Rebel Traders 083 : The $100k Challenge

What would it take to turn $1,000 into $100,000? Well, that's the challenge and here's what we're doing...

In a change to our regular programming, a challenge was laid. In the finest tradition of Randolph and Mortimer from Trading Places a small wager was placed and either way, you stand to be the winner.

The challenge was to take a small account of just $1,000 and turn it into a $100,000 in the shortest time possible without betting the farm, in a consistent, methodical way without being glued to the screens. An UnHustled trading method that is easy to follow and apply. This is an episode you DON'T want to miss...

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Sean Donahoe: What would it take to turn 1000 into 100000? That's the challenge. Here's what we're doing.
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 we have a break in our usual programming, and I am joined as always by the master of ceremonies, emcee Phil Newton. How are you doing, sir?
Phil Newton: Phil as we speak.
Sean Donahoe: Absolutely. He's like M.C. Hammer - you just can't touch this. Anyway, with the horrible '80s and '90s trips down memory lane that we were just talking about before the show, we are going to have a little fun here. In the finest tradition of Randolph and Mortimer from Trading Places, a small wager has been placed and either way, you could be the winner.
Sean Donahoe: So here's what we're doing. The challenge was to take - and this is what we were talking about and we'll get into this in a little bit more detail in a few moments - but we were going to start a small account with $1000 and turn it into $100000 in the shortest time possible without betting the farm in a consistent and methodical way without being glued to the screen. And we're talking about a truly unhustled trading approach that's pretty easy to follow and apply, and this is an episode you do not want to miss. So make sure you stay on until the end.
Phil Newton: And we've also got our favorite section, the Trade, Fade or Evade section. Although you got me thinking, Sean, it's not exactly a big bet is it, it's one dollar.
Sean Donahoe: Hey I'm a cheapskate, I think I'll-
Phil Newton: I'll feel much trade in place now, but anyways, yes, we've got the Trade, Fade, or Evade, we're also gonna have a walking down, not quite holding hand in hand, walking down memory lane. We're gonna go down Phil's little memory lane and have a little look at some currencies, and how the differ and how you can get involved with them.
Sean Donahoe: Absolutely.
Phil Newton: And the modern world of options trading and ETMs.
Sean Donahoe: Okay, awesome. So let's lay the scene, 'cause this is what we're gonna be focusing on today is something that was off the cuff, unexpected, and more of an internal thing.
Sean Donahoe: So Phil has talked about this in the past, how he's taken 1000 dollars, turned it in to 100000 dollars, a few times in the past just for the fun of it. Just to hone his skills. We were talking about this at the end of last year and we mentioned it a couple of times on the show that this is what he does, but I wanted to say, "Okay, you know what? It would be really cool if we did that, document it, every step of the way. Set some very firm parameter." And Phil said, "Yeah, alright, I'm up for it."
Phil Newton: And then we said let's do it live just to put some extra pressure on.
Sean Donahoe: Yeah, absolutely, let's put you under the bloody microscope.
Phil Newton: 'Cause otherwise we'd be doing it behind the scenes, and you're kind of like, "Here's what we did in the last 122 months." And let's do it live. It's how I like to operate, because in my opinion, Sean, any fool can look back and say, here's what we did.
Sean Donahoe: Yes, absolutely. And we've seen that happen a lot in this industry. Let's face it.
Phil Newton: If I had a you'd never know about it 'cause ... let's not sell anyone. So good or bad you're gonna get the outcome. So whether we do it in 12 months, whether we do it in 6 months, I've done it plenty of times. The first time I did it was the year that I went full time trading as it were. And it literally was that, it was back to the wall type of scenario, and let's see if we can take, it was a 1000 pound, actually. About 1000 dollars, 1000 pounds, 1000 euros, it doesn't make any difference. But it was to take 1000, insert currency, and we took that too, and when I say we it's the royal we. I. Me. To 92 and a half thousand and a bit of change in a little over 8 months. It was quite an exciting time to say the least.
Phil Newton: What goes through your mind is it a fluke? I think that's one for the things as traders, when you have a successful run at something, whether it's a month, a week, six months, a year, however long. I'm looking back over in 20 years, and I'm still thinking, "Is it a fluke?"
Sean Donahoe: Well the thing is you've done it multiple, I mean we've all had our successes but one thing we always say. You've hit the nail on the bloody head there. Is do it again. I mean we see so many people, we talked about this, we did it in
Phil Newton: -Bit coin craze.
Sean Donahoe: -competitions-
Phil Newton: Most recently, didn't we?
Sean Donahoe: Oh, yeah. Absolutely.
Phil Newton: Yeah, look at my gains bro. It's funny, actually, I was thinking about that in my coffee shop venture and book reading session this morning. And I'm looking around and I thought the thing that's missing compared to 15 months ago is the incessant chatter about Bitcoin. 'Cause that's a, you could not literally throw a stone and not hit someone, metaphorically speaking of course, I wouldn't condone that type of behavior. But you couldn't throw the metaphoric without overhearing someone-
Sean Donahoe: A scone. That's it. That's what he throw.
Phil Newton: Yes. You couldn't walk past one without overhearing a conversation about Bitcoin. "Have you got your Bitcoin yet?" You know, and it was that kind of craziness that was going on about you. I think the point is any fool can talk about what you could have done or would have done and should have done, but why don't we do it from the point of view of here's what I'm doing right now. I literally don't know what the outcome will be, because we're not gonna pretend that we know what the future holds. But we know that on average we're gonna do alright. So let's do it again. That's why we're doing it live this time.
