Rebel Traders 067 : Stress Free Trading

Are you a slave to the markets, dreading or hoping every tick is the RIGHT one. Are you putting too many eggs in one basket hoping they are all golden? Feeling a wee bit stressed? Well, let's sort that out right now.

One of the biggest issues facing traders is the stress and emotion of trading.

If you are not careful, this can have a massive detrimental effect on your trading and its a common pitfall that a lot of traders fall in to.

It doesn’t matter if you are a new trader or a grizzled on veteran, it can cause a problem.

So, in this week’s Rebel Traders show, we decided to tackle this topic head on and share with you how we both fell in to this pitfall early on in our trading careers and how we designed specific strategies to remove this PERMENTANTLY from our trading.

We’ll cover practical and psychological aspects that remove stress and help you divest yourself from the emotions that can influence your trading in a bad way.

If you conquer this, you will trade better, smarter and be a stronger, more resolute trader.

So, let’s get rocking...

Time Stamped Show Notes

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Sean Donahoe: Are you a slave to the markets, trading or hoping every tick is the right one? Feeling a wee bit stressed? Nevermind. 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 Mister Phil Newton.
Sean Donahoe: Hey, hey, hey. This is Sean Donahoe and welcome to the Rebel Traders podcast. We've got a conker here for you, a stonker, a rock-n-roller, and as always I am joined by my partner in podcasting, Mister Phil Newton, who is over there wondering what the hell I am on about. How are you doing, sir?
Phil Newton: I'm pretty good today, thanks. Pretty good. It's one of those midweek excitement moments for me. I'm looking forward to today's show. It's going to be a subject that's close to my heart.
Sean Donahoe: Near and dear, as we say. So what are we going to be doing? We are going to be covering what, basically, what we see as one of the biggest problems that a lot of traders have to deal with. And it's the stress of trading. Stress over the overabundance of emotion and emotional investment in your positions can be a huge detriment to your trading success.
So on this week's show we're going to tackle how you can dramatically reduce or even eliminate the stress of trading, and how you could basically sleep easy at night knowing that your portfolio is doing all the hard work so that you don't, per se, have to. So, what else we got going on?
Phil Newton: Well, I think, well just a random comment before we dig into it. I think the funny thing about it all is its self-imposed. So that's what we're going to look into, how to not make it self-imposed. Anyway, we've got our new favorite segment. It's certainly my favorite segment. I've got to admit, Sean, I am enjoying this, where we just pick random stocks and give snapshot analysis. Sometimes we actually find something that's worth putting money on, which is even better. So it's a new segment of Trade, Fade, or Evade.
Sean Donahoe: Absolutely. We always look to see where the trade is, and sometimes it's right there in the corner, in that section. So, with that being said, let's jump right in. And let's just kind of put a little bit of meat on the bone here. Like we said at the start here, one of the biggest problems for traders is the stress of trading. This is because we have a wide range of ways of attacking the market, looking at the market, trading the markets and everything else. But when you have skin in the game, so to speak, it can be an emotional rollercoaster.
It can cause a lot of stress, and a lot of that is due to the way that most people, most retail traders trade the markets, but it's not exclusive to retail traders. It's also
Phil Newton: It's everyone. Everyone goes through it.
Sean Donahoe: Anyone, even industrial level traders, the institutional traders, those guys on Wall Street, they go through so much stress as well. It's just because of the way a lot of people trade. So what we want to do is kind of remove that, because it can be a serious detriment. I mean, you joke about it a lot, but when you first started there was periods when you couldn't sleep, with your very first trade.
Phil Newton: It was an emotional rollercoaster. I went through it and made the mistakes. But because my back was to the wall, as it were, I had to put the trade on. I had to keep the lights on. I had to put food on the table. So there was no choice that I would not put the trade on for me, so I traded through it. It was a heart attack sport, it really was. And given my medical situation, where I'm trying to minimize stress all the time, it probably wasn't healthy for me to do, but it was certainly, it made me resilient very, very quickly.
I had to, not necessarily invent a lot of things, but I certainly discovered a lot of tricks, tips and tactics from the mind's point of view to overcome those challenges so that I could put the next trade on. Because it really is, I've got to admit, it's difficult. It really is difficult when it's your money and there's only you responsible for it. I would imagine it's the same with any business, but I think the difference between ... And this is where a real world business might differ, to compare to trading, is the speed of the feedback that you get from the decisions that you make.
Even when you're swing trading and you might have several days or several weeks or several months, you can see visually, in your profit and loss statements or from the charts, whether your idea is working or not working, either temporarily or completely. And if you're day trading, which is what I was doing back then, you would know very quickly whether your trade was working or not working.
