was.
Everything a child does see, smells, touch and experiences, doing it for the first time in most instances and you've got that sense of wonder or the child has about those experiences. If you can nurture that or rekindle that in yourself, you not only have a great life but get great trading experience. But just have that childlike mindset in everything that you're doing and in this context, explore trading with a childlike mindset. Be open and test the results and keep a journal and track and monitor the results. See what happens.
Sean Donahoe: Absodamlutely, and that's what it's all about at the end of the day. With that being said, let's wrap that up. That is pretty much what it takes to level up and we'll move on.
Automated: Now it's time for the Rebel Trader tip of the week, brought to you by Ready to take your trading game to the next level, discover where smarter traders come to get coached by the best and learning to trade just got way easier. Trade Canyon, smarter traders live here.
Sean Donahoe: Rebel Trader tip of the week, and we kind of talked about it in the last segment, but I really want to emphasize this. Track everything, not only your emotional state, but the numbers, your portfolio growth, your draw downs, your strategies, track everything. When you're on a journey, you have a good idea of like if you if you were going to the store, you know that you're going to the store, you know where you're starting, you know where you're going, you know how you're going to get there.
But in trading, it's a little bit blurry. You got to understand, okay, what is my goal? What is my destination? Are you looking to increase your portfolio or a nest it for retirement? Are you looking to just have a side income or like me, one of my goals is to make every dime I make all my other businesses infinitely more valuable. That's my goal. I understand my destination. I understand what I'm doing, why I'm doing it. You need to do the same, and here's the thing. Once you have that destination in mind, you need to know where you are right now, what position on this planet or on the path the journey is.
You do that by looking behind you to see how far you've come. If you don't start tracking everything to see where you are right now, you'll have no idea if you've even progressed. You could have been spinning around in circles and never even known it. We speak to traders all the time who have been doing this for awhile and they're. They're basically broken even over five to 10 years of trying to make it work. In other words, they've spun in circles for 10 years, got nowhere, but think they've been trading for 10 years. They haven't. They've been running in place and have this-
Phil Newton: Spinning the wheels.
Sean Donahoe: Exactly.
Phil Newton: The one that springs to mind is a guy in Australia, who is kind of like my most exasperating experience with this long conversation with a guy. I've been trading for five years. I know all the bells and whistles. Near the end of the conversation, it just occurred to me to ask that question, do you have a trading plan? Do you write down what you're doing and when you're doing it and why I do it? He went, "No." I said this conversation is over. Until you've got a trading plan, stop moaning. Come back when you are serious. You haven't got past the amateur. He was spinning a very good yarn.
Sean Donahoe: Indeed we have had students who have come to us with similar things before, but again, one of the things is, look, we can help you get out the mud. We can help you get out of the quicksand and move forward, but you've got to know which direction you're going to go 'cause otherwise you're just going to turn around, walk straight back into that quicksand. We can only do that to, you can only do that guys with knowing what your progress is, if you have progress.
Phil Newton: You got to implement as well. There is a large part of that as well. We can bring you to the water, but you've got to do it as well. We've got proven methods and systems in place. They've been working, they do work, they consistently work because it's principle based trading as opposed to, which is the latest hot button tactic and dong indicate that's a trade. It's strategy and it all revolved around tracking and monitoring and testing the performance and making sure that it works. It's, what's that popular phrase that we came up with, it's research driven type of results. If you want a piece of that then yeah, give us a call.
Sean Donahoe: Absobloodylutely. Anyway, let's rock on.
Automated: If you've got questions, they've got answers. Sean and Phil dive into the virtual mailbag for this week's Rebel Traders Quick Fire Round.
Sean Donahoe: The mailbag, and I've got one here for you, which is kind of very relevant funnily enough compared to what we've been talking about, is what exactly goes into your trading plan?
Phil Newton: Trading plan for me really is a series of actions that you want to take to get to an end results. It could be as simple as a moving average. To be fair, my first strategy was a moving average crossover and it can be as simple as when the short period moving average crosses above the longer period moving average, a bullish cross, then I will be bullish to help determine a direction. Now there's a lot more detail to that. It's then, okay, well how will I enter based on that bullish assumption with that situation? It's trying to define every action that you take 'cause most people stop up when the bullish crossover happens, I'm going to go long.
