Rebel Traders 084 : Resisting the Urge

All to often traders are tempted to flick the switch or turn tail and run the other direction. Sometime, the best trade is resisting the urge.

Should you zig or zag? Do you see an opportunity that takes you away from your trading plan and strategy? Are you going to stick to your guns? Well, in this week's show we're going to see about whether to take the step or resist the urge to pull the trigger.

This is one critical area of trading that can be the undoing of many traders portfolios and blows up accounts. Sean and Phil help decide when to pivot and when to stand firm.

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Sean Donahoe: You falling foul to temptation? You tempted to flick the switch or turn tail and run the other direction? Well, 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 mine field. 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 I am joined by the guy who doesn't like to moon walk, as we'll discuss in just a moment. Mr. Phil Newton, how are you doing, sir?
Phil Newton: Doing fabulous today, absolutely fabulous.
Sean Donahoe: We were just talking a few moments ago that, hey, we're talking about resistance here today. And resisting temptation because are you so tempted to ...
Phil Newton: And all sorts of urges.
Sean Donahoe: Yes, well, we won't go into that. That's a ...
Phil Newton: I'll pause there, that's for a different discussion on a different day. Maybe in private.
Sean Donahoe: Maybe with Doctor Ruth on a different podcast, yes. But, we are looking at ... Basically, here's the thing, resisting temptation is very important. If you're resisting so hard you're moon walking like Phil does, then that's a completely different show. But, at the end of day, do you know if you should "zig" or "zag"? Do you see an opportunity that takes you away from your trading plan or your strategy? Are you gonna stick to your guns?
You see, these are the questions we're gonna ask today because we're gonna discuss when, and where, and how you should consider whether you take a step or resist the urge to pull the trigger on different scenarios. You see, this is one critical area of trading that can be the undoing of many traders portfolios and it has a tendency to blow up accounts if you're not careful. So we're gonna kind of dive into that a little bit and see where we rock and roll.
Phil Newton: As always, we've got our favorite, certainly my favorite section, "Trade, Fade, or Evade". A little look over our shoulder where we get to see the production line process that we like to call our trading strategy and decide on whether we would, would not, or trade, fade, or evade. To be fair, whatever the chances that we're gonna look at, it does not matter what the name of the chart is as we'll see later on. Is it going up, down, or sideways? What are we gonna do with it?
Sean Donahoe: And when you see the list of stocks we're gonna do, it's gonna be hilarious.
Phil Newton: Well, we think it's hilarious.
Sean Donahoe: Well, we think it's hilarious. It's gonna be ... And a few members who've followed us for a long time, and listeners who've followed us for a long time will ...
Phil Newton: Little bit of a side joke, isn't it?
Sean Donahoe: Indeed, it is. Okay, so let's, kind of, before we dive into the meat and potatoes here. I mean this next 48 hours are pretty important for this quarter, okay? We always like to start off looking at the main markets and a quick scan, but I'm gonna go with a fundamental twist here, a little bit.
Phil Newton: I've gotta admit, Sean, you had me panicking. I was thinking, "I didn't realize we were doing a marathon blog-cast this time. A 48 hour podcast? If I'd known, I would've prepared for the marathon session.
Sean Donahoe: I would've brought some supplies. Yeah, exactly.
Phil Newton: Are we taking phone donations? Is it for charity? What's going on?
Sean Donahoe: I know, I know if one of those great big telethons. Oh my god, do they still even run those? I don't think they do those anymore, do they? They're kind of ineffective in the age of the internet.
Phil Newton: Yeah, aren't those charity ones on comedy marathon, telethon things? I think it's text in now. Text 10 pound to this number, or 10 dollars to this number and you make a donation via your phone. That seems to be the way ... It's not like phone in and make a donation anymore.
Sean Donahoe: Ah well.
Phil Newton: Take it away.
Sean Donahoe: Well, anyway, in the next 48 hours we've got ... today and tomorrow we've got some very interesting things going on. Just to keep an eye on the markets. Things that may knock things askew or accelerate this recovery from where we were.
Phil Newton: And in usual good form, Phil hasn't got a clue what's going on. It makes no rele ... it's just irrelevance to my trading decision process. I literally don't know what's going on, Sean. You know what, this is actually good for resisting the urge. I resisted the urge for many years to look at what's going on in the news because whenever I've done that I start having those urges that we were talking about just a moment ago. And I feel compelled to start taking action, or not taking action, because of what's going on the news. It has no relevance to my decision making process because of the way that we apply our strategy.
Sorry, I know I'm getting a little bit ahead of ourselves, but it was just kind of topical points that ties into the main theme of what we're talking about. I am intentionally ignorant in a lot of subjects. I'll find out what happened tomorrow when the markets move and I don't need to know what's going to happen to make a trading choice. Strategy says do this, I'm gonna do this. It doesn't matter what news item, to me, is out there.
Sorry, I kind of stole the thunder there, Sean. I just think it's an important thing to know I literally have ... I don't care what's going on. It does not matter to me.