Sean Donahoe: Now the interesting thing here as well, like I've said, you've done this multiple times. And we want to put it under the microscope. And we've talked about it, but you only started this on January 4th. Obviously started the year, couple of days, just getting things rocking and rolling. But as of right now, your account that you're doing this with is already up quite significantly. Where are we at right now?
Phil Newton: It's, well as of this morning, if you'd asked me on Friday, Sean, I would have said 33%. As of this morning it's 31%, as I'm doing this.
Phil Newton: Funny enough I actually started this last January, and we were talking about it then but personal, family, situation, I got four months into it and then kind of bollocked into, I didn't continue it for the rest of the year because of major personal issue. But back then we took a thousand and it was up to 5000 by April before my mother passed away, essentially. So I know it can be done quite quickly in a short space of time. And if we think back to last year it was pretty stagnant for most of the year, and even still the results in a quiet period of time are good.
Phil Newton: So this year we're off to an equally raging start. January the 4th we started, and again very simple, low maintenance, strategy. And when I say low maintenance I'm not staring at the computer screen all day every day, hoping and waiting and watching every price fluctuation. I do need to be aware of the market and when my orders are executed, but I can do my analysis for the day or for a couple of days, and then not really need to bother checking in. As long as I can place orders, that's all I need. And I can that via a mobile phone like I was doing this morning from the coffee shop. I don't need to be in front of the computer.
Phil Newton: So far this year, we're up to 31% return. And again, I think picking up on what you just touched on, this isn't betting the farm for want of a better phrase. This is risking a half percent of my account equity per trade entry. So it's not crazy risk parameters. Which is what most people associate with growing a small account. Be hyper-aggressive and 30% on a single position, and if you bet big you'll win big type thing. I'm of the view point that as long as you bet small and trade frequently, you will see consistent returns. And you can compound that very very quickly, very easily. Still with low maintenance and without betting the shirt off your back.
Sean Donahoe: Now I want to stop there for a second because you said something and I think skimmed over it, but I just want to highlight the significance. Last year, before, again, it was a personal family emergency and some upsetting stuff going on. But you took a 1000 dollar account and by March had increased it 500%.
Phil Newton: Yes.
Sean Donahoe: I just want to highlight that.
Sean Donahoe: Now when hedge funds are grateful if they're beating the broad markets. I mean if they hit 30% in a year they're swinging from the trees with kazoos and party hats and all sorts of crazy thing-
Phil Newton: Yeah, I think two schools of thought with the big fund though. I mean with small accounts you're gonna see exponential growth. And, to be fair, compared to a hedge fund, anything up to 50 to 100 million could be considered small accounts. And the hedge funds got such a large pot of money and not always have the ability to make speedy decisions. And neither do they have liquidity to utilize all the money that they have available.
Sean Donahoe: I was gonna mention the liquidity, it isn't all in fairness. I'm using it just as a absolutely ridiculous comparison.
Phil Newton: Yeah, I appreciate, I'm just trying to kind of set the scene. So compared to 1000 dollar type of account up to 5000, it's just a little under 5, I can't remember if it was just a little under or a little over, I'll have to check the numbers. But it was right about 5000 dollars.
Sean Donahoe: Yeah. Not an insignificant increase though, for the average.
Phil Newton: It's not an insignificant, right. But you're going to see that type of growth with small accounts because it's small accounts. Now with the same strategies you're not going to be able to go to infinite position size if you had 100 million dollars in your accounts, you're not going to see that same 500%, because the liquidity's just not in the markets. It's just not there.
Phil Newton: So with small accounts, and when I say small accounts it's actually we're talking about what could be classified as a micro account account with 1000 dollars starting off. But you know if you go into the few hundred thousands or even the low millions, that can still be considered a small account. You should have sufficient liquidity in most places even across a half dozen markets to see, I wouldn't say comparable growth, but significant growth in your accounts. It is possible up to that point.
Phil Newton: So we're kind of rambling here, we're just trying to compare what the hedge fund do, because they'll be high fiving each other if they get 30% per or a high single load double digit returns, they'll be high fiving each other, congratulating themselves on a very excellent. But the sort of quantities that they're talking about, it doesn't take much of a profit to see millions.
Sean Donahoe: Well this is it.
Sean Donahoe: Now let's go into the rules a little bit 'cause like we said. We had some very, because we are very, the new watch word at Trade Canyon is unhustled.
Phil Newton: Yes.
Sean Donahoe: But we want a very unhustled way to be trading. Now there're usually a lot of people, "Well what would you consider a hustled trading?" Well that's where you're glued to the screens-
Phil Newton: It's a job. It's a 9 to 5, 9 to 5 would be a relaxing day.
Sean Donahoe: Very true.
Phil Newton: You spend all day doing it. I don't want to spend all day at the computer. Yeah.
Sean Donahoe: Yeah, and it's also about high risk, high stress, that is hustled. So we want to give you the opposite.
Phil Newton: Lack of sleep at night and all the things that come along with over leverage positions, high risk decisions, high maintenance. Anything with high and extreme in the phrase somewhere, that's what we don't want because that's the misconception that ... of a way that you need to trade. It's that boiler room high pressure, I want to do the opposite to that tradition notion of what is involved in trading. I want to have a more relaxed approach, I want to be able to sleep at night. I don't want to wake up in the middle of the night thinking, "Oh my god, what's the market gonna do?" I don't want that experience. Mainly because it's bad for your health, but I don't want that stress and anxiety.