That's where the confusion happens, but you need to go further. Say, okay. I'm bullish. That's my directional assumption. Okay, well then what? How will I get into the market? Then I'm looking for me personally. In this example, I would then looking at, okay, well I'm looking for a bullish pattern to suggest not only what indicator has shown me that price is actually suggesting a move higher and that might come in the form of a price action based, whole buckets where price has rallied, it's retraced a little bit and then that typically suggest that should it continue to move higher then it's a continuation plan.
Then I'm also going to define what I would consider a pullback and how I define that and where my entry will be based on that pattern of where my stop loss will back then and where my stop loss would be based on that and then how I'm going to project a potential target based on my interpretation of that particular pattern, that particular setup. I'm trying to define every possibility, every action that could be so that I have that conveyor belt experience. Step number one, has the bullish cross happened? Yes.
Step number two, has a price action pullback, has priced pushed higher and retraced? No. Okay, wait for price action to push higher by at least this amount or for three consecutive balls or however you define a pullback and then you can move on to step number three. Step number three, entry is here. Step number four, targeting blah blah blah. You can see where I'm going. That for me is a trading plan. It's just trying to define exactly what you're going to do, when are you going to do it? Why are you going to do it? When you can understand those things at a granular level, then you have a pretty robust trading plan.
Sean Donahoe: Absolutely, and it's very, very much like the analogy I use for trading plan is in business, what we call SOP, standard operating procedure. In this, do this, define the process, define what happens on that conveyor belt from start to finish so that at the end of the day, anyone could potentially pick up that trading plan and continue the business and that is one of the things that is critical to what I do because it becomes the framework of the entire business. It becomes the definition points of all activities.
That's funny 'cause I was talking to one of my business partners in one of my other benches and we were saying, 'Look, if I get hit by a bus tomorrow, the business must continue." We've got to put these procedures in place that allow that if any one party is-
Phil Newton: Got a self managing business.
Sean Donahoe: Anyone else can pick this up and start executing. Trading plan is basically to my mind that standard operating procedure is just developed and focused on the process of trading and that consistency. Cause if it becomes almost like a procedure, so to speak, the conveyor belt, it allows you to remove the speculative aspects of what you do, unless it's part of your actual strategy. But it allows you to remove those random elements that could inversely or conversely affect your returns at the end of the day.
Phil Newton: I think when you get down to the granular level as well, Sean, you start to free up the emotional responses that we were talking about earlier as well where if you know exactly what one and why you going to take a piece of action based on an external situation, then it's like you've got that standard operating procedure. Okay, Sean's off for a couple of weeks, he's broke his leg. He is going to be laid off. He can't get into the office, blah, blah blah. Okay, who's going to do his job? Okay, well here's the SOP for what he does.
You give it to the next person who's competent to do those things and can work with the authority that you have. You you can just literally slot that in if someone's not already doing it. That's what we want from trading as well. It's that standard operating procedure. Getting that trading plan down to the if this, then that type of experience. When you've got this conveyor belt, you get down to the finite detail that you know exactly what you're going to do, when you're going to do it and why are you going to do it.
If can answer those three questions and then if you're not sure if there's that emotional response, the reaction, then you need to get a little bit more detail on that particular element. Trader to pull back or how do I do that? If you just ask that how question, okay, I'm going to trade the first pullback after a breakout of a consolidation. Great. How do I do that? Define the pull back. What is a pull back to you? What would constitute that? If you can get more detail so that you can get a very defined description, it takes that emotional away and you don't have to worry about, will my business run without me, that you were just describing. You've got an SOP for that situation.
Sean Donahoe: Exactly. What else is in the mailbag there?
Phil Newton: Yes a question. I had to kind of catch up and scroll past it. What is the best stock market advice that you've ever received?
Sean Donahoe: Now that's going to be a difficult one. The one that immediately strikes to mind that I've referenced privately is you can't do this alone. That was the jarring indignance that really set me down the path I'm on, is the fact is bullocks, yes I can. The fact that a broker said that to me and this is many, many, many years ago. This is from the investment side funnily enough said you can't do this alone. That's why you need me. Again already aware, very much aware way back in the day, the broker only has one interest at heart and it's not my interest. That already having that knowledge-
Phil Newton: Was that book's titled, where are all the customers?
Sean Donahoe: Yeah, there you go. But at the end of the day, I'm kind of thinking, "No, that is the worst advice." But it set me.
Phil Newton: It became the best advice because of it.
