Rebel Traders 034 : Viva Las Vegas…

In this Las Vegas special, Sean is in the city of sin at a private mastermind and we take a look at both sides of the gambling world and how it parallels and diverges from trading and what this means for you as a retail traders.

In this week’s show, Sean is out of the studio and broadcasting from his luxury suite at the Bellagio in Sin City as the Rebel Traders tackle the myths and psychology of gambling and the business of gambling and why this factors in to your trading, what to do about it and how you can turn the tables on your portfolio.

Sean is going to share some "In-The-Trenches" real world examples of how you can take lessons of Vegas and load the dice in your favor. So, get ready, get your blue suede shoes and we'll break it all down for you...

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Automated: Bright light city gonna set my soul, gonna set my soul on fire. Ready to rock?
Sean Donahoe: Thank you very much.
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 yes, that is the only Elvis impersonation you're ever gonna hear uttered from my lips.
Phil Newton: Thankfully, you left the building early.
Sean Donahoe: Yes, left the building early, indeed. I love it. And as you can tell, I'm joined by my podcasting cohort, Mr. Phil Newton. Phil, how are you sir?
Phil Newton: I'm pretty good today, thank you. Pretty good. Well, I'm always good most days, but you know, today, all the better for speaking to you, Sean.
Sean Donahoe: Oh you're such an ass kisser. Okay, so anyway ... Oh man. So anyway, yes. We've got a little bit of Las Vegas theme here. I have been for most of this week doing our mastermind with some of the top people in the industry. A lot of good stuff. But I wanted ... We were planning on doing this live from Vegas, but I messed up the time zone differences for recording on our ... Schedule for recording versus when my plane was leaving, so we're doing it when I'm back from Vegas instead.
But in this special, we are gonna take a look at the City of Sin.
Phil Newton: Dare I say, Sean, you couldn't do it live, because you were leaving on a jet plane.
Sean Donahoe: And that's it. I'm never coming back again. Indeed.
So yeah, we're gonna be taking and drawing the parallels ... We've talked about this occasionally in the past, the parallels between gambling and trading, and the best place to do it is when you've just come away from the City of Sin itself. And how there are parallels and divergencies from trading, and what this really means for you as a retail trader.
Phil Newton: We've also got our usual quick fire round where it's your trading questions are answered. And we've got the bullshit of the week, we call it the hype the hyperbole, the shenanigans, the nonsense, the idiocy, the tomfoolery, the other things that I can't quite express because my vocabulary's not that good.
Sean Donahoe: Business as usual and status quo. The business as usual and status quo of the industry, yes.
Phil Newton: Indeed. And somewhere amongst all of this nonsense and shenanigans, we're gonna try and answer the question of where is the trade?
Sean Donahoe: Perfect. Okay, so rocking on. What are we looking at? Well here's the thing. If you consider what the common perception of trading is, it's like everyone thinks that -
Phil Newton: for the fence, close your eyes, hope for the best.
Sean Donahoe: In fact, yes, absolutely.
Phil Newton: for the bullseye. That's usually the association, isn't it?
Sean Donahoe: It really is, and this is one of the things that we want to draw a line in the sand. The gambling mindset, which is the-
Phil Newton: We can draw a line through It's inaccurate. As we've said many times, it's an easy comparison to make, because most people understand and have some familiarity. It is inaccurate.
Sean Donahoe: It really is, although there are parallels, which is what forces this perception. We talk about this as a retail trader trap, because most people do live, and this is something that we were talking about right before we pressed the button to record, is the uncertainty and hope of gambling versus the business approach, which is what we take, and we reinforce in all of our trading, which is systematic risk evaluation. And we're gonna go into this in a little more detail, but I just want to draw a line right through the middle of this, and smack it on the nose so to speak, is business versus gambling. It's all about the numbers, and an analysis versus just closing your eyes, rolling the dice, and hoping for the best. And that is a big difference.
Phil Newton: It's true with any business as well, Sean. It's not just the trading comparison. Again, we like to compare it to business, all the time. But if you approach business in the same way that people assume you would approach trading, and that would be to ... You know what? I'm gonna hang a shingle up outside. I'm gonna throw the lemonade stand on the front porch. You know what I'm saying. Whatever the thing is that you want, the business idea. If you didn't have a business plan, if you didn't have funding, if you didn't have budgeting, or you didn't know how you were gonna perform and operate your business ... In other words, if you didn't have a business plan, at least some form you've laid out, what you're gonna do, when are you gonna do it, why you're gonna do it, then starting a business would be comparable to gambling. Because you're just hoping for the best.