Phil Newton: So it's a way of trading that allows me to do ... to be fair I was gonna say 30 minutes, but it could be 30 minutes spread over the day in 5 minute segments. It's not a 30 minute a day, it's you pick your direction and then you trade that direction. And that is essentially it. It's a very quick evaluation, is the direction still the same for the day? And you're pretty much gonna check in once a day if you want, with the charts, is the direction still the same. Yes, there's no change there. And then you're literally away from your accounts. It's put the trades on, keep trading when trade hits targets relax and reevaluation, reassess. Take the rest of the week off, or do we carry on trading. It's a very relaxed way of trading to grow your accounts around other commitments.
Phil Newton: I mean for me it typically involves free time, a lot for free time, do the things that I want to do. Largely involving spending a couple hours drinking coffee and reading a book somewhere in my home town. It might be that you've got other commitments. Work commitments, life commitments, family commitments. You don't have the luxury of being able to spend all day looking at the charts like some people do, like you see in the movies, like you see in the TV. Often it's not productive because I suppose one of the things of trading is that the actual act of trading doesn't really take that long. When you've got your process down and you know what you're doing. And, again, you don't need to know a lot to be able to be successful at this trading thing, you just need to be very clear on what you're gonna do, when you're gonna do it, and why you're gonna do it. So when you know those things it doesn't actually take that long.
Phil Newton: So the misconception is that you need to be looking at the charts all day. You don't. You literally do not. I mean the analysis part, when you get into what, when, why you're gonna do something. That doesn't take that long. But yet people will sit and stare and look at the charts all day for hours and hours and hours on end. Waiting. For what? I don't know. But for me, from my perspective, is has that initial first condition been met? No. Okay, based on where we are right now it could take five or six hours to set up the condition I need to move onto the next phase. Knowing that, I don't need to spend the next five or six hours looking at the charts. And that's the misconception that people do, that's why people stare at the charts all day. They're waiting, watching, for that condition to be met.
Phil Newton: But they don't realize that that condition might take, 3, 4, 5 hours on the time frames that we're talking about. Or maybe you're on a daily chart, it might take 3, 4, 5 days. It might take 3, 4, 5 weeks for that condition to set up. But yet they feel compelled to look at the charts until that conditions been met.
Phil Newton: I'm saying that you don't need to do that. When you have clarity on what you're waiting for to happen next then you don't need to watch the charts all day waiting for that thing to happen next. You just check in in 3 or 4 hours, and if it's happened put the trade on. If it's not happens, come back tomorrow. And that is kind of what makes it unhustled. It's what makes it relaxing, it's what makes it unessential to be glued to the screen, watching every price fluctuation. And then you get bored and impatient, you either get bored or impatient and start putting trades on that you unnecessarily should be putting trades on.
Phil Newton: Again that's really the trap that novice traders fall into. They're looking at charts all day, they feel compelled to put a trade on, and the act of trading doesn't take that long. But they feel that they need to be doing something, and clicking the mouse button, orders on, is their, "I need to be doing something." And the reality is we get paid to wait. So I'm gonna use that time more productively away from the computer. And you can focus on the day job, focus on other things, focus on your other business interests, or in my case, out to the coffee shop, reading a good book or a bad book is what I'm reading at the moment. It's a bad book, what can I say.
Phil Newton: But nevertheless, you've got the luxury to be able to manage your time more effectively when you know what you're gonna do, when you're gonna do it, and why you're gonna do it. Does that kind of ring true, Sean? I kind of hit the soap box early again.
Sean Donahoe: Absolutely. You did. You hit that soap box and spit it halfway across the floor as you jumped on it, but, yeah, absolutely. I mean this is what we focus on here is the most time efficient way to trade where we're, I mean, I don't want to use the word passive, but it is pretty bloody passive. I mean low maintenance, I think that's the better way.
Sean Donahoe: But here's, so the roles kind of defined were it's gotta be a simple approach. It's gotta be something that anyone can do. It's gotta be a low dollar account that can grow, which was, again, we're starting off with a pot of 1000 dollars. Not glued to the screens.
Phil Newton: I was just gonna say, it's kind of like that if I was dropped in the middle of nowhere type scenario with 1000 dollars, it's that type of challenge. If you were starting all over again and you only had 1000 dollars to make money trading in the markets, what would you do and how would you do it?
Sean Donahoe: That's it. Now the other thing-
Phil Newton: It's that type of adage.
Sean Donahoe: Absolutely. So again, obviously not glued to the screens, minimal screen time, once, twice a day. Simple, simple, simple. Low risk. So no more than 0.5% of capital per trade. Something that allows you to, again, sleep at night. Reduce stress and everything. And something that you can consistently grow. Now the interesting thing here is we were talking about this yesterday, and so well what if we did a million dollar challenge, we said well that would just be, because, again, we're talking about different position sizes, what if you had a lot more money in your pocket, like my account. Starting off with 100000 dollars. No problem. Okay. So if it was me in a different scenario, rather than 1000 to 100000, he goes, well let's just take you from 100000 then to a million dollars. So that's-
Phil Newton: That's what we're doing next, that's what we're doing after this one.
Sean Donahoe: But the point here is it's something you can scale, that you can start off small. That you can get into, and this is what we're doing. But here's the thing, so those are the rules. But let's move onto the actually instruments because there's a couple of things here. And this is something that's very very important, a lot of people may or may not be familiar with these particular things 'cause we're not talking, per say, options trading here. Which is our usual bag.
