Rebel Traders 063 : Do This, Don’t Do That…

Is your trading not quite firing on all cylinders? Did you zig when you should have zagged? Well, let's see what we can do about that...

Today is a little strange for me. I am actually in California rather than at our HQ in Texas due to a family emergency.

It's been a rough few days and my head has not been in the game for trading. One of the worst things you can do with your trading is getting your personal emotions to influence your trades.

It's one of the core rules I have in my "Standard Operation Procedure" manual that is my trading plan.

Funnily enough, one of the things we talk about a lot is letting your trading aid your lifestyle and not letting your trading BE your lifestyle.

Well, that is certainly true today and I am extremely grateful for power and freedom trading the way we do has provided.

There are a lot of Do's and Don't that we use in our trading. So, at 6AM this morning, I recorded a special "On the road" episode with my partner in podcasting, Mr Phil Newton. In this episode, we outlined a few of the most important of these for you. Not only did we go into the "What" we also went into the "Why" these are important.

So, sit back, take notes as we share a few very important ways that you can use these to improve your trading.

Time Stamped Show Notes

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Sean Donahoe: Is your trading not quite firing on all cylinders? Did you zig when you should have zagged? Well, let's see what we can do about that. Let's rock.
Automated: Rebel Traders takes you inside the world of two underground master traders who take an entertaining and contrarian look at the markets, to cut through the noise of Wall Street and help you navigate the trading minefield. Together, Sean Donahoe and Phil Newton are on a mission to give you the unfair advantage of a Rebel Trader, and now here are your hosts, Sean Donahoe and Mr. Phil Newton.
Sean Donahoe: Hey, hey, hey. This is Sean Donahoe, and welcome to the Rebel Traders Podcast. We are California dreaming on location, unintentionally. I had a little bit of a family emergency so I actually had to jump on a plane, come over to California, and rock and roll. But hey, we're still here, we're still broadcasting, and I'm joined by my partner in podcasting, Mr. Phil Newton. Phil, how are you doing, sir?
Phil Newton: I'm pretty good today. You reminded me of Zig and Zag, another UK reference to their show in the 90's on kid's Saturday morning TV.
Sean Donahoe: Oh, my good grief, now you have blasted me back as well. It's like a Saturday morning breakfast show. But there you go. Anyway, it's all good, and we're rocking and rolling. As I said, we're kind of on location, so if the audio is a little bit different, hey, that's cool. But again, this is kind of also one of the things we talk about a lot, is the ability to put your trading around your lifestyle, not make trading your lifestyle, and the ability to ... Again, I'm on the move, as I often am. In this case, it's for a family thing, but oftentimes, I'm traveling the country or traveling the world because of business, but again, from my laptop, just before we went live, I was checking my portfolio, going through things.
  It's actually six o'clock in the morning here in California, so again, I'm checking things pre-market and everything else, rocking and rolling. But again, in this week's show what we're gonna be doing here is looking at a few do's and don'ts of trading, how a few minor tweaks could fix, hey, some of the major problems in your trading. So it's time to roll up our sleeves a little bit, dig in, and if you're tired of trying to break every pivot, tweet and news bump that pushes the opposite direction to where you want it to go, maybe this will help you just a little bit here. So let's also get rocking and rolling with a few do's and don'ts and a few other things. What else we got in the show?
Phil Newton: Well, it's an interesting thing, because we've changed up the format, so it's always difficult to know what's coming next. Normally, I'd be sensing we've got the usual Bullshit of the Week, but that's gone out the window. We've got the shovel and we've shoved it out. We've got the now, new and and improved Trade, Fade, Evade, which I've gotta admit, Sean, I'm quite looking forward to because we're gonna try ... well, not gonna try ... we're going to pick a few random stocks and decide whether they're trade it, fade it or evade it.
Sean Donahoe: Absolutely. And somewhere amongst all of that, we also ask, hey, where is the trade? Is there a trade there or is there not? And on top of that, again, we're trying to also change the format up a little bit. You might have noticed a few little changes here, little diversions and little enhancements, but we're doing this so we can knock out the podcast that must faster to get it live that much quicker. You guys don't have to wait from the time we record, the time that it drops on your iTunes or wherever you listen to it. So, with that being said, okay, the do's and don't of trading. Now this section, this idea was kind of inspired by a book, funnily enough.
Phil Newton: Was it me? Was it me?
Sean Donahoe: No, I'm afraid you're not that inspirational, my friend. I'm sorry.
Phil Newton: I'm not that inspirational. Oh dear, oh dear.
Sean Donahoe: No, no. Play the world's smallest violin again. It's actually a book called Eat This, Don't Eat That. It's something that's a very popular book for people who are trying to get healthy and I thought ... just popped in my head, do this, don't do that. It's very simple. Let's keep it bullet point, almost simple of things that you can do. What we're gonna also do is I'm gonna copy and paste this entire do this, don't do that kind of list on the show notes, just so you can, if needed, put them in a document, print them out, stick them on the wall, because they're literally bullet point simple. But it's nice little reminders of as you're going through your day's trading, you're doing all the kind of stuff, it's like, "Oh, yeah, don't do that. Okay." -
Phil Newton: I think it's more to do with principles, more than anything. It's something we go on about-
Sean Donahoe: Kind of.
Phil Newton: ... quite regularly, because one of the things that we quite regularly talk about is the tactical stuff. The which indicator do you use, or should I have a particular setting on my chart, or should I use ? It doesn't matter. Pick whatever you're happy with, but the principles of trading, they haven't changed in hundreds of years. I think that's kind of the direction that we're going in. If you do these things, you're gonna set yourself with a foundation for success.
Sean Donahoe: Absolutely. You're absolutely right about that. This, and the principles of good trading, of successful trading. Because unfortunately, a lot of things have warped in terms of perception and execution, and what people think should be, but at the root of it, these are the principles of the professional trader. I'm not talking about the institutional trader, the guys that have to certain .