And yeah, that ... If you have a business plan, most people don't think about it, because you're starting a more traditional business, either with or without a business plan, no one thinks that if you don't have some structure to what you're planning on doing, no one compares that to gambling. But that's what people do in the trading world. It then becomes a silly comparison, when comparing the same principle that we're talking about with business, as opposed to trading. What are your thoughts on that, Sean?
Sean Donahoe: Well, here's the thing. It's absolutely dead on, what you're saying. The problem is, most retail traders ... And it's a sad, sad fact. We talk about the rule of 90/90/90, which is 90% of retail traders lose 90% of their money within 90 days. And the entire industry relies on that, for retail traders, because they're gamblers. They're not coming at this with a process, or a positive expectancy strategy, or as we just mentioned and what we call internally within our business, systematic risk evaluation. And the problem is that this cycle is gonna always continue, as people are encouraged to trade without a strategy that they can rely on, that they're disciplined enough to use.
Don't get me wrong. I love Vegas. Vegas is my second home. And as I've mentioned before, I actually was gonna become a professional gambler, a professional blackjack player. But here's the thing. There's a big difference between the guy who goes to Vegas on a weekend, and he's got some money in his pocket that he wants to throw down on the table -
Phil Newton: Have a bit of fun, yeah.
Sean Donahoe: And have a bit of fun and just relax. Because it's entertainment. Or go see a show, or whatever else they're doing. They're doing it because they're just there for fun. But as a professional gambler, there's a entire business behind that. -
Phil Newton: Most professional gamblers don't call themselves professional gamblers. Whatever the game is their forte, it's, they're a professional poker player. They're a professional craps player, or-
Sean Donahoe: Blackjack player, yeah.
Phil Newton: They're a professional blackjack player. They don't typically refer to themselves as professional gamblers, because in the mind, gambling suggests something other than what they're actually doing.
Sean Donahoe: And that's exactly the point. -
Phil Newton: And that's the point we're trying to bridge.
Sean Donahoe: Yeah. You'll hear me say, I was gonna be a professional blackjack player. Not roulette, not craps, not poker. I was gonna be a blackjack player, because that was my speciality. Now I'll tell you an interesting thing. I was there at an event, god, a few years back. And I was there with a very good friend of mine who is a professional poker player. And I sat down, I played a lot of online poker, but I'd never sat down in a casino to play poker against other people.
Now I was very good online, and when I played poker online, again, bringing the business aspect to it, I had all sorts of additional software that would statistically analyze all of my opponents, in their seats, their playing styles and everything else, because you can do that. I would play multiple tables at once. And another thing-
Phil Newton: Because you've got a software team to support the ability to do that.
Sean Donahoe: Absolutely. And then I would have bloody, all sorts of probability analysis, that would actually take and analyze my hands and the probability of success, based on my opening hand. So again, I'm not just doing this, playing the cards that are in front of me. I'm doing detailed systematic risk analysis in that.
Now, the thing is, I was very successful at doing that online. Made a lot of money, because again, just for entertainment and also because I'm a nerd, the fact that I can do this allowed me to be very successful. The problem was I put myself in a false sense of security, by going and sitting down at a table with a whole lot of professional blackjack players, and very quickly, including my friend who's a professional blackjack player, I bet into him thinking I was hot, I had a great hand, and I kept check raising, as the phrase is in poker. He was sat on what's called pocket rockets, two aces. I had king and a queen. And it's one of the lesser of the top hands, but it's still within the top hand range. And came out with a reasonable hand. I think I had, bloody ... I think I ended up with, I can't remember. I think it was three kings.
But the problem was, I raised into three aces, so he had me beat. But I'd gone all in, with my significant pot.
Phil Newton: Well, for all intents and purposes, pretty decent hands. But he had-
Sean Donahoe: I had a decent hand.
Phil Newton: Decent hand.
Sean Donahoe: But he had the better hand, and he knew he had the better hand, and he let me check raise into him, because he knew what was gonna happen next. Because he had the far superior hand.