Sean Donahoe: Now if you're outside the US you're doing this with spread betting and CFD's. Can you explain that a little bit? Again, for the American audience who's not familiar with these particular instruments.
Phil Newton: I think the easy way of explain them is that they're a way to express the trade, like a stock option is a way to express the trade, or a future's contract is a way to express the trade.
Phil Newton: And so a CFD is an over the counter product, and it stand for certification for difference. And again, I think the best way of thinking about it is it's like a bet, same with spread better, I mean it's more obvious with spread betting. I'll bet you 1 dollar that the stock market goes up, and for every point that it goes in my favor I will get 1 dollar back. And if it goes against by, say, five points then ill lose five dollars for each one of those points. And CFD's work in the same way, it's more like you're trading shares, you trade a CFD that might represent a number of shares or a fraction of a contract. It allows you to trade bigger or fractional amounts of the real, underlying market.
Phil Newton: So, for example, the future's market, the mini DOW futures, every one point it represents a five dollar value. So CFD's and spread betting allow you to trade a fraction of the underlying point value if you traded the exchange traded contract version.
Sean Donahoe: It's funny 'cause I was explaining this to someone last night as it's a derivative-
Phil Newton: Exactly. Yeah.
Sean Donahoe: -of the underlying instrument. But it's more like if you consider it, it's a micro sharing. And that's what I was trying to explain it as.
Phil Newton: Yeah, I think-
Sean Donahoe: It's a leverage micro share.
Phil Newton: A lot of the brokers, I think they're market maker brokers, so what actually happens is that, particularly with spread betting, they make their own markets that's based on the underlying instruments. In this case we're talking about the DOW. So they'll basically have a mirror version that you can spread bet, and you can trade pennies, pounds, or hundreds of pounds for every points that the market moves. And you can literally put a bet on that is any size that you want.
Phil Newton: So the reason that I'm choosing, personally I'm using the CFDs. The reason that I'm choosing that vehicle to express the trade compared to, let's say, futures or stocks or shares or options, because it allows me to trade a fractional amount of a standardized contact.
Phil Newton: So I'm trading index futures, initially. Mainly because of the volatility that we've got at the moment. I quite like volatility, I like a lot of movement. I'm okay with that. Someone else who might not be so comfortable with that type of wide swinging market, 'cause we can see a 3, 4, 500 DOW point move in a day at the moment. Not everyone likes that volatility.
Phil Newton: So if you want something that's a little bit more sedate then you can trade other things, like currencies, for example. You can certainly trade something that's not as volatile, and the downside to that is you might have to wait a little bit longer to see the type of results that we're talking about which thousands to a hundred thousand dollars. It might take you a little bit longer, it might take you a little bit sooner, it really depends on how the market moves.
Phil Newton: Right now the markets are widely ranging on a single day to a week. We can see a 600, 7, 1000 point move on the DOW in a week. That's great opportunity to see this account grow. And one of the reasons I was seeing the big growth that we're seeing in such a short space of time already as we start this challenge.
Phil Newton: I kind of got off the beaten track there, Sean, we started talking about what are some different vehicles. Essentially the choice of vehicle that I'm using means that I can trade small position size relative to the size of the accounts that I've got. Alternatives, because depending on where your on on the world, alternatives might be to trade shares on ETFs. Instead of trading a fixed 100 shares or 500 or 1000 shares, you can trade two or three shares on an ETF, that makes the most sense to you.
Phil Newton: And again there's plenty of choices these days to be involved in an ETF that tracks an index or a market, or a sector that is suitable. I mean the oil ETF, USO, it's almost like a penny stock at the moment. What is it? It's around 12 dollars per share at the moment, something around there. So if you wanted to trade oil, which is quite wide ranging at the moment on the futures markets, you can trade it as an ETF, trade two or three shares at a time, and it's gonna cost you the margin equivalence for 13 dollars a share. You could trade one share and buy outright all 13 dollars if you wanted to, I'm not suggesting you should.
Phil Newton: You can be flexible and nimble with a small account with stock by trading two or three shares. But to not worry about that you're basically using CFDs. So I can trade micro allocations of an index. 'Cause I want to trade indexes, I want a 24 hour market, I want something that's moving. The thing that's moving the most at the moment is the US stock indexes. So it's the S&P, it's the DOW, it's the NASDAQ. So I want to trade those because of the high price volatility. 'Cause that's what I'm looking for. But if that's not to your flavor, there's certainly many many alternative out there at the moment. If you want to replicate your own challenge equivalent that is more suitable for your personal risk, your personal situation.
Phil Newton: Does that make sense Sean?
Sean Donahoe: Absolutely because the thing is the CFDs and spread betting derivatives are not available inside the US. I mean it's something that is not available to us, but-
Phil Newton: You can trade CFDs but it's just not on the indexes. You can trade them on currencies, for example.
Sean Donahoe: Yeah, exactly, exactly, so yeah. I mean the ETF equivalent is a lot easier. Again, depending on your accounts-
Phil Newton: You can blame the United States government for the regulations, it's kind of like the patent day trader rule, it's an archaic restriction that's put on investors. I'm quite anti the overregulation in this regard.
Sean Donahoe: Abso-bloody-lutely.