Phil Newton: So you're successfully doing it on a day in, day out basis.
Sean Donahoe: Exactly.
Phil Newton: We make that distinction. We try to make that distinction quite regularly, don't we?
Sean Donahoe: Yeah, absolutely. With that being said, I guess the first do and don't is do treat trading like a business. Don't treat trading like a hobby. This is a drum we bang a lot.
Phil Newton: Straight onto the soapbox.
Sean Donahoe: Absolutely.
Phil Newton: Straight onto the soapbox. Why break the habit of a lifetime?
Sean Donahoe: Absolutely. I packed that in my suitcase just in case. We had to break it out, just in case.
Phil Newton: You remind me of Wiley Coyote, you know with one of those fold up Acme soapboxes for just such an occasion.
Sean Donahoe: I might have to actually make one of those, just for the fun of it, with Acme written on the side. But it is something we talk about a lot. The core thing is, if you're gonna be serious, successful, and ultimately, profitable, with your trading, you need to have that businesslike approach. Don't treat this like a hobby. This is one of the problems and it's kind of obvious. You would think it's obvious, but we do see a lot of people who are coming at this as kind of, "Oh, it's a nice little hobby on the side. I've got some money, I'll just put in the markets." Like they're going to the casino, they're off to Las Vegas for a weekend or something like that. "Oh, I've got some money in my pocket. I can afford to lose this. Let me throw it in the markets. Oh, there it goes."
Phil Newton: And goodbye.
Sean Donahoe: Yeah, exactly.
Phil Newton: And goodbye. What was that ... was it The Simpsons or was it ... No, it was South Park, wasn't it? "We're gonna invest your money in this super duper ding dong thing, and it's gone."
Sean Donahoe: Yeah, pretty much. Pretty much. We're in this to make money.
Phil Newton: That's like a hobby mindset, isn't it? Yeah, that's the hobby mindset. So don't do that.
Sean Donahoe: Exactly. Don't do that, because at the end of the day, we're in this to make money. The whole process ... The only reason I will put my money in the market at all is because I want some return on that investment. We talk about ROI or ROC, return on capital, and ultimately, we want that return. That is the most important aspect. If there's one word to take away from this, is a return. And that's what we're doing. A business opens up on the high street, Phil's Fetish Shoe Shop.
Phil Newton: Phil's Favorite Shoe Shop.
Sean Donahoe: We open up a business on the high street with the intent of executing business through the day, and then during that day we hope to actually get a return on the expenses that we put out into the business. The expenses basically here the trade risk that we're putting out there. Okay, that's the daily execution budget. Might have to pay some commission to some brokerage, a discount broker or whatever kind of brokerage you've got. There's fees involved, but at the end of the day-
Phil Newton: That's the cost of business anyway and -
Sean Donahoe: Cost of doing business, exactly. Yeah. The COGS, cost of good sold, so to speak, as we talk about in business, and the cost of doing business, but at the end of the day, we want a profit. That's why we've gotta take all the actions to make that happen.
Phil Newton: Compare that to the hobbies, though. The hobby, by comparison, to stick with the analogy, you do it infrequently. You do it maybe once, twice a week, or once, twice a month. You don't do it on a regular consistent basis like you would operate a business. The hobby is something you do in a little bit of free time. You don't really take it that seriously. You're playing golf and you lose your balls in the rough, no big deal.
Sean Donahoe: Indeed, and you've gotta watch about that rough where you lose your balls.
Phil Newton: You don't wanna ... You know I like to watch my balls. Never mind. But you get the idea. It's a different mindset, a different way of life. It's a different way of thinking. I'm not suggesting that ... because we're all about being time efficient with what we do. You can just check in once a day and you make sure everything's as it should be, and if you've got a bit more time, you can spend a bit more time doing it. If you've got a little bit less time today, like you have, looking for new trades probably isn't top priority, but you can still maintain the positions with a quick glance while you're about your travels. You can scale it up and scale it back, depending on your circumstances and situation, which is the great thing about what we do. You can just maintain the portfolio as opposed to grow it or farm it and all the rest of it. But the point is, you still opened up for business.
Sean Donahoe: Exactly, and the one key word you mentioned there is consistent. Here's the thing. We are always looking for a consistent process that delivers consistent results in a predictable fashion. Now you might have ups, you might have downs. You might have spikes in business, you might have gluts in business. Doesn't matter, but it's the consistent application, consistent approach. Production line ... as Phil likes to mention, which is doing here. And at the end of the day, we're looking to consistently execute our strategies, our approach to the markets. We want to make our side as consistent and as predictable as possible, and we have a positive expectation strategy, in other words, hey-
Phil Newton: We expect to make some money with our ideas, yeah. Which is just like, surprisingly, just like any other business. We expect to make some money here, with, as you were saying, with a consistent application of your strategy, just like every other business. Surprise, surprise.
Sean Donahoe: Exactly. And it's funny, because I really don't hear a lot of people talking about it, but it's bloody obvious. And again, a lot of the-
Phil Newton: And it's all about the widgets and, "Look at my Lambo, dude," and #buythedipincrypto. This is what we're talking about. We're tactical. Those things change. The minutiae changes every day, but the business of trading, it hasn't changed in a couple of hundred years. Buy the dip in an uptrend, a long-term uptrend. Go with the money flow, if you're a trend trader. Different styles of trading have different rule sets, and those have not changed in hundreds of years. There's only three things the market's gonna do, up, down or no change. That's it. Pick a direction and go with the flow. You don't need to make this complicated, just like ever other business, the more complicated that you make what you're doing, then the more difficult it is to actually do what is essentially a simple task. It is, "Do I think that the charter's going up? Is prices going up? Okay, well probably that's gonna continue." That is as simple as I like to make it.