So anyway, I got wiped out. And I'm walking away from the table, pissed, not at ... Now this is a big difference. Again, just mindset. I wasn't pissed at my friend. I was pissed at myself, for being so reckless, and gambling, not being systematic at my approach. I realized that while I was doing this for fun, and what I had ... I was taking what was a business mindset, into a fun state, where my friend, who's a professional, was treating this like a business, and was gladly taking all the money out of my pocket, into his. Because now I'm in his zone, of where he is, business like. And I was mad at myself, for allowing myself to gamble, rather than be systematic.
Where I'm at home, with all this analytical software, I can be systematic. Here, I didn't have that.
Phil Newton: I think what's the difference ... Just to pause you there, Sean, I think what the difference ... This is the first time I've heard you tell me this story, but I think the difference that I heard you say there is, you were doing something completely different to what you normally do. Through no fault of your own, because you've normally got that software support, you've got the comfort of your own environment, you're playing multiple tables, multiple hands, so you've got, as we say, a portfolio type of approach. Whereas, when you went to the Vegas, you had one table, time is probably slowing down for you because you're not playing as fast as you might normally do, and also you've not got the support of the software helping you work out the probabilities and the percentages, and making the statistical suggestions.
There's a big difference. So you're playing a different game to what you would normally be playing. So you're strategies are probably very different as well, which makes it, hey, you're not doing what you normally do, therefore, as you recognized after the fact, "I was probably gambling there, and I didn't realize it. I thought I was doing the same thing that I normally do." Well very clearly, you weren't.
Sean Donahoe: Yes. And again, the market, which in this case was being surrounded by professional poker players, taught me that lesson very quickly. Now here's the follow-on to that story. I went and sat down and I took a break, took a breather, because I was what they call on full tilt. In other words, I was angry. But unlike a lot of gamblers who then blame the casino or the game, it's rigged, or anything else, and I'll tell you another story about that in a few minutes, I realized very quickly, no. This was my own fault.
So I sat down, just let myself calm down, said, "You know what? Bugger it. I'm gonna go play some poker." Sorry, sorry, blackjack. I'm sorry.
Phil Newton: I think the phrase you're looking for, Sean, is you got your shit together.
Sean Donahoe: Basically. I really did.
Phil Newton: You had , you got yourself a nice little whiskey, and you got your shit together, and you said, "Okay, well, what's the plan? Here's the thing. What's the plan going forward?" I like it.
Sean Donahoe: And so that's what I did. I went to go sat down, play some two hand blackjack, and I found a table which was by itself, and basically monopolized playing multiple hands. And one thing you mentioned is the speed difference.
Phil Newton: Mm-hmm (affirmative). It's a very big difference, yeah.
Sean Donahoe: When I'm at home playing multiple tables, I'm playing four hands at once. It's fast. Playing in real life, one hand can take five to ten minutes. It was dead slow, and boring, and it really forced me to speed things up, to the pace I was used to, was ... It really just made -
Phil Newton: Outside the comfort zone.
Sean Donahoe: -my strategy.
Phil Newton: a different strategy. Yeah. So I think the lesson to take away here, just for our loving and adoring listeners, is sometimes, when you think you're trading ... To bring it back to the stock market, you're trading one way, you think you've got the business mindset, but the reality is, you probably don't, because you're letting the ... As you were just saying now Sean, you're letting the emotional influence of your decisions impact your decisions. Because you were used to a very faster game and almost a very different style of trading.
Wen you went to the tables in the real world, your style of trading was completely different to what you were used to, so therefore you thought you were doing one thing, but the reality was you were doing something very different to what you were expecting to do. And that's a trap that a lot of new traders can fall into, when real money gets put on the line, you think that you're doing one thing and the reality is, you're doing something completely different. And to be able to recognize that, it can be quite difficult. You do need to sit yourself down in the corner and evaluate.
This is another good reason why keeping a track of your trades and your positions, are not just the, "I entered here, and I plan to exit there," type of tracking. But as I've said many times, track your emotional state of mind. Write down, "I'm feeling this," dear diary style. "I'm having a bad day trading."
I used to do that, and it helps you recognize the moods that ebb and flow back and forth when you're trading, when you're perhaps being over-influenced by the internal monologue that we all have with ourselves.