That gives you immediate feedback, whereas with a business you would evaluate, at the very earliest, at the end of the month, at the end of the quarter, at the end of the year, and probably you're not going to really worry too much because most businesses take from one to three years to kind of find their feet and turn a profit. And yet in trading you get that feedback on the decisions that you make within minutes if you're day trading, within hours if it's shorter term, maybe with a few days or a few weeks if you're swing trading.
That feedback is, it just elevates a level of pressure that you don't see in our usual comparison, which is an everyday business, you know, the real world of business. That's the biggest divide between real world business and trading, as far as I'm concerned. And that creates all sorts of anxiety and pressure.
Sean Donahoe: And that kind of leads into the first point that I want to make, is being stuck in front of the screens. Now you were a day trader. Again, from when I first started on this I was addicted to the charts. I was looking, continuously looking for an opportunity.
Phil Newton: I think we all are, yeah. It's all new and shiny, isn't it?
Sean Donahoe: Well it is, but it's also silly that people think that is the way you have to trade. You have to have your big bank of six monitors, and then you have to look for the eight monitors because the more monitors, obviously the more you can trade. And you have to
Phil Newton: one at a time.
Sean Donahoe: Exactly. It always reminds me of that scene out of Swordfish.
Phil Newton: Yeah, I was just going to say, it's funny actually, I had this question this week. It was over the weekend, actually. It was, "How many monitors do I need to trade with?" You only need one, really. You don't need to look at 50 ... But yeah, that Swordfish scene where, or Minority Reports, where you've got the multiple banks that the VR gloves and all the rest of it. That would be the way it would be going in the future. It's not necessary. It really isn't. It's one of those kind of wishlist things. Yeah, you'd look cool doing it, and the reality is you don't need any of it. You really don't.
Sean Donahoe: That's true now. Funnily enough I do, at home in my bay station, I have like three monitors going at any one time and everything else. And that's more because I'm programming, I'm doing this, and I'm keeping it maybe ...
Phil Newton: You're doing other things. I get that. Yeah, yeah.
Sean Donahoe: That's not necessary. I mean, right now I'm in a hotel room in Palm Springs, I've got my laptop, I'm recording a podcast, looking at the market, placing a couple of trades. I've got my cellphone if I want to place any trades, and that's all I need. I don't need anything complicated. That's one of the main things, is a lot of people really over-complicate the process of trading. When you start thinking and you start really focusing on the streamlining of the process ... This is one thing I'm really big on explaining things as, it's process. Process in, process out.
Phil Newton: Seems like we've lost Sean.
Sean Donahoe: And if you streamline
Phil Newton: I would imagine he's going to be back in just a moment.
Sean Donahoe: Focus everything in simple, repeatable, consistent process then a lot of the complications are removed. A lot of the noise is removed, and conversely a lot of the stress and emotion. And one of the big things for a lot of people is the emotional investment, the fear of loss. And this is one of the things, and I hate to draw parallels to the gambling world, but a lot of people treat trading like they're going to the casino, and then the emotional rollercoaster of the exhilaration of a win, versus the fear of a loss.
It's what gambling is all about. It actually triggers a whole load of psychological triggers. It's really a chemical cocktail of pain and gain. And the problem is that we hate to lose. We love to win. And when people approach it like they're just playing roulette every single day the problem is that the emotional impact of that just, it becomes unbearable. You have increases in cortisol levels. Your dopamine is up and down. It's like taking a little hit of some sort of narcotic.
That's why it becomes addictive to a lot of people, but the problem is it makes you irrational in terms of your decision making process because the emotional influence has a negative impact on what should be -- and this is again what we're kind of talking about -- is the checkbox process, the process of, "Does the trade meet the certain criteria for your strategy? Yes, no." And it's as simple as that. That's not always, "Is this going to be a good gamble? Is this going to be a good bet? Is this going to be a swing for the fence? And I'm going to load up my boots here and boom, off we go."
It can be a real rollercoaster of emotion. One thing that I'm very big on, because funnily enough -- and I've mentioned this before in previous podcasts -- one stich I was actually considering going to be a professional gambler, just blackjack and everything else. And I wanted to make sure that, if I was doing this, I mastered that one aspect because I am going into a casino environment in that situation. I am going where the pressures are there to gamble, to get excited, not to actually go through the process of a positive expectancy strategy with blackjack, which you can do if you know what the hell you're doing.
So when you're going into that kind of environment, you're going into that, you need to have a real lid on your emotion, otherwise you're going to creamed. The lure of large numbers. The casino, regardless of how much of a positive expectancy strategy is, they have an infinite bankroll and you're going to have a losing streak that's going to wipe you out. It's as simple as that. So you have to go in with a process, a strategy, and everything else, but also mastering your emotions.