Sean Donahoe: It really is.
Phil Newton: And that's as simple as I like to operate my business. There's a few more steps involved, but the overarching principle ... In the last 12 months, is this chart going up, down or sideways? It's going up. Okay, well it's probably gonna continue to go up in the next few days. Ergo, I've got a good trade. That's it. It's that consistency of application that you were on about. I suppose that leads in quite nicely to have that routine, do follow maybe a strict routine. You mentioned, I like to use the production line analogy, but all it really is, is a checklist. Has step number one happened? Okay, move on to step number two, step number three and so on and so and so on. So always have that strict routine that you can follow.
  That's another thing that helps keep it businesslike and time efficient. It's by having that routine in place that you can follow to make as much of the things that you would normally do on a regular basis as consistently and methodical as possible so that you're not forgetting something. Because I've got to admit, when I first started out I had more of a mental checklist, as opposed to a physical checklist, so it was easy to skip over things and miss something and then you're not left wondering, "Why didn't that trade work out?" And then when you review your positions, it's like, "Oh, I missed a critical element because I didn't follow a checklist." If that makes sense?
Sean Donahoe: Absolutely. Absolutely. The counter to that one is don't trade on emotion. Like Phil was just saying, do trade following a strict routine. The checklist, robotic approach. On the flip side of that is, what's the opposite of that? Don't trade on emotion. A lot of people become very emotionally invested in what they're doing and everything else and-
Phil Newton: Irrational.
Sean Donahoe: Irrational, yeah, that's ... The other way to look at it is, "Hey, I'm kind of scared of putting this trade on even though it's all lined up," or, "Oh, I've got too much money in this one. I can't sleep at night. I'm worried. I'm gonna have to adjust this or tweak this trade," and they're readjusting the positions, keep shifting their stocks. Following the trade and it's not quite doing what they want and they're like, "Oh, I'm not sure about this. Oh, this one's kind of ..." and they're kind of just fretting.
Phil Newton: You're getting completely emotionally engaged in the trade, yeah. I suppose a quick way to ... I'm just trying to say it. I think the emotion's never gonna go away. I think it's worth mentioning this up front. It's never gonna disappear. The way that I like to think about it is it's like a volume dial. Most newer traders trade with big position size, because they're trying to swing for the fence. We know all about our viewpoints on that. If you imagine that position size like a volume dial and it's all the way up, relative to your current situation, to reduce the emotional impact is if you reduce your position size it'd be like the volume being turned down on the emotions. Those little voices in your head that just say do this or don't do that, all those things we're talking about. Reduce your position size and you'll still hear it, but you'll be able to tune out the noise because it's just little whisper in the background. Whereas, when your position size is big, those emotions, those little voices that tell you to do stupid things, it's all the way cranked up and it's the only thing you can hear. Does that make sense, Sean?
Sean Donahoe: Absolutely. It's a good analogy and it's a good way to look at it, because if you trade on emotions, you may as well go outside and set your cash on fire and roast some marshmallows on it, because that's gonna be more -
Phil Newton: I've done that plenty of times, Sean. Minus the marshmallows.
Sean Donahoe: It's really what you're doing. The more you can take emotion our of your trading, obviously the less risk that you're involving in your trading, but you can't take the full emotion out. We are creatures with emotions built in, but you manage it.
Phil Newton: It's always gonna be there, so what can you do to minimize it. Yeah.
Sean Donahoe: Exactly. We can turn down the dial, and that's really ... It's so that you're more emotionally invested in any single trade by trading more often, trading smaller, turning down the volume dial.
Phil Newton: There's reasons why we do this. You start emotional . There's a method in the madness, is what you're just describing.
Sean Donahoe: Basically, yeah. If you've got a portfolio of trades that are rolling all the time, first of all, you've got a lot more ducks to manage. You don't become emotionally invested in each and every single individual trade, but you're managing your employees as a whole. This is the way we look at our trades is, hey, these are the employees in our company making us money.
Phil Newton: The way I described this last night, Sean, and I loved it, because obviously, it came from my lips. What can I say?
Sean Donahoe: Yes, indeed. Yeah.
Phil Newton: To run with our employee analogy, if you've got a business, like we compare it to regularly, and all your trades are your employees, what if one of them phones in sick? It's inconsequential to the business. You've still got 19 employees that carry on. And I like that, the phone in sick employee. As the months go by, this little analogy that we keep tossing back and forth, it evolves quite nicely. But if you've just got one employee in your business and they phone in sick, suddenly you're in a whole world of pain.
Sean Donahoe: Exactly. No, that's exactly it. That's a bloody good analogy. I like that. Gonna have to steal that.
Phil Newton: I like that. It was just an add-on that I thought about last night when I was working with the students.
Sean Donahoe: There you go. Keep that in mind. The more robotic, the more checklist you can make your approach to trading, then obviously the less you have to invest any of your emotional equity.
Phil Newton: It's emotionally draining, as well. It's not just that. It's not practical. It's emotionally exhausting, being so engaged in the outcome of one position. When you've got the ... kind of touching on portfolios, but when you trade with small position and you reduce the emotional impact, and you trade more frequently, it's actually quite liberating, that emotional investments is just reduced to the point where it's just a far more relaxed life. It doesn't sound like it should be, but when you've got more positions on, you actually are more relaxed. Because again, you're not worried about the one employee phoning in sick anymore. Now you've got 19 others to pick up the slack. That's a great place to be emotionally, I find. Other things that we can do -
Sean Donahoe: Absolutely. So more efficient business.