Phil Newton: It served its purpose back in the tech crash because people were stupid with their investment choices to say the least, so it served a purpose at the time. It's not an archaic ruling that could do with being banished in my view. And people are still lobbying toward it. It's the same CFDs, because it's over counts and markets, it's that protectionism from government agencies and bodies that say that we think that you shouldn't do it, 'cause you can't be trusted. It's my money, I should be able to do whatever I want with it. But that, yes, let's not go there. I think that's enough, that's all I've got to say on that one. Sean.
Sean Donahoe: Funny, funny, funny. And again, don't get me on my bloody soap box for the same thing.
Sean Donahoe: But, here's what we're doing guys. This is what we're doing. 100K challenge is basically putting a microscope on my filth, doing right now as that Randolph and Mortimer little bit of a bet here. But it is more of a challenge that you are the winner. You get to watch over our shoulders and here's what we're gonna be doing. This weekend, and this is completely off the cuff. We said, "You know what, hey, let's show people what we do."
Sean Donahoe: So at the last minute we decided to hold a one day private training event. It's happening this weekend. January 26th, at 9 AM eastern. Now this is a paid event. What we're going to be doing is the following. We're gonna be doing this, starting 9 AM eastern. And we're gonna be literally peeling back the curtain, showing you exactly what we're doing. How we're doing it and, more specifically, how Phil's doing it. Because this is his, kind of, gig. This is where he's gonna show you what he's trading, why he's trading it, how he's trading it, how he's deciding on the direction. We're gonna be talking about-
Sean Donahoe: Now there's two elements to this. And I'll get Phil to talk about this in a moment. There's the mechanical entries, exit, stops, and target. There's the simple discretionary entries, exits, targets, and stops. The propriety trend system to determine the direction easily. How to get started with a small account. All of the chart reading skills you need, which are very very simple. And, again, we'll be recording this event. So if you can't make it live for whatever reason you can jump on, check it out, or you've got access to the recordings and you can watch them as many times as you need to. And-
Phil Newton: This is the training as well, yeah, 'cause, I mean, not everyone will be able to get it on the first pass. Which is fine. Or you might miss a thing.
Sean Donahoe: Absolutely. It's what I call the second bite of the apple, which is often the sweetest. So sometimes, again, there's a critical thing that- . I know. I know. I'm a poet and I didn't know it. But at the end of this the main point is that something clicks and then you go back and then you get another thing in context, you're like, "Oh that's what he meant there!" And suddenly the last piece of the jigsaw jumps into place.
Sean Donahoe: But we'll also be having a private slack group, and we'll be doing real time daily alerts as well of what he is doing as he's doing it and everything else. So-
Phil Newton: I think the other point is, I mean one of the purposes of the training is to, it's not for you to do a carbon copy clone of what I'm doing, although if you want to kind of copy and follow along you're more than welcome to do that. But the whole purpose is to get you to be able to do your own challenge. With relevance and relative to your situation, that's why we're doing the training elements so that you've got full transparency on what we're doing, how we're doing it, but more importantly how you can go and replicate it.
Sean Donahoe: Absolutely.
Phil Newton: Teach you how to fish, as the saying goes.
Sean Donahoe: Indeed, now here's the thing. This isn't just, okay, pie in the sky, suddenly made up strategy. This is something that has been proven. He's used it for years. He's done this multiple times. This time round we're putting it under the microscope, we're showing as we go what we're doing, how we're doing it. But, more specifically, like Phil said, so that you can create your own 100K challenge.
Sean Donahoe: I think this is the most important part, I think this is why it becomes completely invaluable. Now here's the thing. We usually don't do this, I mean this podcast is more direct about what we're doing, how we're doing it, in the markets. But this is the first time we've ever run this event. It's online, you don't have to physically turn up anywhere to our offices in Austin or Las Vegas where we might do this in the future. But this is a virtual online event. You just turn up at your computer, crack on your cellphone, log in, watch, and you're ready to run.
Sean Donahoe: So, again, this is happening this weekend, if you want to sign up and if you're interested, go to, and that will take you to a cal form, tell you a little bit about the process and everything else and you can sign up and we are only opening this up for a few seats, because, again, this is an ad hoc, private event. We have no idea how crazy this will be because it's the first time we've done this. But, again, we're putting the invite out there but time is short, and those seats are gonna fill fast.
Sean Donahoe: So go to and lock in one of your seats.
Sean Donahoe: Okay, so I want to back into some of the stuff that we were talking about here, because a couple of things we were talking about here were the rule based, mechanical entries and exits, and the discretionary. I don't want to get into too much detail here, because, again, this is what we'll cover in more detail in the event itself. But this is rule based. There are specific rules that are very simple to follow. But what's the difference between your discretionary elements and the mechanical? Because we talk about production line continuously, I wanna highlight the differences.
Phil Newton: Mechanical for me is once I've picked the direction, for example I might be bullish on the instruments that I'm looking at. I'm going to deploy an entry money management method that is mechanical. I then don't need to look at the charts again until the direction changes. And it can take anywhere from one to three days for the direction to change. So I technically don't need to look at the market again for two or three days. And that means that I can just check it on my phone with the broker, I already know the direction, and all the entries and exits and targets, they're all predetermined, so it's mechanical and you can have them written down on a piece of paper or spreadsheets or whatever you want to use, and you know when you're getting in, when you're getting out, and if it's going in the right direction. You know when you're taking profits.