Now, when you're at home and you're sat in front of the trading screens and everything else you have to have that same approach. You have to kind of look at this and be very ruthless in how the divestment of emotion in regards to the money that you're putting into the market. Phil, we always talk about trading smaller and trading more often to mitigate that, but what ... I'll let you talk, because you explain this one a lot better, is why that is, and the role in portfolio stocks.
Phil Newton: Yeah. I mean there's basically three things that we do to ... It's kind of like an all encompassing, here's three quick things that you can do. And it touches a lot of points. It helps reduce a lot of the emotional impact, as well as help practically get the trade on. Because let's face it, we're always talking about if you're not putting trades on you're not in business. That's how we open up the shop every day, as it were.
So three things that we typically do are, number one is we assume that you've got a systematic approach to find, filter, and sort trades. We call that a strategy. If you've not got your own strategy you can buy someone's strategy. They've put a lot of research and effort. If you want to buy our strategy you can certainly do that, as well. The point is, we're going to assume that you have a strategy. So the first and foremost thing is, follow a systematic approach to execute your trade ideas.
The second thing is that we want to trade small. The reason why we want to do that is, if you imagine that your position size, it's like a volume dial on your emotions. We've spoken about this a few times in the past, haven't we Sean?
Sean Donahoe: Yeah, this is actually a good point. I like this volume dial thing.
Phil Newton: Yeah. I mean, so if we imagine the volume down, and the usual rules for position size is two percent of your equity to be allocated to a single position. Personally, I think that's too much because most of the time there's a big difference between practically what the numbers say you could trade per your position size versus what you're emotionally capable of trading. So I always divide the practical bank balance with the emotional bank balance, and there's usually a major difference between your emotional bank balance, regardless of whatever your physical bank balance is.
And that physical bank balance, that doesn't necessarily, it doesn't matter how much money you have, is all I'm trying to get to. Your emotional bank balance is relative to your financial situation and in trading it's always going to be smaller than your practical, physical bank balance. Does that make sense, Sean, before we kind of in there.
Sean Donahoe: No, absolutely.
Phil Newton: I kind of sidebarred on the sidebar there, didn't I?
Sean Donahoe: You sidebarred and moonwalked all over that. That's okay. That's good.
Phil Newton: Whoo-hoo-hoo! Moonwalked. Anyway, so we've got that. So that's what we're trying combat, and that, it's that emotional divide, so we're trying to get our emotional bank balance to catch up with the practical bank balance. So I always compare that emotional side like it's a volume dial's turned up loud and that's the position size, because the textbooks tell us to use a certain position. Usually it's around two to four percent of your equity per trade, and that's the volume dial being all the way up as far as I'm concerned.
I personally think that's way too big for the reason I've just mentioned. So if we turn the volume dial down on the emotion it would be like having that emotional impact, that emotional experience just dialed down. You're still going to hear the music. So if you imagine that noisy neighbor for a moment, with the volume all the way up, it's dooh-dooh-dooh-dooh, drum and bass coming through the walls. You can't sleep. You can't concentrate on work. You can't do anything. It's just that constant dooh-dooh-dooh-dooh coming through the walls.
That's the volume dial on your emotions all the way up with whatever your position size is right now. So if you turn that volume dial down it's going to, it'll still be there. The neighbors still are going to be playing the loud music, you know, your emotions still are going to be there, but it'd be down to a manageable level to the point where perhaps you can just ignore that little voice in your head. You can ignore the neighbor. The drum and bass doesn't matter so much because you've got other things to focus on. It's not as loud an experience.
And it enables you to function, essentially. That's what turning the volume dial down is. And that's why I'm reducing my position size. It allows me to function and make relative decisions, not just with trading but in everyday life because I'm not stressing about, "Will my trade do this? Will it do that?" I'm not putting all my eggs in one basket. You know, you've got that reduction of the volume on your emotions turned all the way down. So reduce your position size.
And because you're reducing your position size, that's going to allow you to do the third thing that we always advocate, which is trade more frequently. It sounds really counterintuitive, this. I always get pushback on this. I'm sure you do, when you speak to our students as well, Sean.
Sean Donahoe: Yes, absolutely.
Phil Newton: But it's just, it's such counterintuitive, but trade more frequently. Trade more frequently. And I can't emphasize this enough. This is kind of how money is made. Think about it this way. If you put one trade on, and you're swing trading and your time horizon, you know similar to mine for example, maybe 30 to 45 days is your time window for that trade to play out. And if it doesn't work then it's timed out.
But you put one trade on with four, five, six percent of your position size and you've got one position on, and you're going to wait 45 days for that to work out, and there's going to be a heart attack. There's going to be stress. There's going to be high anxiety. It's going to be sleepless nights. It's going to be, "Will it, won't it work out?" You know, all your eggs in one basket. You've got a one horse race and you don't know if the horse is going to finish. That's essentially what we're saying here.