Phil Newton: Yeah. I was just gonna say, other things that we can do to kind of reduce the impact of that emotional minutiae, if you like, is get rid of the external influences that are of no consequence to your trading. The news is a constant reminder of things that we shouldn't look at, because basically, forget the news is another big do. Do forget the news. Don't look at it. It's of no importance whatsoever.
Sean Donahoe: It really is. Yeah, the do there, as you said, do forget the news. Don't forget the chart. Here's the thing, we talk about this as a noise factor. This is one of the things that, again, can influence emotions, funnily enough, because you get all riled up by our cognitive biases and everything else, or whichever way we invest ourselves in a particular news story. Exactly. That could be a big factor, as well.
Phil Newton: Maybe we swing politically, I don't know. You can find a bias to support any viewpoint, but it's always an irrational viewpoint, because like you said, it's cognitive bias. You can find something to support or disprove your viewpoint with a stock or a trade idea. The thing we're always talking about is the general news is representative of the general public. The clue's in the name. And the general public are always the last to know anything. Why would you wanna listen to the news? If they're the last to know something, it's not news. It's new. Clue's in the name. It's not new. You are the last to know something because it's now reached the general population.
Sean Donahoe: That's true.
Phil Newton: Why would you wanna pay attention to it? This is why we say don't forget the chart, because everything you need to know that will impact price is in price. You might not know why it's been impacted, which is where the news will help, but trying to trade from the news is what we're saying to don't do. And if there is something that has impacted the market or a stock, that would be reflected in the price movements. Because there's many times you and I, Sean, have both seen a news headline . We're waiting for some news report. We happen to be online and we hop on the phone, and it's like, "What's gonna happen?" I tell you every time, "It's gonna be sput, sput, fizz." And you'll laugh, and you're like, "No, it's gonna be this report," because you're a bit more fundamentally inclined than I am. And I'm, "No, no, no, no, no. Sput, sput, fizz every time." What happens is price typically just peters out, because everyone's waiting for this news announcement, if it's a no news announcement or if a headline goes on in the ticker tape and something weird happens or the excitements, the talking heads going crazy about that announcement is greater than the actually news announcement itself. And the news announcement, typically, has zero impact on price. So the markets-
Sean Donahoe: Because it's already baked into the price, yeah.
Phil Newton: Most of the time, yeah. And if it is a shock to the market, if it is genuinely new news, if that makes sense, if it's generally a new piece of information that, for some reason, has generally been breaking news, which is infrequent these days, but let's just say it does happen, you'll find out if that's gonna impact the market. The people who can move and influence the markets will move and influence the market based on that information, or not, as the case may be. And most of the time, it's not. And that's why I always default to ignore the news. Most of the time it's sput, sput, fizz. Look at the chart. Everything you need to know is in price.
Sean Donahoe: Yeah, pretty much. And the other flip side of that is when there is something that is newsworthy, news driven and has a big impact, the sput, sput, fizz can also ... it goes to the -
Phil Newton: It provides the opportunity.
Sean Donahoe: ... interest. It can provide the interest for the -
Phil Newton: Yeah. And the airline incident's the one that springs to mind, where that was genuinely breaking news where that guy very sadly and tragically was pulled off the airplane kicking and screaming, a few months ago.
Sean Donahoe: That was with United, yeah. -
Phil Newton: That did have an impact. The stock's price, a temporary negative thing. But the reality was, up to that point, still a fairly reasonable stock. It reverted back to where it was just a few days later. And that's the type of opportunity that the news, when it's genuine new news, if it's breaking news, I suppose, not false ... When I say false news, it's not false in the sense that it's made up. It's just not really news. But the sensationalizing old news ... that's the right phrase ... that's what happens most time. They sensationalize old news to make it sound like it's new news. If it's genuinely a new piece of information like a breaking instant like that or the Facebook breach ... Mind you, that's kind of sensationalizing old news, but you get what I'm saying. When it's generally a breaking piece of new information, that can provide an opportunity. Price will react and it will either an opportunity or not, as the case may be, by looking left across the chart.
Sean Donahoe: Absolutely, which is exactly the next do. Do look back left across the chart. Don't focus on the latest bar. We touched on this a little bit, so let's put the light back on this one.
Phil Newton: It took me a long time to kind of get this one, actually, because I always looked at the live bar. When day trading, which I spent 12 years doing, it's hard not to look at the live bar when you're sat in front of it for many hours. But it did take me a long time to kind of get out of the habit of looking at the live price and focusing on that. It's a still developing bar. If I could turn it off, the live bar, and just have the latest bar on whatever timeframe developed, if they could code that into the software, that would be great, because it would make my day a lot less stressful. Coming back to that stress thing again. If I could turn off that live price and just have the new bar develop, that would be great. I think that's why I like daily charts so much at the moment, because I'm looking at it typically out of market hours, and I'm always looking at the latest piece of information and they're no new updates. It's not fluctuating up and down. It's not dancing around. It's like these are the stocks I'm gonna trade today, and I can very unemotionally and very detached look left across the chart and find out if the last traded price is at an interesting level that makes it worth exploring further.
Sean Donahoe: Absolutely. If you focused only on the live bar, you're gonna be like, "Is it going up? Is it going down? Is it going up? No, it's a little bit. Oh, no, it's going up. It's rallying. Okay, great ... And it's going down again."
Phil Newton: We spoke about this a few weeks ago. This was a bullshit segment, as well, where I think it was goals, wasn't it? We've mentioned this quite a few times now in the last few weeks. It was a section of the day, 30 one minute bars. And on goals, there was just one giant bar that looked like it was selling off in a big time. And I'm holding my arms, doing the air fingers, big sell off. The reality was, it was a one minute chart. It was only the last 30 minutes. At a random point in the day. And when you look at the scale, it wasn't actually that big. As a dollar amount, as a percentage of the regular movements, it wasn't that big.