Phil Newton: So that's the mechanical entries, exits, stops, and targets. Again, I don't need to look at the charts to see where those things are. I just need to know the levels. And again, that's known before the trade goes on, before the orders are placed. It's like pick your direction and then you deploy this method. So that's the mechanical. Does that make sense for the moment?
Sean Donahoe: Yes.
Phil Newton: Discretion, as the name suggests, it requires a little bit of chart reading. So for anyone who is a little bit more, who does have a little bit of time and wants, it's not necessary as I've just mentioned. For some people they like to look at the charts or are looking at the charts a few times through the day. So if you want to finesse and fine tune entries then a little bit of chart reading skills can be applied, and it's very, again, very simple methodical process that allows you to do the same thing, but at a more discretionary way through the day and the week.
Phil Newton: So there is a little bit of looking at the charts involved, but again it's once every couple of hours. It's not necessarily, "I've got to look at them all day every day." Has it set up in the morning? No, let's check in in the afternoon. Has it set up? No, alright, let's check in before the markets closed. Alright, nothing to do here, come back tomorrow.
Phil Newton: It still requires a little bit of screen time but, I hope I'm trying to illustrate, it's still not time intensive, it's just if you've got a little bit more time and you've got them on in the background you can check the charts a couple of times in the day and when the trade sets, up the trade can go on. And again, you'll know the entries, the exits, the stops, the targets, as the trade goes on. It's a very, again, methodical process that's used. It just requires a little bit of chart reading and a little bit of interpretation. So that you can set that trade up.
Sean Donahoe: Perfect. Makes a lot of sense. And again, like I said, rules are very simple. This is designed that anyone with a small account and a little time in the day can put this together. And that's what we're gonna be covering, that's what we're gonna be doing. And like I said, you'll be able to follow along as Phil continues his journey towards 100K from a 1K account.
Sean Donahoe: Very simply. I mean the interest has blown us away. 'Cause this was more of a private behind the scenes ...
Phil Newton: It started off as a passive comment to the group, and literally it was "Tell me more, tell me more, tell me more." It's like, "We'll send an announcement out." It's like, "Yeah! We want that." I was, to be fair I was quite flabbergasted, quite honored, a little bit abashed that I'd not publicly done something similar in the past, 'cause I've been doing this on and off for years for my own personal gratification. And I've got no problem trading publicly, I had a trading room for many years. I was live trading for many years. We used it briefly back then in the live trading room as well.
Phil Newton: I'm not shy about public trading is the points, but I was just, it never occurred to me that there would be so much interest in this style of trading where you could pick you direction for the week, essentially, and not have to worry about checking into the charts. It was a simple process. You know everything before you actually go and put the trade on. It's very mechanical aura. I'm certainly using the mechanical entries, exits, stop, targets. It's just such a stress free way of trading, and allows you that mechanical approach. And you get your chart reading fix at the same time, if you want. Because we all like to do that, and it just meant that people can kind of do it around their commitments, if they're on the go, they're mobile, they don't need to worry about the charts, which is the big concern. There's not a steep learning curve with the process. It literally is, here's the process, go and put the trades on and if you just plug away at this process it's gonna make money.
Phil Newton: And it's quite an interesting strategy from that perspective because everyone usually associates this style of short term trading with, "I've got to be at the computer all day." And it's complete fallacy, it really is.
Sean Donahoe: It really is. Okay, so like I said., go check it out. You'd like to jump on, grab one of those seats for this weekend's training. So with that being said, let's go into trade, fade, or evade. And, like you said, we could actually twist it around, kind of topical, based on today's conversation. And we want to look at, basically, some ETFs around some index futures.
Sean Donahoe: Now our Phil's got a wee list here that he put together, again, just for the fun of it, because honestly I forgot to do it with the show notes. So Phil said, "Well, let's do this."
Phil Newton: So Phil grabbed the reins today.
Sean Donahoe: Phil grabbed the reins, and pulled a few together.
Phil Newton: Fine, I'll do it.
Sean Donahoe: Fine, fine, fine.
Phil Newton: Well while we were walking down memory lane, hand in hand, don't tell the wife. I cut my teeth on, I was a currency trader for 12 years for my sins. So we thought we'd go and take a look at some currencies but rather than go and look at the actual spot currency we thought we'd go and look at the ETF equivalents.
Phil Newton: Now what's the difference between them? Essentially one is a 24 hour market, and the other one isn't. The ETF version of the currency is, it's already dollar denominated, so it's not head. If that makes sense to you it makes sense. If it doesn't make sense I'm not gonna spend an hour explaining it. Google it.
Sean Donahoe: True enough.
Phil Newton: So you've got the, it's essentially a stock traded equivalence, hence the name, exchange traded fund. So you've got this stock traded equivalence, and it's only open for US market hours. So 6 and a bit hours. You've got that traded, so the cash market equivalence is 24 hours, and you've got an ETF equivalence. Why am I talking about both of them? Because while you can trade currencies and options on futures, you can, again, trade the smaller position side, you can manage your position sides more effectively on the ETF.
Phil Newton: So it just allows you a little more flexibility is all I'm trying to suggest.
Phil Newton: Anyway, with that said, Sean, let's go and take a look at a couple of the top currencies. Let's take a look at FXA for Alpha, Foxtrot, X-Ray, Alpha, this should be the Aussie dollar.
Sean Donahoe: Let's have a look here.
Phil Newton: Yes. So it's overdue for a change, it's like what would you be doing?