It's a really high stress situation. You've got all your eggs in one basket. All the chips are on the table. You're completely dependent on that one trade working out. And let's just say that it didn't work out. It's just an emotional rollercoaster, and then you're going to put the next trade on. And that's what most retail traders, that's what most new traders do. That's what most inexperienced traders do. They put as big a position size as they think they can handle, either practically or from a greed point of view, because they're always over-positioned.
And then they put one trade on, and then they sit on the sidelines, whether that be for a day, a week, a month, or however long their time horizon is for the trade. And they're literally biting their fingernails, hoping for the best, and praying that the worst doesn't happen. That's the experience when you've got big position size and lack of trade frequency.
Now let's look at the other scenario. You've got a reduction in position size, so the volume dial is all the way down on your emotions, and now you're going to trade more frequently. I typically advocate one position a day. So if I do one a day, take out the weekends, and on average you've got about 20 trading days in a month, I'm going to have about 20 new trading positions in a month.
So now I'm not worried about one trade. And we can all do one trade a day. It sounds like you're trading a lot, but if you just do one trade a day, it takes 20 to 30 minutes to do that, and now after 10 days you've got 10 positions, 20 days you've got 20 positions. So in a month I'm going to have this rolling portfolio. So my time horizon is about 45 days, as I mentioned. There's an overlap from one month to the next, from one expiration date to the next because I use stock options to do this.
And I'm going to have this rolling portfolio constantly. And every 45 days there's going to be a new batch. Remember Gremlins, the movie? We've got to get the '80s reference. This is the new batch. So we've got that in there all of the time and it's just this rolling portfolio. It takes 20, 30 minutes a day to set up and manage, but after the first months you've got this rolling portfolio. And I'm now not worried about one position. Again, we've compared this before, haven't we, with having employees.
It's like having one employee opening up the shop. But if they phone in sick there's no one opening up the shop. There's no one manning the cash register. There's no one talking to customers and taking orders if that one employee phones in sick. But if you've got the same shoe shop on the high streets, and you've got 30 employees working for you -- obviously if you can justify having the 30 employees in the first place -- but you've got 30 employees working for you. If one of them phones in sick it doesn't matter.
You're not worried about one employee because you can spread the workload over the other 29. And to be fair, if five of them phoned in sick, or 10 of them phoned in sick, even if half of them phoned in sick you've got another, out of 30 employees you've got 15 employees to pick up the slack. It's easier to manage, even if half the workforce phoned in sick tomorrow. It's not detrimental to the business, is all I'm kind of trying to get to. And this is why it works.
So you trade with a consistently dependable strategy, either yours or someone else's that they've taught you. You trade with a reduced position size. And you trade more frequently. And you have this suddenly wonderful experience where you're not worried about one position, you're worried about managing the shop and making sure the business is open for business tomorrow rather than worrying about, "Will this employee, is he doing his job? Are they doing what they're supposed to do?"
And you're not focused on that one trade, that one employee, micromanaging, looking over their shoulder. Then you're not doing your job properly, which is to look after the business, and you're not worried about the one trade, the one employee. You've got this portfolio experience. If you think about all the hedge funds and the institutions and the big ding-dong traders, that's how they trade. They trade with frequency. They trade with position size. And they continually put positions on. And that's how many institutions.
And it's extreme. It's high frequency tradings, where you've got hundreds of thousands of trades going off in a day. And that works, that's profitable. From a retail point of view, if we're doing it ourselves and pushing the buttons, one trade a day. We've got this high frequency experience, this high volume, high quality and it just creates this stress free, anxiety free experience.
Sean Donahoe: That's exactly it.
Phil Newton: That's all I've got to say about that.
Sean Donahoe: There goes Forrest Gump. All right, so ... He's laughing. He's a special guy. He's our special kid. So with that being said though, I mean, the look at the end of day is having this production line process checkbox. Keep it simple. Keep it straightforward. And one of the things is, don't be glued to the screens. Don't sit in front of the screens looking to force the trade, or just because you've got something done. Be busy and make something happen, or it doesn't ... It's outside the purview of your trades, your stock, or anything else.
Because when you do that you're just introducing new stress, new risk factors. And a lot of the times one of the big stresses for people is when you introduce risk, when you've got risk that you can't manage, because risk means stress. It's as simple as that. So what we do is we ...