Sean Donahoe: Well, while Phil goes takes a break then he goes on a ...
Phil Newton: Has a lie down while you let everyone ... Pull back the curtain, let everyone know what's going on. I'm just gonna step out for a while because I like surprises.
Sean Donahoe: There you go. Anyway, so we've got a few things going on. We have major earnings results from some pretty big companies, Federal Reserve statements, and the outcome from the Chinese and the China trade war discussions and negotiations.
Phil Newton: Chika d'China, the Chinese chicken. I would love one of the talking heads to do that.
Sean Donahoe: That would be funny. But we've got Facebook, Microsoft, Tesla, General Electric, and Amazon will report earnings in the next 48 hours. Now, we had Apple last night, which is already screaming ahead. They beat earnings, despite negative news. So it's gonna be interesting to see some of these other FANG and top tech companies step out. I'm also very particularly curious about General Electric because, as you know, I've been bagging on them for months and the way they've just produced ...
Phil Newton: Markets have just opened, Apple up 5%. Boom. Literally, as we're doing this, markets have just opened. Apple taking a big jump, which in the scheme of things, considering it's gone from 230 down to 160. It's a great recovery. I'd imagine the talking heads are losing their minds over it as we speak.
Sean Donahoe: Oh, they will be. They'll be all over this like a rash at the moment. In fact, I was gonna go skim a couple of the big ones, but I'm not gonna bother. Screw them. So, anyway ...
Phil Newton: Tesla's positive. Yeah, sorry, I just kind of having a little looks at the phones while you were talking about them. The markets do what they're gonna do. Again, I am very ... I always joke about it, and don't get me wrong, I do know what's going on. It's just, I go out my way not to let it influence me. Again, I know I kind of overdramatize the situation. Yeah, I know when earnings are out, I know when earning season is, I know what stocks are gonna be in my little trading pool. I just don't want it to influence my decision. The fact that Apple is releasing earnings reports, if I'm gonna trade it, it's not really gonna impact my decision to trade it or not trade it.
Sean Donahoe: No, absolutely. And that is one thing we talk about a lot.
Other things going on, yeah the Fed is scheduled to release ... Basically, they've got their policy statement coming out at, I think it's 2:00 Eastern and then as Jerome Powell has mentioned, he's gonna hold a press conference after that statement comes out about a half an hour later. And then, as I mentioned, the Chinese representatives are due to meet at the White House, I think this is Wednesday and Thursday. And then hopefully we get a statement Thursday evening.
And we'll see. A lot of expectation is that there are good things gonna be happening from this. That agreements are going to be reached and people will stop faffing around.
Phil Newton: .
Sean Donahoe: Good luck with that one. You're not gonna get that one for awhile.
Phil Newton: The headlines ... Don't get me wrong, I catch the headlines on the ole' newspaper wrack and the headline that I saw this week was that Britain will run out of food if there's no back stop for Brexit. If that means anything to you, great, I'm not gonna spend an hour explaining it. It's not relevant. But I just think that the panic that the headlines, and the talking heads, and the newspapers they're talking about. Britain will run out of food if we don't come up with an exit agreement because we're about to just back-pedal out of all the trade agreements and stuff without any safety net. I just wanna know ... We could be talking about the China thing, it's like the over-dramatization of the situation creates panic and pandemonium from the general public and the reality is it's not as bad as what everyone's making it out to be. Yeah, it's dragging on.
Again, same with the trade agreement. Yeah, it's dragging on, yeah it's making everyone's eyeballs roll, but the reality is it's not as bad as the headlines suggest.
Sean Donahoe: That's it, there's gonna be a shortage of black pudding from the north because that is all part of Brexit. It's a Brexit from the north and the south.
Phil Newton: And we import it from France, anyway. It doesn't come from the north.
Sean Donahoe: Completely bloody ridiculous.
Phil Newton: Oh, dear dear.
Sean Donahoe: If you threaten to take away the rich tea biscuits and the Hobnobs, there's gonna be fricken riots.
Phil Newton: It's gonna be murder. Absolute murder.
Sean Donahoe: And this has absolutely no relevance to anyone in the US, but if you ever go to your grocery store ...
Phil Newton: But we could be talking about anything. The country of origin and the names don't matter. These situations have happened. There's similar things going on that would translate wherever you are in the world. It's just history repeats itself over, and over, and over again and the talking heads make such a fuss over what is essentially nothing. By comparison to what they're making it out to be. Don't get me wrong, it's a serious thing, what we're talking about, but they're making it out to be 10 times worse than what it actually is and it makes the whole situation even worse.