Sean Donahoe: But it was newsworthy. It was newsworthy.
Phil Newton: But guess what? It was that sensationalized news item that wasn't really news.
Sean Donahoe: Yeah, exactly.
Phil Newton: Again, another illustration to look left across, to get a full picture. We normally say, look at least 200, 250 bars, or candles, whatever your preference is, on whatever timeframe you're looking at. That's gonna give you enough information to look and make an appraisal from the whole of the charts rather than just that live piece of information or the last 10 minutes or the last 20 minutes. Because most people don't look even enough data to make a full appraisal of, is this worthy of further exploration.
Sean Donahoe: Absolutely. Okay, so kind of jumping on from that, and this is one thing that we talk about a lot and it actually leads into the trade, fade or evade here, which we'll be doing in a moment. But do move on if you can't see the trade fast. Don't overthink, overanalyze, and force the trade. Now this is one thing that we talk about-
Phil Newton: This is a pet peeve of mine when I'm coaching students.
Sean Donahoe: Yeah, exactly. It's-
Phil Newton: Move on. Move on.
Sean Donahoe: If you don't see it, if it's not right there, if you don't see, "Oh, yeah, that's a good one," and, "Oh, that could be a good," boom, move on. Because if you don't see it, it's not there.
Phil Newton: Just picking up ... This is where I'm fussy on the wording. Just hearing, Sean, describe the situation of when to move on. When you start saying things like, "Well, that could provide a good opportunity, and this might be a good thing and maybe ..." There's no solid, definitive, "Hell, yes," situations. That's what I'm always . "Hell, yes. I've gotta be on this. Holy smokes. Today's the day for this one." That's the experience that I'm looking for. If I've got a, "Maybe. Yeah, well, could of. Might be."
Sean Donahoe: Maybe -
Phil Newton: There's no conviction there.
Sean Donahoe: Yeah, exactly.
Phil Newton: And if you catch yourself taking a breath before you speak ... I mean, I always encourage people to talk out loud. Firstly, you sound crazy, but it doesn't matter. But when you're looking at a chart ... And we'll illustrate this. This is one of the reasons why we do the trade, fade, evade. If you catch yourself going, "Um ..." move on. There's nothing there. Your brain knows everything that it could, should or would have done at any point in time. If you have to kind of spend time trying to pull teeth and draw information from the long-term memory, it ain't there. It literally is not there.
  Go and look at something else that is a, "Hell, yes." It's in an uptrend in the last 12 months. Great. Is it dipping in an uptrend? Yes. Great. I'm gonna buy the dip in an uptrend. Fabulous. Is today the day? Yeah. We've got a sign of exhaustion. Great. Let's put the trade on. That's the conviction that I want. And notice the wording. "I will put that trade on today." Not, "Well, maybe it looks interesting." And that's the difference between being able to put the trade on today and be fast and efficient with the time, versus what most people do. They'll spend two hours looking at a chart, trying to figure out where the trade is. It ain't' there, dude. Move on.
Sean Donahoe: That's exactly it. No, at the end of the day, that's exactly it. So that kind of leads on to one of the things that we talk about a lot, which is following your trading plan. This is part of our bullet point kind of approach to looking are the markets. Are we going to spend hours a day in front of the charts trying to find and force a trade? Are we going to be just kind of boom, boom, in, out, okay, on with the rest of our day? That's what our trading plan kind of does, because trading plan is your business plan. It's how you're gonna approach your trading. It's the structure for the entire operation, so to speak. But one thing we do see, and this is the don't, the counterance of that, is don't shoot from the hip. You're not John Wayne. You're not Clint Eastwood. You're
Phil Newton: You ain't that good.
Sean Donahoe: Yeah, exactly. That's not-
Phil Newton: When you've got 20 years of experience under your belts, yeah, you can do that, because you've got 20 years experience to back those shoot from the hip situations. To be fair, you and I both know, Sean, that there's times where you can do that, but it's the voice of experience that you do it. When you start out, you don't wanna any judgment whatsoever. You wanna know, "This is what I'm gonna do, when I'm gonna do it, why I'm gonna do it." And if you've got anything outside of that remit, you don't do it, because as a new trader, a new inexperienced, unprofitable, trying to get to the point of being a successful, profitable trader, you don't wanna make any judgments. Period. Just like when you start ... surprisingly, that shoe shop on the high street. You wanna make sure that you follow your business plan, your marketing plan, all the advice from your support group and consultants and whoever you have, you wanna make sure you follow that to the letter, because that's the blueprint to success. They've shown the way already, so why would you wanna do something different because you aint that clever. If you were that clever, you wouldn't need all that support in the first place. You don't have to reinvent the wheel. I certainly didn't reinvent the wheel, but I painted it a different color and put an extra spoke on here and there. We didn't reinvent-
Sean Donahoe: Spokey Dokey. You put the card in the spoke, like the old days.
Phil Newton: Exactly. I didn't invent trade the trend. I did'nt invent buy the dip in an uptrend. But you know what? That's worked for hundreds of years. I ain't gonna do anything different to buying the dip in an uptrend. I just defined what that meant for me, and that's what I meant by, I painted it a different color and I've added the Spokey Dokeys. You can do that. You do not need to reinvent the wheel.
Sean Donahoe: Absolutely. So with that being said, now we're gonna move on to trade, fade or evade.
  Trade, fade or evade.
  Okay. So, we're gonna look today at a few automotive stocks. There's been a lot of controversy. Tesla's in the news. We've got everything happening the new NAFTA with Mexico, and Canada trying to break into NAFTA 2.0. One of the sectors and industries that's in the news is how this is going to affect the automotive industry. We're gonna go with the big three. We're gonna look at Tesla, Ford and General Motors over here. I guess, let's start with Tesla. Always in the news. Always a lot of interest. We bring up now and again, because for the BS of the week, all of this was a good subject that we used to touch on every now and then. But Phil, gonna start with this one. Trade, fade and evade Tesla?