Sean Donahoe: Well I'm seeing a rally in a down trend. I would be selling the rally but it's already kind of happened. But that's been a consistent downtrend since the beginning of 2018. Yeah, I mean I would fade that. I mean it's not at an extreme, but that would be a fade, fade, fade.
Phil Newton: Yeah, so what we're seeing already is the same logic and philosophy can be applied not just to stock and indexes it's good for currencies as well, is what we here. It's like the same evaluation process, we're not going to do anything different. I think that the misconception, again, that misconception word again, the misconception is you've got to trade a different way because it's currencies. I think when you've got that mechanical process to find, filter, and sort opportunities you can apply the same or very similar process to any market, any instruments, any time frame that suits your purpose anywhere in the world. And this time, we just happened to be talking about currencies.
Phil Newton: So, yeah, so that rally and a downtrend again, it's very clear, very obvious, that it's in a down trend. I see it more a down channel, but nevertheless, we're just picking over bones really. But yeah, sell the rally and downtrend.
Phil Newton: Let's take a look at the British pound. FXB for Brave, so Foxtrot, X-Ray, Bravo if you're following along at home.
Sean Donahoe: So this is interesting, this one's a little, I mean this one is rallying. Market's have just opened. And again you've got a pretty solid, well, a downtrend since the beginning of 2018 but the last, I want to say end of December well, kind of looking, mid December onwards it's rallying a little bit, it hasn't broken back into what passed recent highs of beginning of November. I mean, honestly I'd evade this one right now. Especially with all your Brexit BS.
Phil Newton: Yeah, I was just gonna say. A hint of the lack of commitments, or conviction rather, to be able to say, yes, it is doing this. That's usually what I hear when people are trying to figure out what should I be doing? 'Cause that, as always, we want to be able to say it is going up or it is going down or it is in a range. And whether we're looking at the last 12 months or the last sort of 3, 4 months which is kind of the old default position, usually. It's not clear, is it going up? Is it sideways? It's doing a little bit of everything all at once.
Sean Donahoe: It's going sideways at the moment, but it's not going-
Phil Newton: Yeah, I think that's a good indication. All I want to point out is that it's the same process that we do, that same initial assessment, is like what is this chart doing? Is it going up, is it going down, it sideways, and if you can't figure that out, or it's undetermined, go look at something else. So let's go and do that, let's take our own advice. Let's go and take a look at the Euro. It's probably, because they're so close together, the pound and the Euro, they're probably going to be similar viewpoints, but let's take a look at it. FXE for Echo, Foxtrot, X-Ray, Echo.
Sean Donahoe: Evade.
Phil Newton: It's a little bit easier to see this one, it's very compressed in it's price action, I find, whether you're looking at, it's almost like a stair stepper. It's compressed, puts a big move in, then it's compressed and not doing anything. It's not really exciting me.
Phil Newton: Let's take a look at the Yen. FXY, Foxtrot, X-Ray, Yankee.
Sean Donahoe: Oh, that's a ... I like this one.
Phil Newton: There's a little bit more oomph in this charts, isn't there?
Sean Donahoe: A little bit, a little bit, now again I would be ... you know this is tempting, this one. I'm liking this one, it's had a lot of momentum recently. A very obvious dip, but it's kind of been all over the place. Very range bound if you're looking back, I'm looking back 18 months. It's kind of within the range, but it's like a giant head and shoulders here. But stretched over 18 months.
Phil Newton: Just doing your trick, if you just flip that over to the weekly charts.
Sean Donahoe: That's exactly what I was about to do, that's where I was going next. This will be probably be ...
Phil Newton: It's been at a range for about two years, and most of the time, apart from one big blip, the 2016 new year. It's been pretty much consolidating for most ...
Sean Donahoe: I'm gonna have to say, I'm gonna have to evade. It's not clear, I mean it's not doing anything yet. But that recent momentum catches my eye, is it gonna thrust up and continue that from where it is? 'Cause it broke, I mean it obvious broke it's recent downtrend from beginning of 2018 did have a nice rock up and then it went into a solid downtrend and this is kind of reversal of that, going back up. But, again, until something new emerges here ... yeah. I'm gonna have to evade it. But I like the recent momentum. That caught my eye.
Phil Newton: And let's finish, well we'd have to look at the dollar index. Let's go and take a look at the DXY, D-X-Y, the symbol for that may vary slightly depending on the platform you're on, but that's what it is on mine.
Sean Donahoe: Yeah, DXY is standard for most of it.
Phil Newton: So this is, again, the dollar index. So we've looked at all the other currencies compared against the US dollar, so this is everything kind of put into a basket and given a dollar index name, so it's everything else compared to the dollar as an index.
Sean Donahoe: Pretty much. I'm gonna have to evade this one too.
Phil Newton: It looks like a pigs ear, doesn't it? Yeah.
Sean Donahoe: It does. It's a dog dinner. There's nothing really to day about this one. I mean it has, obviously, picked up nicely from April of last year. Obviously with the trade dispute and everything else that kind of put some downward pressure on things, but it was already under pressure. But it's kind of sideways at the moment. -anything.
Phil Newton: Yeah, well I think this is, as we've just gone through the currencies. This is kind of one of the reasons I go through, it's actually part of what we'll be going through on Saturday's training, actually, is how do you select the market to trade? I mean, appreciate that depending on where you are in the world you might have some country restrictions depending, or market restrictions depended on the account or type of account. Or the fund or your ability to actually trade. So depending on where you are in the world there are gonna be restrictions. And that's just the nature of regulation, and the nature of the beast.