It's just a whole frustrating situation, as we're seeing the situation in the US. Let's bring it back home a little, because we're talking about the US markets, predominantly. There's a situation going on at the moment that's causing all sorts of pandemonium, and turmoil, and headaches, and heartaches, and maybe a little bit of acid reflux, depending on who you're talking to, because of certain political situations, and shut downs, and agreements not being met. It's the same type of things going on, alright, for different reasons. Stupid things are happening. Why can't we all sit down round the table, come up with an agreement, find a solution, and get on with it? That's what the politicians are for, none of this school yard pushing and shoving that we constantly see in the news. It's just frustrating.
And again, to be fair, this is the big argument why I turn off the news. As you can already gather, no matter what we're talking about it just makes me frustrating that these idiots are in charge of the state. They're running. It's like, just sit down and come up with an agreement that everyone's happy with.
Sean Donahoe: No, it is ridiculous. It's actually why I stay out of politics myself, it's just ... Money moves and it's gonna move somewhere. It doesn't matter who's saying what, who did what to who, who shut down what, who ...
Phil Newton: Who's doing what to who, as well. .
Sean Donahoe: Well, yeah, indeed.
Phil Newton: Whether someone's doing a cheeky little dance on the TV and they act like a politician, it doesn't make any difference. The markets are going up, bullish. Market's going down, bearish. That's all we're interested in.
Sean Donahoe: Money moves. That's ...
Phil Newton: They're gonna do what they're gonna do.
Sean Donahoe: Exactly. Here's the thing. This is where we're getting to resisting the urge. It is too tempting with side information that's not relevant to switch things up. And this is the real thing we're talking about here. I mean, Phil and I have our strategies. We have our core Trade Canyon strategies that we use that we have amalgamated, fused together, and created some wonderful things. Phil applies, has other strategies, I have different strategies that I've developed. And, again, we're very happy, confident with those and everything else.
But one thing we see a lot of traders end up doing, and it's a bad habit, but it's also, I think, a combination of experienced traders who get lucky, but still fall foul of this, and new traders looking for the Holy Grail. And, I'll speak for myself, but, again, I've been there, done that, and everything else. But it is too easy to change the plan because you think you've got a new element that's gonna add a special flavor, or a special element to it, when you've already got something that bloody well works. Here's the thing, if it works, great.
Phil Newton: Aint broke, don't fix it.
Sean Donahoe: Exactly. There are different things we'll talk about diving down different rabbit holes and chasing squirrels, we'll get to that in a moment. But a lot of people, I see them do this all the time, is they keep curve fitting the strategy for the current situation they're in without proving the testing and getting the actual numbers to validate that an adaption or a change to the plan is valid. And then they wonder why their strategy never works because it's only working to what they've already seen in the past which is ever-changing and fluid. So they're doing ...
Phil Newton: Confirmation bias.
Sean Donahoe: Confirmation.
Phil Newton: They've seen it work once, "Alright, I'm gonna add it into the strategy because it worked yesterday.".
Sean Donahoe: Exactly.
Phil Newton: And I think that's the danger from kind of ... You refer to it as "changing the strategy", I call it "strategy hopping". They're jumping around or "indicator jumping". They're jumping around from tool to tool, from strategy to strategy and because yesterday was a favorable signal, and it worked out, so this must be the strategy that's working. And today, the current strategy that they're active on, is not either producing a signal, or an alert for them, or a setup, or it's produced a monetary loss. Notice the wording then, it's not losing trade, it's monetary loss because monetary losing trades happen with every strategy and everyone's looking, we're kind of overlapping into the Holy Grail, everyone's looking for 100$% success rates, and it doesn't happen. No business works like that in the world, and trading's no different.
It's that jumping around from strategy to strategy because they saw, alright, the last week of signals has had a good run with this strategy setup, and therefor I'm gonna use that strategy. What happens is is that all strategy, all methods, all tools, they kind of run in cycles. So there's gonna be favorable cycles, there's gonna be exceptionally favorable cycles where you have multiple back to back monetary gains. And then there's gonna be periods of time where you've got monetary losses, and then there's gonna be those times where there's several monetary losses back to back.
What happens is, is because they see that favorable week, month, year, whatever the time period is relative to your time horizon. They look at the last week or the last month and they go, "Oh, there's the favorable cycle.", and they jump from the current strategy, or tool that they're using, to the new tool or strategy that's producing this confirmation bias that, hey, it's been a good week, or a good month, or whatever. What happens is they're probably jumping in at the time where it's at the peak, or near the peak, of the cycle of favorable experience with that tool and market conditions.
Inevitably, they might catch the tail end of the positive monetary gain run, and then the straight on to the downturn, the down tick, the monetary losing phase of the strategy, the setup. And they'll trade that all the way down, all the way down, all the way down and think, "Shit, this doesn't work." It's a crap strategy, it doesn't work. This indicator's a load of bullocks. It doesn't ... Whatever the ... They're right, and at the worst possible moment, they're then looking at the next tool, the next strategy, the next indicator, the next time frame, whatever adjustment they're looking to make. And they go, "Oh, for the last month, this has been producing some great results." And at the worst possible moment, they jump ship, and that's often right at the point where they're gonna start seeing that favorable cycle in the current strategy.