Phil Newton: Just like a disclosure. First time I'm hearing these stocks are literally first impressions. Tesla, I think I would trade it. I'd be bullish. It's in a range. We're at the lower end of the range. It's probably not gonna be a today trade. Maybe it'll be a tomorrow trade with a sign of exhaustion. So it's checking off my usual strategy trades. But yeah, I think I'd probably trade it. I'd probably be bullish, lower end of the range, target would be upper end of the range.
Sean Donahoe: Exactly. I was thinking the same thing. The only thing that would make me hesitant is, like you said, looking for that sign of exhaustion. One other thing is, just looking back, -
Phil Newton: Looks like it's developing today, to be honest-
Sean Donahoe: Yeah, it could well be. At the end of the day-
Phil Newton: ... as we're recording this.
Sean Donahoe: Yeah, absolutely. Looking at it, that might be a jump in on the ... I'm looking at the ... I have a three chart setup here for this. I'm looking on the ... this is 15 minute chart here and it's looking quite nice. So yeah, I would probably trade this one, as well. I like Tesla. It's made me a lot of money and when it whips -
Phil Newton: I've had a few trades on it recently, yeah.
Sean Donahoe: When it whips . There's a lot ... the range high and range low's kinda high, so when it snaps, it's volatile. It means there's some good opportunities there for the sniper.
Phil Newton: I was just gonna throw a quick tip in, where's the trade? Because Tesla, it's an expensive stock. It's a currently $310 stock. The options are gonna be well expensive, man. If that's out of your price range, how to make it more affordable so that you don't have to, "It's too expensive. I can't trade it." Maybe you do debit spreads. You can take a little bite out of it, rather then go for the big trade that can be quite capital intensive, smaller accounts. Just throw a quick tip out there, because it came up yesterday on a training session for us, didn't it, Sean?
Sean Donahoe: Yeah, exactly. No, I think that's -
Phil Newton: Not between you and me -
Sean Donahoe: No, that's a dead on point there, because it just makes it a nice discounted ... Adds some extra security in there. Defines your profits and defines some risks. That's a great way to execute a trade on that.
Phil Newton: It just means you can take a bite out of it, rather than just go, "Oh, it's Tesla. It's too expensive." There's no expensive stocks when you're options trading. You can construct that's within your budgets or risk tolerance.
Sean Donahoe: Absolutely.
Phil Newton: Because to be fair, even for me, it's a bit expensive. I'd rather do a spread on it, just because it's one trade, one contract. It's a few thousand dollars for contract. It's a little bit expensive just to not spread the trade, spread the risk.
Sean Donahoe: Okay, next one. GM.
Phil Newton: Anyway. Anyway. GM. GM. Let's take a look at it. GM. To be fair, you go first. Trade favors age.
Sean Donahoe: Actually, I would trade this one. I'd probably be a little short. Here's the thing. We've got little whips all going on because obviously of NAFTA and everything else that's coming in, which again, how's that gonna affect it? I think there's a little bit of a whip sore here. I would maybe ... I was thinking I would sell some calls. It'd be interesting to see how that plays out, but it would be a very short-term trade if there was anything there. It's already in a down trend a little bit recently.
Phil Newton: So bearish to neutral for you, yeah?
Sean Donahoe: Bearish to neutral, yeah. bearish to neutral.
Phil Newton: Hence why you'd probably be selling some calls trades.
Sean Donahoe: Yeah.
Phil Newton: Okay. To be fair, I've gotta stick to my guns. My whole philosophy, it's buy the different up trends, sell the rallying down trend, or it's in a range. Buy the range lows, sell the range highs. For me, it's at the range lows or near the range lows, in this case. If I was gonna do something, I'd probably be bullish, because I'm looking at this as it's in a range. There's a slight downward slant to it, but looking at the last 8-12 months, it's been going sideways, as far as I'm concerned. My whole philosophy is based around, if nothing new is developing, same thing's probably gonna continue to happen. So I've got to be bullish at the range lows.
Sean Donahoe: Fair enough. Like I said, mine is a very, very short-term-
Phil Newton: This is just what separates traders -
Sean Donahoe: Mine's a very short-term because of NAFTA. That's the only thing that would be a fundamental aspect -
Phil Newton: Yeah, that's right.
Sean Donahoe: ... but again, very, very short-term. Phil would probably be looking at 45 days. I'd be looking at like seven days.
Phil Newton: If I was looking at a 10 day trade, I'd probably do credit spreads. It's going sideways in the last two weeks. If I was thinking very short-term horizon, I'd probably agree with you. Either puts or calls. I don't think I'd have a bias one way or the other. The last couple of weeks, it's just been sideways, so you could quite happily sell something on the assumption that it's probably not gonna do anything for the next few days.
Sean Donahoe: Yeah, pretty much. And also looking on the 15 minute chart, I'm seeing a couple of -
Phil Newton: Interesting little side bar, Sean. I just caught us doing it. Depending on your time horizon, you're gonna have a different perspective. Because in the last 12 months, I'd be bullish if I was short-term with a 7-10 day trade horizon. I'd probably be looking to do what you were doing, which is sell puts and calls. So it's just an interesting little side bar, depending on the objective that you have in mind. My default objective is what's gonna happen over the next 45 days. I evaluate the last 12 months to make that evaluation. It's just interesting, different time horizons, different perspectives, produce a different trade by looking at the same chart.
Sean Donahoe: Yeah, absolutely. Yeah, again-
Phil Newton: And there's no right or wrong. You're one way, I'm the other, and that's perfectly fine. Different time horizons. I think that's the lesson here, more than the ...
Sean Donahoe: A very nice little observation is again, that time horizon, because yeah, looking back at the 12 months, it is kind of range bound, exactly as you said, where the range lows and everything else. Well done. Okay, let's move on to the third wheel in this entire equation, which is Ford. And that's F, if you're following along at home. Again, looking at this, trade, fade or evade, my friend?