Sean Donahoe: Because I'm like, "Oh, you're so full of shit." The fact that you're doing that too and that's the trap a lot of people fall into because they believe that. In fact, there's many pundits. Jim Kramer actually uses this almost every show. You can't do this alone. That's why we're here. Well why? Well, it's because he wants you to keep watching his show. He wants the sheep to watch every week and every day so they can get their advertising dollars. The end of the day-
Phil Newton: He is there for entertainment, financial entertainment.
Sean Donahoe: Financial entertainment. Exactly. To my mind, that's the best advice I ever got 'cause it sent me on this path. What about you?
Phil Newton: Well, thinking about the kind of my first serious introductions to this. I'd always had an interest in business from kind of early mid teens, but the from the stock markets point of view, I've already relayed the story in the past where I visited a neighbor and overheard a conversation on the phone to his broker and he's giving him instructions of what to do and went to the written how he wants it done. Surprisingly, you know where I got that from now. But after the phone call, I asked him what it was and it was essentially he said, he was trading gold at the time, but used to sell it to the stock market.
The advice essentially was or it wasn't really advice. It was just a little nuggets of wisdom and it was that the stock market and the financial market and financial trading in general, it wasn't some exclusive it Etonian boys' club. What would be the US equivalent for like Etonian?
Sean Donahoe: It's not the old boys club, the old boys club.
Phil Newton: High end ding dongs, yeah, the boys club. It's not the old boy's club. It's nothing to do about who you know or what you know or whatever the fancy handshake is. It's got nothing to do with that.
Sean Donahoe:
Phil Newton: If you've got money, you can play.
Sean Donahoe: Yeah, that's exactly it.
Phil Newton: That's it. That everyone is on the same level. If you've got money, you can play. That was it. That was I think some of the best advice that I ever got 'cause that meant that I didn't feel excluded because it was not an old boys club 'cause that's the impression that you get from this. Even by today's standards, it's like some exclusive mystical and secret club that everyone's involved in, but you've got money you can play and that's it. End of story.
Sean Donahoe: Absolutely. You don't have to be mortal man here.
Phil Newton: I think as well just on that note, even compared to 20 years ago, the barrier to entry is significantly lower because of technological advances.
Sean Donahoe: Yeah. Discount brokers and everything else. You don't have to have.
Phil Newton: There is so much opportunity now to make money in a multitude of different ways, not just from the stock market, but the barrier to entry on starting a business even in the stock market is exceptionally low, which is a good thing and a bad thing. But that's a conversation for another day.
Sean Donahoe: Absolutely. Now this is a technical one for you. This is one that caught my eye. If I own Facebook stock, can I sell a Facebook option without buying any Facebook options? I know that this guy is kind of going into the covered cold type, which is what this is sounding like.
Phil Newton: Let me just look at the question. If I own Facebook stock and I sell a Facebook option without buying Facebook options.
Sean Donahoe: I think he's trying to do a covered cold air.
Phil Newton: To be fair, I think the question is a little bit confused as to what you're asking.
Sean Donahoe: I'm making that assumption.
Phil Newton: I'm going to break it down. You own Facebook stock. Can I sell a Facebook option? Firstly, owning the stocks kind of irrelevant at this point. Can I sell an option in Facebook? Yes. If you did that on its own, it would typically be a naked option. Without buying Facebook options, you don't have to buy options at the same time as selling it out. We normally suggest you do so that your risk is defined and that's often referred to as a spread. Dependent on which way round you're buying and selling, it's either a credit spread or a debit spread. It doesn't really matter for the purpose of this question, but yes, you can sell options without buying options. It's usually referred to as being naked. Now when you bought the stock involved-
Sean Donahoe: Unless you're trading like Phil, which is most of the time naked anyway.
Phil Newton: Yes, in my under crackers. Now you've got Facebook stock as well, so you've got the stock, can you sell an option? It's dependent on what you're selling and that could be you're selling puts to kind of average down and get more stock at a low price at the stock tips or if you're selling Kohl's and that would be what might be termed as a covered call in your case. But you don't necessarily need to to buy up the same time as selling an option. It depends on the strategy and what you're trying to achieve. There's a lot of ways that this could be answered. I'm just trying to cover a few quick basis for time sake more than anything.
Sean Donahoe: It sounds like the objective here and the point with a covered call is to make profit even if Facebook goes up down by small incremental goes know what. The downside is if Facebook goes basically sky rockets, you'll be obliged to sell your shares for less than the optimal price.
Phil Newton: It's a good problem to have. You'd be selling at a profit. It just won't be the big profit you might be expecting.
Sean Donahoe: Exactly.
Phil Newton: But then if you thought that was going to happen, why were you selling the call in the first place?
Sean Donahoe: Exactly. It's a risk mitigation kind of a conservative strategY.
Phil Newton: I think it depends what you're doing. But no, you don't have to buy an option to sell an option at the same time. You can do, but it's not essential.
Sean Donahoe: Exactly. Good question there. With that being said, let's jog on kitty.