So what happens is, they'll hit the losing phase hard, jump ship, hit the next strategy, maybe get a couple favorable trades, monetary gains, and then hit the losing cycle of that strategy. They'll constantly jump from strategy to strategy, from tool to tool, and just trading the losing phases, the monetary losses phase of every tool, strategy, and indicator that they use. And that, for me, is one of the biggest mistakes that novice traders make. As they're looking for their strategy, they don't give the current strategy sufficient enough time, or the tool that they're using, enough time to make a sensible decision.
And here's the crux of it. They've probably back tested and researched the tool. They've gone back six months, eight months, twelve months, maybe five years, ten years. They've done a lot of research, said, "Hey, this tool, this strategy, this produces results. Over a long period of time, it produces great results." And at the first sign of a monetary loss, they jump ship. It's like, you've just spent months researching this, and you're gonna throw it all away? All that research to see ... Well, how long are the winning phases? How long are the losing phases?
And you've got now this expectation that, okay, if I hit a losing phase, it's gonna last at least this long, and maybe up to that long, but on average it's gonna be "X" number of days, weeks, months, whatever. Depends on the strategy, time frame, et cetera. But if you've armed with that knowledge and the research that you've done, you know that you can weather that storm and you can position size yourself accordingly to be able to compact that down tick in strategy, or however it is that you're treading.
I'm being intentionally vague here, I'm trying not to mention tools or anything, but it's the same experience with every strategy, tool combination. Again, as I keep saying, at the worst possible moment, they jump ship and think, "Okay, I'm gonna use something else. I'm gonna ..." And then they start just shooting from the hip. I'm gonna switch out moving for Mac D, I'm gonna switch out Mac D for RSI. I'm gonna switch out the tool for something else, and then they just disregard the months of work and the years of research that they've gone through back testing, will throw it out the window and make it up as they go along. And then it's, "This trading lock's a scam." Why do you think that? Why do you think that? You've just decided to disregard all the research.
Compare it to the real word for a moment, Sean. Phil's on a soapbox, Phil's on a roll. Hold me back. Put me to sleep. Strap in, boys, this is gonna be a big ride. Compare it to the real world, it would be like having ... There's a shop on the High Street we keep talking about, and it would be like opening up randomly for hours. One hour here, an hour there. You hire an employee and today and you fire them tomorrow. You don't open up at the weekend, maybe you take Monday off. You just randomly open up the shop, you don't reorder stock. That's what you're doing with the strategy that we've just described. In the real world, you wouldn't run your business like that. You would make sure that you've got well staffed business. You'd make sure that you're open during the hours that you said you were gonna be open. Your business of operation, you're gonna have to stock the staff, the means, your operating procedures, they're all laid out. You wouldn't run your business in the conventional way, broadly speaking.
Trading's no different. But yet, people do weird stuff because they have this compulsion, this urge to reinvent the wheel. Not just, literally on every trading opportunity. Every minute of the day, I'm gonna just make it up as I go along. Yeah, let's see what happens with this trade, shoot from the hip and see if they hit the target and hope for the best. And then that leads into all sorts of stupid decisions. I know, I'm gonna swing for the fence on this one, and we know that that doesn't happen every day. You're gonna swing for the fence, I'm gonna make a 1000 point move today. Well, does the market move a 1000 points in a single day to justify that expectation? No, it doesn't. Why are you hoping that it's gonna happen today of all days? It's just crazy, crazy decisions that just kind of snowball themselves, or this domino effect of one stupid decision dominoes itself into all these stupid little mistakes and it all starts with jumping around and not being consistent with your decision making process.
Phew, I was on a roll there, Sean. As you can probably gather, this is a serious bugbear. If you wanna wind me up, just start this conversation with me. If we ever meet, just start this conversation with me because it really is a frustrating thing. People would see so much success if they just said, "You know what, I'm gonna use this tool, this strategy, this timeframe, whatever thing, and just stick with it for six months. Do nothing else but master that tool set, that timeframe, that strategy." Six months. Give it six months in real time. Back test the last five years, get to know it like a sweet, sweet lover.
But you get to know it, and you will see success. It doesn't matter whether it's our strategy or someone else's strategy. Guess what? They all work, just give it enough time and dedication to make it work. Rub those ear lobes, Sean. Woosah, woosah.
Sean Donahoe: Okay. I was gonna say, he could not resist. He could not resist the temptation to jump on that bloody soap box.
Phil Newton: Oh my word. It's the biggest frustration and I take it personally because most traders would see success if they just did a little bit of work, trade small, trade consistently. The same things that we keep talking about week in, week out, month after month, and now year after year. We've been saying the same message. Trade small, trade consistently with a positive expectancy strategy. So do some research on the strategy is kind of what we're talking about today, essentially. You do those three things, you will see success just like any other business in the real world.
Sean Donahoe: That's it. That's exactly it.
Phil Newton: Let's take a breath there, Sean. I think Phil needs to let his blood pressure just settle down for awhile.