Phil Newton: Evade. It's under $30, which is one of my criteria for a trade. I will trade under $30 from time to time. On the regular things to trade, this would be an evade. If I have to trade it, it looks like it's in a downward sloping channel. Again, I'd probably be bullish, to be honest. Nothing new is developing. Until something new happens, same things are likely to happen, so if it stays above $10, I would imagine it would get to $12. Simply because, call it a channel, if you want, but it's in a consolidation. So the same philosophy, for me. Purely technical. It's going up.
Sean Donahoe: Yeah, I would be the same, but like you said, it's under the $25-
Phil Newton: Time horizons.
Sean Donahoe: ... I'm a raising. I would evade this one, as well. Don't get me wrong, I love Fords. I actually had a Mustang for the longest time. -
Phil Newton: There's nothing wrong with it. It's just we've got certain universe criteria when it comes to selecting stocks. And somewhere to $25, $30, is the minimum threshold for trading a stock with options. To be fair, that's in our universe of stocks. We've got a download for that somewhere, haven't we, Sean?
Sean Donahoe: Yeah, yeah. If you go to And you can -
Phil Newton: What do you call a little bear, Sean? Is it a pup?
Sean Donahoe: Cub. A bear cub.
Phil Newton: Oh, is it a cub, is it?
Sean Donahoe: Yes.
Phil Newton: Right. I'm cubbish on this stock. A little bearish.
Sean Donahoe: There you go. So, short-term, a little bearish, little cubbish. Long-term, probably a little bullish. I guess that's a calfish, but there you go. Anyway, good rock. That's what we talk about. So, okay. With that being said, ladies and gentlemen, that is the end of this week's show. Hope you enjoyed it. Hope you learned a little insight into what we do. Again, that trade, fade or evade, I love this little segment. It gives highlights to the viewpoints.
Phil Newton: Just checking in on last week's ... I was just gonna quickly check in on last week's trade, because we quite like Google. It's pushing higher above the 1,200. It's currently touching 1,240, so we're up about $30. Certainly from . It's working out quite nicely, based on our trade, fade or evade from last week. We both hit on a stock that we both really liked. So that's working out quite nicely.
Sean Donahoe: Turned out nice again.
Phil Newton: I think if I had to put a trade on-
Sean Donahoe: Turned out nice, Vicar.
Phil Newton: ... I think possibly Tesla. Maybe I'll find out tomorrow if we see a sign of exhaustion on today, maybe it'll be worth it. I'm not really getting excited about any of these, to be honest.
Sean Donahoe: No, not this time. Again, I always like the find the entry point for when there's a new snap.
Phil Newton: Yeah. It's that, "Hell, yes," experience that we mentioned earlier. I'm not having that. Like with Google, it was like, "Hell, yes. This is a ... Why didn't this come up on the regular scan?" It was a, "Hell, yes," experience. Whereas, today, well, "Meh, yeah." They're on my radar, take a look at them. I'm not excited. I've not got the, "Hell, yes," experience. That just highlights what we mentioned earlier. This whole purpose of that trade, fade, evade is to try ... Watch your gut instincts. If you were gonna do something, what would you do, and would it be today? No, I've not really seen anything today. Go and look at something else. It's the whole reason why we're doing this, just to illustrate, you can make a quick, speedy decision when you've got a methodical, systematic approach to find, filter and sell stocks. We're literally picking random stocks here. Whatever was in the news yesterday is what we're looking at .
Sean Donahoe: Exactly. Funnily enough, even if it's not in the news, we'll pick out sectors, we'll look at things that maybe have tickled the radar, so to speak. But again, it's just a case of is it not off the back of the news, because we don't wanna be trading like that, because that's one of the things we don't talk about. It's just what is topical? What is interesting? What might be just a random thing to keep a random element to it just so you can understand the process. I think the big takeaway from today was time horizons. Two very distinct approaches or intents. Opposite sides of the chart, so to speak, of where we are bias wise. Are we bullish? Are we bearish? But it was right down to that time horizon, so good little takeaway I think right there.
Phil Newton: Interesting observation. Interesting.
Sean Donahoe: Absolutely. So that's it for this week. As I said, thank you for listening to the show, do appreciate it. And remember, this show is not free. It will cost you a five star review. Just go to and you can see all the ways you can listen to the show and subscribe to the show and review us on your favorite way to hear the show. Or you can just tune in every week, go to the site,, and just listen to us every week. All the shows are posted there, along with show notes and everything else that you need. How can they connect with us on social media, Phil?
Phil Newton: They can go to the same link, They can find all the links to the Facebooks, the Twitters. We've got a Facebook group, which is starting to be getting a little bit more active now. Now that I've found it and realized that we had it, Sean, I'm in there. If you wanna join us, Phil's gonna make a vain attempt to try and be social. Or if you wanna do it the old-fashioned way ... When did email become old-fashioned? ... email [email protected] and that comes directly to me. If you wanna send me fan mail or adoring gifts, all the usual praise and glory that I'm worthy of, by all means, send it over. Or even if you've just got a trading question, I'll try and answer that for you, as well.
Sean Donahoe: Absolutely.
Phil Newton: Do we have anything interesting to put up for next week's show, Sean?
Sean Donahoe: Yeah, well, actually-
Phil Newton: Or is it gonna be a surprise? What do you reckon? Shall we keep it secret or have we got something interesting?
Sean Donahoe: Let's do a little tease. What we're gonna do is what it takes to-
Phil Newton: Ooh, it's a surprise.
Sean Donahoe: Absolutely. What makes an actual great trader? Now this is kind of gonna be a little introspective. It's gonna be a little bit casting a wide net. But there are some principles that make a great trader and what takes a good trader from good to great here? What takes a good trader, makes them a great trader? What makes them absolutely outstanding? And what is it that actually makes them consistent? What makes it so that they're not just lucky, but what makes them a great trader? So we're gonna cover that in a little more depth.
Phil Newton: As I like to say, I'd rather be long-term successful than short-term lucky. Because there's a lot of traders that get short-term lucky. It's that what makes you long-term successful, and that's what we're trying to differentiate.
Sean Donahoe: Absolutely.
Phil Newton: And that's gonna be good. I'm looking forward to it already, because there's some very common threads that make successful traders regardless of trading strategy, style or time horizon.
Sean Donahoe: That's it. So, with that being said, ladies and gentlemen, rock on. We'll see you next time.