A lot of the ways that we approach the market, a lot of the ways we approach trading is to minimize that risk, to capture the big moves when they happen, to be positioned for that, but be positioned in a way that we're not worried about it, like we used the employee analogy there, is that yeah, okay, if one calls in sick, five calls in sick, 10 calls in sick, we've got everything else to pick up the slack and business goes on. Business will be in business today, tomorrow, next week, next month, next year. And we continuously grow
Phil Newton:
Sean Donahoe: ... we have a streamlined, efficient approach that allows us to be consistent, and consistent in the right direction. There's multiple versions of consistent. You could be consistently crap, or could be consistently moving forward. There is a big difference, so we're talking about consistently successful, consistent growth, consistent approach that consistently delivers results that we want. So just to put an underscore on that entire one right there.
Phil Newton: Another way to perhaps come about this ... You just kind of prompted and jogged a memory. Kind of how I came about this process was I had an experience I didn't like or enjoy or was stressful for whatever reason. I didn't want to do it again. So my evolution, early on especially, came about because I don't want to experience that again. How do I put a rule or a process in place that prevents that experience from happening again? That was, for the most part a lot of it can be, well more often, how do I repeat success? Because when you're learning you might not know what success, true success, looks like.
So it's like, okay, well I know I don't want to experience that horrible event again. Is it a one off thing? If you've experienced it several times, maybe you've got a system in place to prevent you from having that experience. Because that's what I did. I didn't want to sit at the screen all day, but I was day trading, so how can I make a strategy that allows me to put the trades on first thing in the morning, and just check in at the end of the day as to whether they've worked out or not?
And then suddenly I've just freed up 80 percent of my working day, and just by changing the way that I viewed the trade. So rather than go for a quick scalp, is what the phrase might be termed, I'm going to try and capture the bulk of the move of the day. And usually I can get that position on first thing in the morning. I just need to check in at lunchtime or the end of the day to see if that viewpoint has unfolded for me, and just try and capture the move of the day. And that evolved to the move of the week, that evolved to the move of the month. That's where I'm at now. I'm looking to capture the main move of the month.
Sean Donahoe: Yeah, exactly. Well, that's exactly it, so there you go. That's stress free trading. That's the ways to reduce the stress, the risks, and everything else with what you're doing, and again, just make trading a little more enjoyable and not so stressful. So with that being said, let's move on to Trade, Fade, or Evade.
All right, so we're going to go a little topical, first of all. And I'm going to throw this one at you, Phil. Tilray has been in the news a lot recently, a pot company. TLRY. Now again, this is something that spiked up. They only released the end of last month and we're just looking at
Phil Newton: Yeah, just looking at them. We were talking about this in the Facebook group, weren't we?
Sean Donahoe: Yeah. And if you're not Facebook group guys, you should be in there. Trade Canyon, sorry Rebel-
Phil Newton: You should be, because I'm there.
Sean Donahoe: Absolutely Mister Wonderful here. So yeah, go to Trade, sorry, and you can be a part of that. But yeah, this is one that hit the news cycles and went a little bit bloody mental. Literally scraping up from its open at the end of July, about $20, spiked up as high as $300 in a very short period of time, and then took a bloody nosedive. Now again, this is what we term the freight train. The light in the end of a tunnel is a freight train coming your way, to quote Metallica.
But yeah, this hit a brick wall pretty quick. What's your thought? Trade, fade, or evade? Or point and laugh?
Phil Newton: Well this was a point and laugh when we were in the group. This is a good example of a bubble type environment where you've got an exponential movement and it's just not substantiated. From the daily charts point of view it's Evade. I've not got enough data. It wouldn't make the criteria for being on my universe of stocks. So what I'm going to do, Sean, I'm going to cheat a little bit. I'm going to move to the 60 minute charts because what I want to see is at least 200 points of reference, 200 days or 200 candles.
So I'm just going to flip over to the 60 minute chart so I've got that, so I can make a sensible evaluation. Would I trade this? It's still going to be an Evade. While I've got enough data to make an evaluation, it's not really doing anything. It's not really a , a dip, and an uptrend because the trend looks like it's changing because it's crashed down. It's not ranging. It's not trending up. I've got this half and half. It's trending up and the other half, or about a third of the chart, is trending down.
It's not really making that footprint that I'm looking for. I'm looking for a definitive up trend, a down trend, or a range as my first point of evaluation. I'm not seeing any of those things, and I'm hunting for the trade and it's not there. So the quick evaluation is that there's nothing recognizable for me to get involved with at this point. It's got to be an Evade. Again, we're talking about this because it was kind of top, and then we were laughing about in Facebook group.
Sean Donahoe: Yeah. Even after all the hype, this is ... The pot industry, funnily enough, is a, I hate to say, a growth industry right now.
Phil Newton: It's gone up in smoke.
Sean Donahoe: It's gone up in smoke.
Phil Newton: That's why we were laughing about it.