Sean Donahoe: Yeah, have a lie down. Take a Valium, dude, take a Valium. This kind of does show exactly why this is so important. For years, I've seen many, many students just shoot themselves in the foot. I mean, they're extending their foot, putting the shot gun against the toes, and wonder, "What happens when I pull this trigger?" Well, you're gonna find out very quickly. Problem with trading is its very slow
Phil Newton: And they do it again. "Oh, that hurts. Let's do it again and see if a different result happens."
Sean Donahoe: Exactly.
Phil Newton: And then the rest of the toes just fly off.
Sean Donahoe: Dear me, it's not a good thing to have happen, but it is one of those aspects you've just gotta consider, "Okay, what am I doing? Am I being consistent?". And this is the watch word, is consistent. If you keep ... Whether your strategy dancing, or time frame dancing, it really doesn't matter. You gotta focus on what works. Now if you don't have a positive expectancy strategy, then obviously, this is not gonna be great. You don't wanna keep doing something that's gonna lose you money. But you've go to know ...
Phil Newton: I think you don't have to reinvent the wheel, as well, because there's plenty of people that have done the work, have done the research and the majority of these strategies work. I think that's the big secret that's not a secret, Sean. As we said literally just a moment ago, whether it's our strategy or someone else's strategy, if they're trading it and they're promoting it and they're doing it in real time, which a lot of traders do do, it probably works. Will it work for you is a different question.
If you have the knowledge and the faith that, "Hey, our strategy works, we've done a lot of research. Been trading it real time for years and will it work for you is kind of the big question.". As you keep saying, give it six months, demo trade it, get to understand the quirks and the idiosyncrasies of the ruleset. Some of them are simple, some of them are complex. Our strategies are always really simple, Sean. At least I certainly think that way. Because I've gotta make it work for the poor farm boy in the room, which is me.
The strategies do work, they all generally do work, but you've gotta find your footing to see if it works for you. And this often also referred to as and I think this is some of the difficulty and probably why people have that urge to jump around. Because they're not sure whether it's gonna work for them, or they don't have the time, or they've got that kind of fear of missing out on the movements. They've not got that patience to wait for the opportunity to present itself with the strategy. And if they did that, then there'd be a lot more successful traders around.
And this is where, perhaps, doing it around the day job actually makes sense because you're kind of forced to be patient. You've got to wait for opportunity because you're doing other things during the day. You're not sat in front of the computer trying to trade like it's Nintendo. Because that urge to put the trade on, it's high, because that's what we're looking for. We're actively looking to put the next trade on, but the reality is is the majority of the time we get paid to wait. The actual act of trading takes very little time to put the trade on. There's the set up, step one, step two, step three, whatever's in your process. The actual act of trading click, click, trade's on. Now we sit back and wait. We're either waiting for the trade to unfold, or waiting for the trade to set up, and there can be many hours, many days, maybe even many weeks and months depending on your strategy and time frames, for those things to actually unfold.
The urge is strong to be doing something, and I think having that shift in mindset to realize that waiting for the setup or waiting for the trade to unfold to targets, for example, is what's essentially necessary for the successful outcome. Having that little shift and understand that waiting is a perfectly ... You're either long or short, or waiting. And sometimes you're both, you're long and waiting, or you're short and waiting, or you're flat in the market and you're waiting. You're always gonna be waiting somewhere.
When you have that realization that waiting is what you should be doing, then it makes the application of the strategy a little bit easier. That is, I suppose, the real trade is to know that you've got to sit on your hands and be patient. We're almost like little money security guards. We're waiting for the money to either come in or go. We are like little security guard when it comes like that because security guards are, most of the time, most of the activity is stood around waiting with our hands in our pockets. Waiting for that activity. If something happens, great. But the reality is, it's wait, wait, wait.
Sean Donahoe: Absolutely. And it's very true. The problem is that there is the temptation, and we all do this and I am absolutely guilty of this, but in a very structured way. We see a lot of squirrels. We dive down a lot of rabbit holes, but we have to be very cognoscente of, is this something that we can dive into and why we're doing it. If we're chasing a squirrel, is it gonna benefit us? If we're diving down a rabbit hole, is it gonna benefit and add value to what we're doing? Is it something that we just wanna explore because it's tapped our curiosity? Well that's fine, but we wanna make sure that at the end of the day, it's time and effort really well invested.
At the end of the day, I go down occasional rabbit holes because I'm very interested in AI and some of the algorithms I actually built to mechanical and automated strategies, either for just day to day trading for the retail trader or the high frequency trading aspects is something I do a lot, as well. I'm always looking and building algorithms because I've got a coding background and I want to test and retest and explore different ideas. Different thoughts I'll come up with at three o'clock in the morning, completely out of random space. It's like, okay, is that worth exploring? I'll write it down, boom, boom, boom. And then if I have time I'll invest some time and effort if I feel it has a benefit.