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

Rebel Trader Do's and Don'ts

Do - Treat trading like a business
Don't - Treat trading like a hobby

Do - Follow a strict routine (The more "Checklist" and robotic the better)
Don't - Trade on emotion - You may as well go outside and set your cash on fire and roast some marshmallows

Do - Forget the News
Don't - Forget the Chart

Do - Look back to the left of the chart
Don't - Focus on the latest "Bar"

Do - Move on if you cannot SEE the trade fast
Don't - Overthink, Overanalyze and Force the trade

Do - Follow a trading plan (We can help with that)
Don't - Shoot from the hip, you're not John Wayne and your not Clint Eastwood

Bonus Do's and Don't we Didn't Discuss (But You Should Also Use!)

Do - Be ruthless with your trades
Don't - Be married to your positions

Do - Verify Everything with Facts, Data, and Numbers
Don't - Trust rumors and opinions blindly

Do - Use leverage as a more efficient way to discount your positions
Don't - Use leverage as a BIGGER pot

Do - Places trades you are confident in
Don't - Place trades that are just "I have to place a trade" positions

3 Key Takeaways From This Show

  • Timeframe is important. You can have different views on the same stock when your trading timeframe shifts
  • Consistency of application results in consistent output.
  • Your trading should be a production line of positions working for you continuously

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