Automated: Don't forget, if you have a question you want to ask Sean and Phil, just go to and your question may be featured on a future show. Oh, oh, what's that smell? It's time to call out the Wall Street shenanigans, mainstream confusion and outright high jinks and hokum of so called experts. Yep. It's time for bullshit of the week.
Sean Donahoe: Alright, so bullshit of the week. This one was funnily enough, before before even Phil realized what we were going to be talking about, we were talking about this before the show.
Phil Newton: We were talking about the bullshit before we realized this was actually going to be a great segment of bullshit of the week.
Sean Donahoe: Absolutely. GE again, a mainstay of the blue chip sector. It had the funnily enough is when you think of-
Phil Newton: It was a big part of the Dow Jones index for many, many years.
Sean Donahoe: Yeah. 110 years. At the end of the day, it's one of those, if you are asked to name a company that would be a blue chip company, it's one of the first ones that people go to. Well, not anymore. Over the last few years, and it was funny 'cause we were talking about this and restructuring a lot of the noise that was going on in one of our very early shows last year. We were saying how this-
Phil Newton: showing up in and out all the way down.
Sean Donahoe: Yeah. I've be writing this one down like a pony down a mountain. I really have. Six shooters and .
Phil Newton: To be fair, why? It's in a downtrend seller rally in a down trend. It's that simple folks. That's it.
Sean Donahoe: It wasn't difficult.
Phil Newton: It continues to go down anyway. He was aside. It's been kicked out the index that tracks and monitors the top 30.
Sean Donahoe: Yeah, the top 30. It's being replaced by Walgreens, which is the pharmaceutical. It's like Boots over here over in the UK. But yeah, we've been talking-
Phil Newton: Actually it was in the name there, Sean Walgreen Boots Alliance.
Sean Donahoe: I didn't even tweak that up so there you go. Anyway, yes. Do ane and which reference we won't translate. But we talked about GE a few months ago and their bad business decisions and their uncontrolled decline, which has been very profitable for short sellers like us in this regard. Jeffrey Immelt's departure really what was a rocky 16 year run that saw what was a mainstay of the American economy lose about 38% of its value over his tenure. But even from January 2017, it was trading at $32 a share. January 2018, it had gone down to $18. Well, it's a 44% drop.
Then today it's back. It's kind of into petty stock territory at $12ish, $12, 88 as of last night when I made these notes. It's a 60% drop in two years. Basically what's happened is a Dow said, well you're not really a blue chip, you kind of going into the penny stock territory. That's not really one that we would call worthy of the 30 industrial leaders. That's such a decline through bad decisions, bad management. It was exposure. A lot of finance, if my memory's right, when we were talking about this a year ago, it was a lot of their financial drag down.
Phil Newton: It's not quite where it was. It's not far off, but it's not quite where it was in the 2009 low, but nevertheless it's
Sean Donahoe: It's going to be close.
Phil Newton: I'm just looking at it on a weekly chart this moments and I think what's different now, it's not cracked. It's not like Enron here. I think this ties back to what we were talking about. It's been a reasonably fast, but it's been a steady decline over a period of several months, many months. It's not like Enron where they were completely fudging the books. It mismanagement. They'll turn this around, but it's going to be painful to do.
Sean Donahoe: Looking on the weeklies, you can see from 2017 was basically up to that point, it was in an uptrend.
Phil Newton: I think this is a good example of how to recognize a trend change. I'm looking at it on the weeklies from sort of end of 2008 to present. It's just a good example of what happens when the markets crash, what happens when they recover? A nice slow steady recovery, but then no, actually the company is up shit creek anyway and then there's the trend change. You've got a good example of what one looks like. This is one to actually study, I would think.
Sean Donahoe: Absolutely.
Phil Newton: Just to come back to the bullshit angle, what we were talking about before I realized that this was going to be in the bullshit segments. My kind of bullshit about this was that the news, the talking heads, the media outlets were putting 60 minute charts, splashing them over saying, "General Electric has taken a swan dive. It's blood on the streets." All those exotic buzzwords. All they're doing is showing over the last few days it's moved from $14 down to about 12 and a half dollars as we're talking right now.
But they did it in such a way that it exaggerated what was actually happening and they're just focusing on the fact that it's been booted out of the index. Whereas when you do what we've just done, when you look at things in perspective, when you've got a bit more time horizon, the reality is, it being ejected from the index is not a big deal. There's been a knee jerk reaction, but there is nowhere in anywhere close to blood on the streets and it's a nightmare for General Electric and blah, blah, blah. This is the worst news they've experienced and it didn't put a blip on the radar.
There's going to be a little bit of a knee jerk reaction as pension portfolios and funds kind of rebound their books and all the rest of it, but the reality is it's not been a major factor in what the news and headlines suggested. It's just highlights the ever increasing bullshit and over sensationalized reactions to something that was really, yes, it was an important day, but only because it was marked this day in history. It's now not part of it being involved more than a decade and now as hard as that maybe it's not reacting the way that the headlines were suggesting.