Phil Newton: If it's got merit, yeah.
Sean Donahoe: If it's got merit to go explore that a little further or chase that squirrel a little bit. But here's the thing, this is the important part of this. Trading ...
Phil Newton: I think if you're not trusting developments just to ...
Sean Donahoe: No, it could be anything. Stretches your development, it could be just general knowledge, it could be about trading, or certain industry, or certain economic theory, or certain area of the world.
Phil Newton: Okay, fair enough, yeah yeah.
Sean Donahoe: Here's the thing, it never detracts away from the day to day process of trading. The trading plan, whatever it is. While I have those outside pursuits, it never ever detracts away from the day to day trading plan and execution. It's not making me dance a new strategy. Now if I come up, Phil was mentioning because I do a lot of strategy development, if I come up with something new then great. But it's separate. The day to day stuff happens.
Phil Newton: That's the point I was coming on to. There's a very distinct line between, "Okay, this is the active strategy, I'm not gonna mess around with it". But you've got a very distinct line in the sand to say, "Okay, this is research, this is development, this is me exploring my interest with the chutes with the financial markets. Is there an opportunity?". We can kind of class that as discretionary ideas and developments, and research, and all the rest of it. There's a very distinct line to say, "Okay, that's one element of what I'm doing to keep myself aware and abreast of the markets and at the sharp end of the tool set". You're keeping that sword, that you like to reference, well honed and sharpened for just such an occasion where it needs to be used. But it's separate from the actual strategy. The one that is already tested, researched, and proven and is now, it's almost like that's the bench mark.
Is the research that I'm doing gonna be better that I'm already doing, or is it worse than what I'm already doing? And I think that's a very clear distinction to make. New traders blur the two very much all the time, almost. They don't separate the act of strategy or the strategy that they're trying to apply with their ongoing personal development as a trader and they are two separate things and I think that's a very important thing just kind of underscore.
Sean Donahoe: Very, very much so. Very much so. Again, one final thing to say in this is that resources are precious. Time and money are equally valuable. Invest them both wisely, but stay on target. I think that's all I got to say about that.
Phil Newton: That's a great place to finish, yeah. Separate the two.
Sean Donahoe: Absolutely.
Phil Newton: That's the most important thing, there's nothing wrong with either of them, despite Phil's soap box speech earlier. Just make sure that they are separate.
Sean Donahoe: Absolutely. Okay, so, trade, fade or evade. Now, we're gonna have a little fun here and again, like I said, there's a little bit of an inside joke, which I'll let everyone in on. We did a kind of a roll through some stocks awhile ago and we ended up talking about looking at completely different charts with completely different analysis.
Phil Newton: On more than one occasion we've done it, Sean.
Sean Donahoe: On more than one occasion.
Phil Newton: Either type of verbal or actual.
Sean Donahoe: Yes.
Phil Newton: We fluffed up a little bit.
Sean Donahoe: It has been, but the funny thing is that we're looking at these individual charts, and he just highlights the fact that the actual company does not matter, it's what the chart is telling us, and that's it.
Phil Newton: The process, yeah. The process behind ... This is kind of like ... I suppose it kind of leads in to what we're talking about. When you've got a process that works, it doesn't matter what the symbol on the chart is. We could be talking about stock charts, we could be talking about forex, futures, bonds, we could be talking about the Aussie, Australian index. We could be talking about Europe, European stocks. It doesn't matter what the name on the chart is, the principals around what we're doing on any time frame, are all the same. We're buying the dips in uptrend and selling them on rally's in a down trend with a trending market. Ranging markets, or buying the range low, selling the range highs, or we're waiting for the breakouts of the highs and the lows. They're the six things that we like to do, counter-trend trading is the two black sheeps of the family. There's really only eight things that you can do in the market within the context of, there's only three things that the market will do. It's going up, down, or sideways.
When you know that principle, trading becomes really, really easy. So all we need is a tool set to help us figure out what's going on. Is it going up, down, or sideways? And that's what we're gonna do in trade, fade or evade.
Sean Donahoe: Perfect. Okay, so let's have a look. Let's start with BA, Boeing.
Phil Newton: BA, my arch nemesis.
Sean Donahoe: Boeing, Boeing.
Phil Newton: Not British Airways, as I keep talking about, because that's the abbreviated name in the UK, that was the start of all the confusion.
Sean Donahoe: Absolutely. And I ended up using it for Bank of America, so let's just be very clear here, it's Boeing.
Phil Newton: Again, as you keep saying, it doesn't matter what the name is, but we're definitely looking at Boeing, BA. Again, it's going up, down, or sideways and since the beginning of 2018, looking back at the last 12 to 15 months, which is what I like to do, it's in a range. I looked up, we've had a little bit of earnings pop. I don't even know if there is earnings. It looks like it has jumped higher. Probably earnings, we're in earnings season, it's a fairly natural conclusion to make.