Phil Newton: But when we go through how to actually select, I actually use the currencies as an illustration of, these were great to trade 2003, 4, 5, because the range of movements, the price volatility that we mentioned earlier, was huge on currencies way back then. And that's why, arguably why I spent many years trading, it was one of the better markets to trade at the time.
Phil Newton: Now, by comparison to other markets, other instruments, other indexes, currencies are not the best thing to trade because of that lack of volatility, that lack of movement. So, again, no matter where anyone else is in the world, one of the questions that I get frequently is should I be trading currencies? It's like, well, I'm not saying, "No, don't." But there's better things to trade, and as we go through the currencies it's really difficult something that is moving. The Yen maybe, kind of looked interesting because it was moving by comparison. But when you look at the scale of it, there's not that price volatility, there's not that much range of movements to really get the blood flowing, to really get the interest.
Phil Newton: Other things look more interesting. And this is always my argument at the moment, is open your eyes, look around the world. We've got such an abundance of opportunity to pick a market anywhere in the world that makes the most sense for us to trade, that suits our flavor for risk and volatility. And when I'm talking about volatility in this context I'm talking about range of movement and price volatility.
Phil Newton: If you like a lot of price volatility, like I do, then I'm gonna stay with the US index futures at the moment because they've got some of the biggest ranges of movement at the moment. If you want something that's slow and steady and more conservative, then yeah, maybe look at currencies. But you've got to choose the flavor that you like. I like volatility, I like a lot of volatility, it typically means that I get paid quicker. But if you're choosing your markets based on what someone said you should trade 15 years ago, that's the wrong reason to be choosing currencies as your choice. If it suits your personality, your risk flavor, your personal profile, all the same different phrases to kind of express the same thing, your personal preference. It's kind of like saying, do you want an Audi or a BMW? They've all an egine, four wheels, they all kind of drive, they're all kind of in that luxury range, they all do the same thing. But one might do it a little bit better than the other because you prefer BMW on the front versus Audio.
Phil Newton: You know what I'm saying here Sean, don't you? It's personal preference at that point 'cause they do the damn same thing.
Sean Donahoe: Absolutely, absolutely, yes.
Phil Newton: So all I'm trying to do is when you're picking a markets to trade, choose the one that makes sense for you. Your personality, your risk profile, and that's what we mean by these things. I like a lot of movement. That is one of the main reasons that I choose the markets that I trade. I want to trade them frequently, I want to trade them with low risk, that explains my decisions, my choices, and again, we're gonna go into a lot more of these things on Saturday as well. But again, just trying to get you a little bit of a flavor. When you're choosing your own markets, choose the one that makes sense for you. For me, currency is not worth my time at the moment and haven't been for the better part of 2010. There are other things to trade.
Phil Newton: But there are plenty of choices all around that world that might have a better flavor or risk profile, or however you want to phrase it, that suits your current personality at the moment versus your risk tolerance.
Phil Newton: That's all I've got to say on that subject Sean.
Sean Donahoe: Bloody good. That's it. And there you go, I mean that really is the meat and potatoes of what we're looking at here, the ability to look at these ETFs, make decisions, and again, apply similar methodologies of what we're talking about.
Sean Donahoe: So, basically, that's it. And again, if you want to join us for this weekend's training, the 100K challenge training, that is Very simple, easy to remember. Go there, jump on, we've got a little more information about what we're doing. I mean we covered most of it here. But again, would love to see you that training. There are limited seats. And again, this is a ... if we're going to be doing this training again, or if we'll scale it up, it really depends on how much interest there is, and right now there's a lot of interest. We do expect those seats to go fast.
Sean Donahoe: So with that being said, that is it for this weeks show. I really, this has been a lot of fun today and I hope you've learned a lot. But please remember this show isn't free, does take a lot of time and effort to put this show on, and it will cost you a 5 star review. So just hit that subscribe button on however you're listening to us, or if you're listening to us on the site leave us a review. We always like to hear what you think of the show and the content and everything else. It helps us reach more readers and investors just like you.
Phil Newton: Yeah, and if you'd also like to get to us on the socials you can get to us, well I was gonna say Twitter then Sean, but I just don't use it. You can get to us on Facebook, we're in the Facebook group, so quite active there. We're very approachable. We're very active in our little universe, community, there if you'd like to come and join us. And ask us questions, maybe you'll get featured on the show next week if you've got an interesting question. And even if you've not got an interesting question, maybe we'll give you a shout out, who knows.
Phil Newton: If you want to reach us directly, you can do it via email. Just hit reply on any of the emails that you received already from us, 'cause we do send out a little email notification that let's you know about the email, the show, anything interesting. Just hit reply on any of them and they'll either come to me or Sean.
Phil Newton: That's it. Sean, what do we got coming up in next weeks show?
Sean Donahoe: Well, you really should tell them where to go. [email protected], if you're not on our mailing list already, or just [email protected] if you've got any questions about the 100K challenge, just drop us a note, that's fine. And Facebook, again,
Sean Donahoe: But next weeks show we're gonna be talking about resisting the urge, and what we're talking about here is one of the pitfalls I've seen many traders fall into is they get tempted to tweak, to change, to do things that are outside of the normal purview of their trading plan. And we're going to show you how to identify when you should or should not resist the urge.
Sean Donahoe: So with that being said, rock on, we'll see you real soon. Take care for now.
Phil Newton: Bye for now.
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