Sean Donahoe: Yeah, there's a lot
Phil Newton: But it was topical. Yeah. I mean, I actually spoke about this because of the bubble. And now analyzing it as if it was a bubble, I think there's more downside movements, but currently they're around $115. I was pointing this out, or I was looking at it through the lens of, we saw this same pattern, this same price behavior unfold on BitCoin. Based on bubble behavior it's probably going to move low. There may be a little bit of a short term rally, but it's probably going to move lower, maybe it's going to move down from $115 down to about $50.
Because we've seen this behavior before, go look at BitCoin. Go and look at the dot-com bubble. Go and look at the South Sea bubble in 1850s, '60s, whatever it was. Go and look at tulipomania. It's the same pattern repeating. You know, history leaves us a footprint. This, for me, would be under the category of bubbles. And I was expecting it to move just a little bit lower. So I think it's a good one from a talking point point of view, to study and research, and just watch it unfold in real time as this is what a bubble looks like.
Sean Donahoe: Yeah. And now, again, right now if you got in early on this, you know the $20-ish or what have you, you're still sitting pretty at $115. But again, do you want to sit through any pain as you see any retracement or possible, hey, cash in, cash out. I would, if I was in this. Actually, I'd have been out of that on the day it hit that $300, probably even before that. But you know what, I'd have locked in some profits on that one, but I wouldn't be in this one at all.
Phil Newton: I was just going to add a talking point in there. The reason why we would have done that, if for whatever reason we were in the position, it gapped up on news and that's always our reason to get out of a situation, it's better to get in a position. Just so we're not just cherry picking what happened to be the top of the move, we always talk about this, if you get a news, you get a big gap, that's the reason to get out. It's not the reason to get in the position. We have spoken about that in the past on one of our news episodes.
Sean Donahoe: Yeah, indeed. I think if my memory was right it was a Netflix hop.
Phil Newton: To be fair, we can add a little bit of weight to this as well. We didn't invent this. Surprisingly, this truly leaves a footprint. If you go to Reminiscences of a Stock Operator, it was written in the 1920s and publicized as a book in 1933. It's talked about in there. This isn't a new phenomenon. It's been going on for hundreds of years. The news is a reason to get out of a position, not what the crowd does which is to get in a position. So it's not a brand new idea. We're not reinventing the wheel here.
We're just looking at the footprints that history has left us, and history goes back a long time in the stock markets. If you don't believe us, go and read Reminiscences of a Stock Operator. It's going to be the best $10, $15 you'll ever spend, and it's mentioned in there. It's the reason to get out of positions. It was true then. A hundred years later, it's true now.
Sean Donahoe: There you go. Okay, so let's actually go on to the main thrust of the Trade, Fade, or Evade. We're going to go into the Social Smackdown. We're going to look at some social media stunts, and we're just going to go quick, boom-boom-boom. Let's knock it out of the park. So, Facebook, FB. Trade, fade, or evade?
Phil Newton: I'm looking. I think the fact that I'm struggling to come up with an immediate answer says everything. Again, taking my own advice, I'm struggling to find. If I had to do something, it's at the lower end of the range. I'd be tempted to be bullish, but I'm not seeing my usual signs. I'd probably trade it, you know, if you twisted my arm, but it's not exciting me to be honest.
Sean Donahoe: I'm going to evade it. Again, same thing. It's kind of the lower end of a range, but it's not enough of a strong enough, "Mm, yeah. I'm going to do that," to do that.
Phil Newton: It's going to be fine. It's wishy-washy, isn't it really. You know, if you had to twist the arm to put the trade on, maybe bullish, but I ... The fact that I'm exasperated and making noises rather than using my words probably says more than we can talk about. What else have we got?
Sean Donahoe: Okay, we've got Twitter. TWTR. Same kind of deal. Lower end of the range. I actually might be interested in trading this one.
Phil Newton: Well, I'm just going to let you go first this time.
Sean Donahoe: I'm going to trade this one.
Phil Newton: I'm seeing a little something.
Sean Donahoe: Yeah, I'm going to trade this.
Phil Newton: Ooh. Ooh, I'd be tempted to fade it. I'd be bearish on this.
Sean Donahoe: Yeah, I'm looking at this ...
Phil Newton: I'm looking at the daily. What I'm saying is, around about the $30 level, if we were going to draw a pattern it's called a head and shoulders pattern.
Sean Donahoe: Yeah, I was looking at that.
Phil Newton: I don't often use patterns by name, but that's kind of what I'm seeing here at the moment. Anything below $30 is, I think I'm probably going to be bearish. That would be traditionally termed as below the neckline. So it's in bearish territory again. It's a pattern I like. To be fair, Twitter's not rallied with the recent market rally.
Sean Donahoe: No.
Phil Newton: So that is a telling point in the first place. It's not showing strength in a strong market. We've got lots of tips of trades of the day here. But yeah, I think I'd probably fade that. I'd have to be bearish on this. That's what we're classing as a fade.