But we're still in a range, despite that. It's in a range, we're at the upper end of the range I'd be evaluating for either a break out to move higher or for it continue ranging. Again, nothing new is happening, so I would expect it to continue ranging. It's not really giving me an indication as to whether I wanna buy the break out or whether it's gonna exhaust and it's gonna continue to be meandering sideways just yet, but that would be the evaluation. For me, it's interesting. It's a not today trade, but it's certainly looking interesting, so it's a wait more than anything.
Sean Donahoe: Yeah, I'm looking for it ...
Phil Newton: So it's not necessarily a trade it or fade it, but it's certainly a, "Oh, maybe tomorrow", type of trade.
Sean Donahoe: It may be a tomorrow one, I'm looking for a gap fill trade after earnings, but I wanna get confirmation on that first. But, yeah, that'll be a tomorrow trade. Okay, next one, BAC.
Phil Newton: BAC. BAC.
Sean Donahoe: Now that is Bank of America.
Phil Newton: Now this is Bank of America. I think we can already start to see there's a BA theme going on here with our selection of stocks this week, .
Sean Donahoe: .
Phil Newton: All the stocks that we've cocked up over the weeks and months is what we're gonna go through.
Sean Donahoe: Yes.
Phil Newton: So BA, this has got an evade it type of feel to me. It's kind of done a little bit of everything. Again, if you notice the wording, it's kind of doing a little bit of everything. I can't quite figure out if it is going up, down, or sideways in the last 12-15 months. Very definitively, you could class it as ranging, you could class it as trending, depending on your perspective. I don't like that whimsical wording when I catch myself doing it. Maybe, could be, possibly, if you kind of turn your head and squint slightly, it's in a down trend. But if you do it the other way, it's in a range. I don't like that ambiguity, so for me it's an evade.
Sean Donahoe: Okay, for me I want to fade this, but ...
Phil Newton: Just on principle.
Sean Donahoe: Just on principle, yes. But, no, for one of my other strategies it's kind of flagged up and it's rolling over from where it is, but I'm not 100% confident in it, so I'd have to evade it right now, as well. Until I get confirmation, it might be a tomorrow thing. But I like it for a roll over, but one thing I know could influence this is China trade talks, which I know is gonna happen in the next 48 hours. So after that, I might have a little more fundamental confidence, but again, different strategy, but I do like it and gonna keep an eye on it and put it on the back burner.
Next one, BABA. Just really confuse things. Not double Boeing, but there you go.
Phil Newton: BABA.
Sean Donahoe: Okay, what we looking at?
Phil Newton: Look at BA twice. Maybe, you know what, I so want to look at British Airways now. Oh dude, we're confusing ourselves. We're intentionally doing all the BA ticker symbols, and we're already confusing ourselves. Certainly Phil's got confused straight away. This is, again, another stop for me. Again, just thinking about the context of the last few months. Again, I wanna see one direction, it's either going up, down, or sideways, as we just mentioned. I don't like it when it's kind of half and half. This is half and half for me. The first half of, and most of 2018 is in a range. The last, sort of, sixish months, seven months is meandering down. Again, it's half and half, for me it's evade. I want that confidence in it is going up or it is going down. It's doing a little bit of everything for me in the last 15 months, so I'm going to evade it for that reason.
Sean Donahoe: Fair enough. Okay. I was actually trying to find the stock symbol, I don't have it for British Airways, so I'm gonna have to skip it. But I was gonna try and be nice to you.
Phil Newton: Yes, we could probably Google it and find the online chart, but let's not worry about it.
Sean Donahoe: Fair enough, so next one, BAS.
Phil Newton: BAS.
Sean Donahoe: Basic Energy Services. I've never heard of this company. It's a penny stock so I'm gonna evade it.
Phil Newton: I was gonna say, this is a new one for me. I mean, it doesn't quite meet the price requirements. If we were gonna trade it, though, it's very clearly in a down trend. Sell the rally in a very well divide downtrend. No hesitation in my mind that that is what I should be doing if I was gonna do something.
Sean Donahoe: Yes. Okay, next one, BAND. Again ...
Phil Newton: .
Sean Donahoe: Bandwidth Inc.
Phil Newton: Abandon Ship.
Sean Donahoe: Now this is a recent company, apparently. I guess it did its IPO must've been back in November of 2017. So we are outside of our 12 month requirement.
Phil Newton: Yeah, it's just got about enough data to make an evaluation. For most of that time, though, based on the IPO's that we have looked at, this is one that has been quite positive from the outsets of it's IPO, which makes a refreshing change because the last several IPOs that we've looked at, they've kind of launched and then fell flat on their face which is kind of typical for what we've seen. I think that is a positive sign, actually for this particular company as an IPO. It's in an uptrend, we've seen a very big retracement. A nice dip at the end of last year. Most of the markets dipped and put a big, deep retracement in with the December sell off, so no surprise there. It's recovered quite nicely. It would be by the dip in an uptrend.