Sean Donahoe: No, but I'll tell you one thing, and you can mark me on this one. I think this is going to put GE into acquisition territory. I think someone is going to buy this
Phil Newton: I think someone's going snap this off. I'm not necessarily saying that they'll snap open, split it off, but there's going to be a calling in the business. They're going to have to turn it around. They've already been doing it, but they're gonna have to turn it around.
Sean Donahoe: But there is a lot of restructuring that we were talking about with intellectual property and movements away from the finance sector and some restructuring there and risk mitigation.
Phil Newton: Too many balls in the air and the jugular and the dropping the balls left, right and center. But from the bullshit angle, it's just over sensationalized news of slink that we knew was probably gonna happen anyway. When it did happen, it was from the market point of view, the way that price reacted, it was a no news event. It was just over sensationalized by the public. I would imagine there's a lot of people getting into the stock and my default response when I see stuff like this, is do the opposite.
The fact that their calling blood on the streets and it's going to spiral down below $10. Yeah, sure it might happen. But because of the news headlines, the public are the last to know anything and they're going to be selling short now trying to profit from the inevitable downward movements of GE. Well, maybe that's a good opportunity to be the buyer from a sentiment points and we've spoken about this many times and it's just don't trust the news media. Don't trust the talking heads, validate everything. It's just another good example of bullshit.
Sean Donahoe: From my perspective, I might put a few in one of my side investment portfolios, but longterm, your not trading, it's an investment. For me, there's an investment opportunity here. I'm kind of thinking this is looking at that box and everything else and some of the fundamentals, it's kind of put them into acquisition territory.
Phil Newton: There's no hurry to get on board. This is literally investment thing. You can take your time over making any type of investment decision here.
Sean Donahoe: Absolutely. It's not an overnight thing.
Phil Newton: It's in dire straights. Again, if you look at the top, it didn't turn around overnight and suddenly now that it's close to tier bottom, it's not going to turn around overnight.
Sean Donahoe: No, that's it. That's exactly it and there you go guys.
Phil Newton: That the whole thing with investments.
Sean Donahoe: That is investing 101 but that's also it for this week's show. Thank you for listening ladies and gentlemen, please remember this show is not free. Takes a lot of to put this all together. It really isn't so it'll cost you a five star review. Just go to traders. You can get access from there to the show, previous shows and you can subscribe-
Phil Newton: And future shows. nutrition.
Sean Donahoe: On whichever platforms and future shows, absolutely including the happening now report, which we do every week, mid week and all the actual training and everything else. We got there that you can snap up for free. Some really cool stuff on there.
Phil Newton: You can also connect with us on the social media machines, Facebook and the Twitter. You can find the links to where we're at on social media, same link traders. What have we got coming up in next week's show Sean?
Sean Donahoe: Well, we've got a little bit of I know we're going to get Star Wars.
Phil Newton: A little bit of this, a little of that.
Sean Donahoe: A little bit of this, a little bit of that, but I think we're going to a little bit of Star Wars. We're going to be talking about trade wars and basically with winners.
Phil Newton:
Sean Donahoe: Yeah, actually likely in an economy far, far away. We are going to be looking at who the winners and who the losers are, what's involved and kind of break it down a little bit more. Talking a little bit about history which tends to repeat itself, but specifically is the rhetoric increases. We're probably going to bring on Mr Andrew Page, our a master of the fundamentals.
Phil Newton: Our fundamental expert. I've got to admit, he never ceases to amaze me.
Sean Donahoe: Absolutely. We're going to be bringing-
Phil Newton: Also, with his fundamental knowledge.
Sean Donahoe: Absolutely. He's, he's fundamentally fundamental and an emphasis on the mental, but it's all good. We are going to probably have a conversation just as the rhetoric increases, what's the fricking reality? What is going on, what is likely to happen, how is this going to shake out? We're going to cut through all the noise and bullshit of the mainstream media, the news networks and the rumor mills and actually kind of break it break fricking down. It's okay, what is going on? Why, where, how and when? We're going to have some fun with it. Absolutely cut through the crap. Let's get to the focus of where the money is. With that being said, rock on. I will see you all next time. Take care for now.
Phil Newton: Bye for now.
Sean Donahoe: 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 now.
Automated: Futures, options on futures, stock and stock options, trading involves a substantial degree of risk. It may not be suitable for all investors. Past performance is not necessarily indicative of future results. Trade Canyon Incorporated provides only training and educational information. If you actually understood and listened to this, then that means you are awesome. Congratulations and well done. Notice, this product may contain nuts.