Sean Donahoe: Interesting. Now you see, for me, I'm thinking short term pop, long term drop. So I'm looking at this. I think it's, because it's at the lower end of range I don't think it's going to ... It's not looking like it's going to break that low at the moment, although I agree with the head and shoulders pattern that obviously has evolved over the last ...
Phil Newton: It looks very prominent, yeah.
Sean Donahoe: But it is very defined, funnily enough. It's looking like it's found its bottom at the moment, at this range. Unless it broke down I would change their mind with new information, but I think it's got a little bit of potential. I think it's got a little potential, but hey, you know what? Maybe that's a straddle or a strangle. You know, one way or the other it's-
Phil Newton: Yeah, maybe we'll not worry about the direction we put a long strangle on, which is a strategy we both like. If it moves, we think there's going to be a movement
Sean Donahoe: There's going to be movement one way or the other.
Phil Newton: We've got opposing points. Yeah, so if it goes one way or the other it doesn't really matter whose analysis is right there. As long as it moves, we'll profit. That would probably be the best way to both be right.
Sean Donahoe: Okay, let's move on to Microsoft who, funnily enough, owns LinkedIn. LinkedIn being kind of like the third biggest social network, or it could be argued it's the one that most people think of. But they bought LinkedIn a little while ago. So the old symbol, LNKD I'm thinking it was, has vanished. Now Microsoft. But then Microsoft has been on a tear for many other things. So it's kind of like a social media stock by converse effect.
Phil Newton: A bit of a proxy way to trade it, yeah.
Sean Donahoe: Yeah, so what were you saying? Microsoft, solid, solid uptrend.
Phil Newton: I would trade, no hesitation. Yeah. We've not really seen a deep retracement, so I'm probably not going to be able to buy the pullback in the usual way, so I'd have to trade the break of a new high, which it's just doing now. It would be a trade, looking at this chart, a long term of trade.
Sean Donahoe: I would agree.
Phil Newton: It would be rude not to be bullish on this.
Sean Donahoe: So yeah, I completely agree. I would be bullish on this. I would trade this. I'm actually already -- full disclosure -- I'm already invested, and I've got the, quote, "invested" rather than trading. I've already got this in my portfolio of my actual long term investments, and I'm very happy with the continued bullish movement. I've been in this one for quite a while.
Phil Newton: This is what you would call a blue chip stock.
Sean Donahoe: Yeah, this really is.
Phil Newton: This long established, well track record, nice smooth trending moves both up and down. This is your classic blue chip play. It looked fantastic, you know, buy it up in an uptrend. What's wrong with it?
Sean Donahoe: Exactly. I've been in this one since 2013 as an investor. I did get out for a little while in 2015. Got back in kind of the end of 2016. And yeah, I've seen that go from around about I guess when I was ... If I'm looking at when I got back in, about $37, $36, and now it's trading at $114. So I'm very happy with that, but that again was an investment. I do occasionally trade the dip, when I do see one. This is one that's continuously on my radar.
Phil Newton: That's what I like to refer to it, as trade around the position. It's a posh way of saying that.
Sean Donahoe: Yeah, they're very much so. So yeah basically I'll load up a long term view, but also I will actually trade around what is already in my investment, just to amplify it. So it's part of a long term one. Okay, move on to one of my favorite stocks, and I say that with tongue in cheek, SnapChat. What do you think
Phil Newton: Need one of those wah-wah sounds when you say it. It's ...
Sean Donahoe: It's a penny stock.
Phil Newton: Yeah, I mean it wouldn't be in the usual universe of things, but I think I would have to be bearish. I would probably wait for a rally to sell a rally in a downtrend. It's not a, "Get on board now." It would be interesting, from that point of view of sell the rally in the downtrend. It's a fade to be bearish, but I would wait for a rally in a downtrend.
Sean Donahoe: Yeah, I would evade it right now, but yeah, I would completely agree with you. I would look for a rally and then sell it. It's just ...
Phil Newton: Yeah, just looking up and left across the charts I think I'd like, if I was going to sell the rally, where would I sell the rally? I think about $11, $12 would be a favorite preference.
Sean Donahoe: Yeah.
Phil Newton: If I was going to do something on this, I'd like to get ... It'll be like an ideal zone. And all I've done is looked up and left, to see where the overhead resistance, to use the traditional term. I call that logical stopping points.
Sean Donahoe: Yeah, I was looking about $12, $15, looking back left. It's been right around that before and, looking left like you said.
Phil Newton: Yeah. I mean, it's been in consolidation since last June, July. It's range bound has broken a new low. So sell a rally in an even longer established downtrend.
Sean Donahoe: Okay.