Might be a little bit easier to see on the weekly charts, just imagining it in my mind's eye. Nevertheless, the daily chart looks like it's buy in the dip and uptrend. I think the opportunity was two or three weeks ago, in fairness. But it would actually have met the requirements for our regular strategy, buy in the dip and uptrend, close outside the Bollinger band. And that would've been about two weeks ago for the actual set up. So, yeah, looks like a good trade. Bullish, if you trade it.
Sean Donahoe: Yep, absolutely agreed. Buy a dip, that's it. Buy the dip.
Okay, last one, BAX.
Phil Newton: And I am a bit dippy.
Sean Donahoe: Well you said it before I did.
Phil Newton: Wah, wah, wah.
Sean Donahoe: Okay.
Phil Newton: Why not, BAX. Baxter. I always think of the soup, Baxter Soup. A little bit of winter warmth.
Sean Donahoe: Indeed. A bit of chicken noodles.
Phil Newton: It's a little bit of a hodgepodge, there's a little bit of everything. You've got a little bit of range, little bit of trend, little bit of range, yeah.
Sean Donahoe: Evade. Evade, evade, evade, evade, evade.
Phil Newton: Evade, yeah. It's a little bit of a hodgepodge here. It's a good example of something to avoid. You've not got a clearly defined, it's in an uptrend, it's in a downtrend, it's in a range. It's doing a little bit of everything. So yeah, it's definitely an evade.
Sean Donahoe: Bugger that.
Phil Newton: Oh yeah. But worth our effort. So we've got all the BA's, god almighty. All the typos that we've made over the months.
Sean Donahoe: All good fun.
Phil Newton: Evade, evade. Push the eject, eject.
Sean Donahoe: We need that on the sound board, going off and stuff like that. Go all Jim Kramer just for the fun of it. But anyway, with that being said, that is the end of this week's show. And I think you for listening, we do appreciate it. But please remember that this ...
Phil Newton: Thanks for putting up with us this week. We've had a bit of a giggle, haven't we?
Sean Donahoe: Absolutely.
Phil Newton: It's been a little bit self indulgence on my part, certainly.
Sean Donahoe: Funny, yeah. And very true. So, anyway, moving swiftly along. Again, this show is not free. It will cost you a five star review, so please make sure you hit that subscribe button. Hit the review button, let us know what you think of the show. What you like, what you don't like, we wanna hear it all. And it helps us reach more traders, just like you get that little bit of a Rebel Trader edge.
Phil Newton: As always, we're pretty open and accessible. If you'd like to get in touch with us, you can find us on the Facebook group, if you go to Facebook and look for Rebel Traders. It is certainly there. You can find us at the same link, If you'd like to send us an email, snail mail, send us a post card, by all means you can certainly do that. [email protected] is my email and it's [email protected] If you wanna hit reply on one of those emails and send us some loving and adoring fan mail, or if you've got a question and you wanna appear on one of the future shows, by all means, send us your mail. What have we got coming up in next week's show, Sean?
Sean Donahoe: Well, I'm gonna talk about the big red dot. The target that is placed on every trader when it starts ...
Phil Newton: .
Sean Donahoe: It's very much a stay on target because again, I'm gonna take a ...
Phil Newton: It makes me think of that scene out of Star Wars now. Every time you say, "Stay on target.", I just wanna "Stay on target.".
Sean Donahoe: That's it, yeah. Jesus, let's ...
Phil Newton: Is this like the edge .
Sean Donahoe: Well, try to.
Phil Newton: So we've got the big red dots, have we, and we're gonna try and blow the Death Star up.
Sean Donahoe: Well, kind of. Actually, the main focus of this is why traders are often the targets of these political, I'm gonna say political, and I was gonna use an expletive.
Phil Newton: those type of comments.
Sean Donahoe: Exactly. So why are we always the target and what to do when anyone starts bagging on traders and trading. The reason I'm doing this is because we've seen a plethora of numpties.
Phil Newton: I like that word, Sean, I like it.
Sean Donahoe: Yeah, there's a plethora of political numpties that are coming out of the wood work to start running for 2020 and already I'm seeing how all traders are bad and people who build wealth are not paying their fair share.
Phil Newton: Let's strap some more regulation on the markets. Let's make it harder for the regular guy to climb out the gutter and make financial success from the markets.
Sean Donahoe: So we're gonna turn the tables, point that red dust ...
Phil Newton: See, that's soap box. Where did that soap box come from? Put that back away. put that away.
Sean Donahoe: There will be, there will be some soap box moments and probably from me.
Phil Newton: Mister Ranty pants will be out on both of our sides of the pond.
Sean Donahoe: Abso-bloody-lutely. Anyway, we're gonna rock and roll from there. See you next time, next week. Same bad time, same bad shadow. Take care, for now.
Phil Newton: Bye, for now.
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3 Key Takeaways From This Show

  • Stop changing the bloody trading plan
  • It's ok to dive down the rabbit hole only if it makes sense and add value
  • Time and money are precious invest them both wisely

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