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[00:09] Show Introduction

[00:01:06] Sean: There’s a stage every trader gets to in their career when they feel like they need to a leap to the next level. Today, we’re going to be breaking that down and the considerations you need to have in place to make it happen.

[00:02:50] Sean: First of all, where are you right now? Phil, what do you think about that?

[00:03:10] Phil: We often talk about the transition from the hobbyist to this is now serious. It’s a mindset shift.

[00:06:20] Sean: One thing I think we need to focus on is what it means to treat trading like a business.

[00:08:05] Phil: There’s no big secret behind the curtain of trading. You’ve got to just take a systematic approach to find, filter, and sort stocks and then you go push the button every day.

[00:09:00] Sean: You’re looking for not only the consistency of the results, which is consistently growing your portfolio but to do that you’ve got to be consistent with your approach to trading.

[00:13:00] Sean: We are talking about knowing where you are going, where you are right now. You’ve got to have that track record that you can see exactly what’s going on in your business at any given time.

[00:13:44] Phil: We’ve also spoken about keeping track of the mindset. Because I was monitoring, the times I was overconfident about the trade, they were the worst performers.

[00:18:28] Sean: I had to jump on some frustrating calls, they were very difficult, and would put you on full tilt and I’m recognizing that. So, I keep my trading log in an Excel file, I have the date, an opening sentence or paragraph that reminds me what is going on, then I have my trades that have closed or are open.

[00:19:57] Phil: You can have Excel, color coordinate that sort of thing, then when you look at it and see okay red is angry so you know that’s the time you need to take a break.

[00:22:25] Phil: Monitor that stuff because when you’re feeling sad, you’re going to make bad decisions.

[00:22:59] Sean: Are you protecting your downside and not just looking to increase the upside?

[00:24:40] Sean: There are some major core differences between the philosophy of growing that nest egg or protecting that nest egg.

[00:24:50] Phil: Yes, on the assumption that you’ve got a positive expectancy strategy, which is just a fancy way of saying you’re making money, I’ve always said you shouldn’t focus on how much money you can make because that suggests having your eye on the greedy pile at the end of the rainbow.

[00:28:56] Phil: My whole philosophy is get what you want done and you can go and enjoy life.

[00:30:25] Sean: It’s early in the morning here, I’ve been up since five o’clock so I am busy.

[00:31:15] Sean: Whatever your lifestyle is, I trade the way I do in a short number of minutes per day. I block out that dedicated time, it’s on my calendar every day, nothing else happens during that time except trading.

[00:34:41] Phil: Get it on the calendar, figure out how long it takes you do something, realistically without distractions, block that time off.

[00:35:34] Phil: When I started trading, I had a low emotional bank balance and I had to build that up over the years. Now, I’ve got no problem putting the trade but it took me time to get there.

[00:38:30] Sean: When trading like a business, you’re going to have develop that and monitor it.

[00:38:45] Sean: Never stop learning and developing new skills, monitoring and tracking those skills, and you can also learn new strategies, new approaches to trading. But only allocate a small portion of your portfolio and your capital to those new techniques so you can prove stuff to yourself without risking your overall portfolio.