Phil Newton: It doesn't excite me. Again, you can hear by, again just picking up on the way I say things, the exasperation, the heavy sigh before I'm committing to a comment. It doesn't excite me. It doesn't do it for me. It doesn't float my boat. My boat is in dry dock at the moment, on this one.
Sean Donahoe: That sounds like a medical condition that you should really go see a doctor about.
Phil Newton: Oh, you can get some pills for that one.
Sean Donahoe: can get some lubrication cream he'll be all right. Anyway, moving swiftly on.
Phil Newton: Looking at Google.
Sean Donahoe: Google, if you're looking at, now they've got two stocks but we're looking at GOOG.
Phil Newton: It's buy the dip. It's a long established uptrend, uptrend. It's just dipped in said uptrend. What's interesting actually, I've just spotted a big volume spike a couple of days ago. That might signify the end of the retracements. And if you look back left across the chart you'll see plenty of reference points where this has happened. But all I'm doing is looking for those times where history has repeated itself, and it looks like now might be the time to buy the dip in an uptrend. But yeah, it's a buy, it's a trade.
Sean Donahoe: I would agree with that 100 percent. Yep, I'd be buying that. If you're looking back on the 60s as well, for the last few days, I'm kind of liking what I'm seeing in there as just a kind of like end of the move. So yeah, I would be, yeah, I would be in like flint on that one. I like that one. In fact, I might go place that one in a few moments.
Phil Newton: I like that.
Sean Donahoe: So okay.
Phil Newton: Well, I think this has come across our screen before. I think one of the first times we did the Trade, Fade, Evade-
Sean Donahoe: Yeah, you did Fang.
Phil Newton: Funnily enough, the day after we did it, it technically, from a trade point of view it actually voided. It didn't move high, it actually moved low. But you know, if we were going to do a trade on it ... Out of everything we've looked at today, this is the most attractive. So if it was now you've got to put a trade on today, Phil. It's probably going to be good.
Sean Donahoe: There you go. Perfect. So with that being said, ladies and gentlemen, that is the end of the show. Hope you've enjoyed it, and please remember this show is not free. It will cost you a five star review. One of those little review things, you press the button and let us know that you love the show. So just go to and you will find all the different ways you can listen to the show.
And you can listen to the show right on the site. In other words, you can press the big button, scroll down, and boom, there are all of the previous episodes, right on the site. But you can subscribe and review us on the favorite way to hear the show, and this will help us reach more traders and investors just like you.
Phil Newton: When you said the end of the show, Sean, I was a little bit disappointed. I thought today was going to be the last one ever. But the good news is there's going to be another one next week, so it's not the end of the end of the show, it's just the end of this week's show.
Sean Donahoe: Absolutely.
Phil Newton: On that note, what have we got coming up on next week's show, Sean?
Sean Donahoe: Well, we have the stocks that we love to hate. In other words, we're going to kind of get on our soapbox, have a little bit of a bitch and a rant about certain stocks that we just-
Phil Newton: It'll be a racking-fracking vomit moment.
Sean Donahoe: Yes, absolutely.
Phil Newton: We can go all Yosemite
Sean Donahoe: We are going to go full Yosemite Sam. And again ladies and gentlemen, if you want to hit us on Facebook, like we said we have an active Facebook group. You can go to Join the group, be part of the conversation. Come join us. Surround yourself with traders just like you and we can rock on from there. You can also find us on Facebook. Just go to You'll see all the different ways to connect with us on the Twitter machine, Facebook.
And you can reach out to us via email, [email protected] is Phil's. Mine is [email protected] Hit us up. We always love to hear from you. Also, with that being said, rock on. We'll do this again.
Phil Newton: I said all of that Sean, without moving my lips.
Sean Donahoe: Yeah. That was the Muppet scenario.
Phil Newton: Wonderful.
Sean Donahoe: Yeah, that was the Kermit the Frog. Just don't ask me about my right arm right now, but it's all good. Anyway, with that being said ...
Phil Newton: Oh dear, oh dear. Oh dear, oh dear. If we can take the tone level we will, and why not?
Sean Donahoe: Absolutely.
Phil Newton: Yeah, I guess it's tune in next week folks. We'll see you next week.
Sean Donahoe: It's goodbye from me. It is good night from him. Okay, take care.
Phil Newton: Goodbye, goodbye.
Sean Donahoe: Take care. We'll see you next time.
Phil Newton: Bye for now.
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3 Key Takeaways From This Show

  • Stress and Emotion can be severely detrimental to your trading success
  • Systemize and create processes to reduce the discretionary aspects that could be unduly influenced by stress and emotion
  • Trade smaller and more often to have a rolling portfolio of stocks so that you are not emotional attached to any single trade

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