[00:40:18] Phil: Yeah, try it on for size. You don’t need to stop what you’re doing to explore something new.

[00:41:18] Rebel Trader Tip of the Week

[00:41:42] Sean: Track EVERYTHING. Not only your emotional state, but the numbers, your portfolio growth, your draw downs, your strategies. With your trading, you need to have an idea of where you are going and it’s only by tracking everything that you canknow how far you are on that journey and if you’re on the right.

[00:44:00] Sean: We can help you move forward but you’ve got to know which direction you’re going to go otherwise you’re just going to turn around and walk straight back into that quicksand.

[00:44:26] Phil: We’ve got proven methods and systems in place, they do work because its principle based trading. If you want a piece of that, give us a call.

[00:45:04] Quickfire Round

[00:45:15] Sean: What exactly goes in to a trading plan?

[00:45:20] Phil: All it really is a serous of actions that you want to take to get to an end result. I’m trying to define every possibility, every action, that could be so I have that conveyer belt experience.

[00:48:20] Sean: If I get hit by a bus tomorrow, the business must continue. We’ve got to put these procedures in place that allow that anyone else can pick this up and start executing.

[00:50:50] Phil: What is the best stock market advice you have ever received?

[00:51:00] Sean: The one that immediately strikes to mind that I’ve referenced privately, is you can’t do this alone. That was the jarring, indignant that set me down the path I’m on. A broker said that to me many, many years ago. It became the best advice. That’s the trap a lot of people fall into because they believe that. What about you?

[00:52:35] Phil: Thinking about my first serious introduction to this, from the stock market’s point of view, the advice was a little nugget of wisdom. It was that the stock market and trading in general, it wasn’t some exclusive boys club. Everyone’s on the same level, if you’ve got money, you can play.

[00:54:45] Sean: If I own Facebook stock, can I sell a Facebook Option without buying any Facebook Options?

[00:55:15] Phil: Firstly, owning the stock is kind of irrelevant at this point. Yes, if you did that on its own, it would typically be a naked option.

[00:56:53] Sean: The downside is if Facebook skyrockets you’ll be obliged to sell your shares for less than the optimal price.

[00:57:02] Phil: It’s a good problem to have, it might just not be the big profit you were expecting.

[00:57:44] Bulls**t of the Week

[00:58:17] Sean: So GE, the mainstay of the blue chip sector. If you were asked to name a company that would be a blue chip company, it’s one of the first ones that people go to. Well not any more.

[00:59:53] Sean: We talked about GE a few months ago and their bad businessdecisions and uncontrolled decline which has been very profitable for short sellers like us. Immelt's departure capped a rocky sixteen year run that saw GE stock lose about thirty-eight percent of its value over his tenure:

Jan 2017 - $32

Jan 2018 - $18 (44% Drop)

Today - $12.88 (60% Drop)

[01:01:30] Phil: It’s been a steady decline over many months. They’ll turn this around but it’s going to be painful to do.

[01:01:38] Sean: Looking at the weeklies, you can see from 2017, up to that point, it was in an uptrend.

[01:01:48] Phil: I think this is a good example of how to recognize a trend change.

[01:02:33] Phil: The media were using exotic buzzwords in such a way that it exaggerated what was actually happening and just focusing on the fact that it’s been booted out of the index. The reality is it didn’t even put a blip on the radar.

[01:06:00] Sean: For me there’s an investment opportunity here. Looking at their books and some other fundamentals, it’s putting them into acquisition territory.

[01:06:28] Sean: Okay, that's it for this week’s show. Thank you for listening to the show!Please remember that this show is not free.It will cost you a five-star review, just go to you can get access to previous and future shows, subscribe, and review us on your favorite way to hear the show.

[01:07:05] Phil: You can also Connect with us on Facebook and on the Twitter also

[01:07:15] Phil: What have we got coming up in next week’s show Sean?

[01:07:50] Sean: We’ve got a little bit of Star Wards, talking about trade wars. We are going to be looking at who the winners and who the losers are.

Resources & Links Mentioned in This Week's Show

3 Key Takeaways From This Show

  • Make sure you are consistent in the application of your approach to trading
  • Trading is a business and not a hobby. If you want a hobby, take up fishing...
  • Protecting your downside is as important as maximizing the upside

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