Sean Donahoe: Absolutely. Now, funnily enough, two hours later, my friend came away from this little satellite tournament that we were in, and he said, "Yeah, Sean, you okay?" I said, "Yeah, I'm absolutely fine." And then he recognizes the big pile of chips in front of me, where I've recovered all my losses in the poker game, because I'm back playing blackjack, which is where I'm good at, where I'm, like I said, I was professional at, at a speed and a voracity that is more in line with what I'm used to, which is in line with my strategy, and I recouped all my losses, and was still ahead, after a very short period of time.
But again, it's a recognizing of the environment, the market you're in, your particular strategy and style. But again, it all comes down to that business recognition of where you are with that systematic risk evaluation. And knowing that, you could have a significant advantage when you're back with where you are good at, or your strategy dictates. This is the best place for what your particular style of trading, or in this case, gambling, was.
And I hate using the word gambling, because it's ... I'm gonna use the word betting, because betting in reality is -
Phil Newton: And gambling suggests something than what it actually is. Again, I don't like using the word at all. we've had many conversations. We've locked horns over this. I'm very particular with the way I use some of my turns of phrase, and that's one of them that I just don't, I want to eradicate that from my vocabulary in every sense. And it's risk evaluation. That's what we're doing. We're placing an evaluated bet on the markets, if you want to use the gambling type terminology.
Sean Donahoe: It's funny because we were talking ... Yeah. We were actually talking just before the show. I was listening, because I haven't actually listened to it, I've skimmed through an executive summary of it, but Ray Dalio's book, Principles, which is an internal document and book that they gave to members of staff, and he was giving it away to the public for a while. But now it's a commercial venture. He turned it into an actual published book and audio podcast, or audio broadcast book.
He refers in the book to the bets that they place, as the world's largest hedge fund, the world's largest fund. They're managing billions and billions of dollars. But they talk about their bets. Not the trades, but their bets, because it might not be considered, per se, a trade, might be considered an investment, might be considered . But they're talking about them as bets. Not as gambled bets, but it's their strategic evaluated risk on their positions, but it's still considered, even someone like Ray Dalio considers them bets. But it's not gambling. And I think that really is a mindset shift that a lot of people need to take.
Now, interestingly, I was talking about ... And I'll tell you this story which is, funny enough I was coming back late last night, and I'm at the baggage claim, from picking up my gear and everything else, and then I'm listening to this guy who was just nonstop talking on the plane and I just wanted to choke him. He's just one of those people who just yabber on, yabber on, and you just ... And they're talking, everyone's talking on the plane and enjoying themselves, but just at that volume where you can't ignore them, you can't filter them out. And funnily, Phil was mentioning a movie, Daredevil-
Phil Newton: It was Daredevil, movie generally, but the character Bullseye. Who's the actor who was playing-
Sean Donahoe: Colin Farrell.
Phil Newton: Colin Farrell, yeah. He's on the airplane, isn't he? And he's got the old lady talking next to him, jabber jabber jabber jabber. And then all of a sudden, he just flicks the peanuts in the old lady's mouth, because he just wants to choke the crap out of her, because she won't stop talking.
Sean Donahoe: Funny. It was funny stuff.
Phil Newton: what you want to do to me, Sean, because I'm nonstop talking.
Sean Donahoe: Not at all.
Phil Newton: this guy, finish my story.
Sean Donahoe: There you go. But no, this guy was just talking about his addictions, oh he was in the Vegas scene for three years, and he was addicted to gambling, and it's all the casino's fault, they encourage you to gamble. They'll even give you cocaine, and he was addicted to cocaine for three years, and he's been in rehab, but he keeps going in and out, he keeps getting addicted, and it's all the casino's fault.
I'm just like, "Look in the freaking mirror. The problem is right there, dude. That's the ... It's the mindset." And this is one thing we were also saying, talking before the show is, trading is not for everyone. Because if you have that addictive personality, if you don't have the discipline to create a barrier between you and your activity, which in this case we're talking about -
Phil Newton: Your tendencies.
Sean Donahoe: Yeah. Then again, you are gonna fall on the bad side, and become a gambler in the markets, in which case you're gonna lose your shirt. You're gonna be part of that 90/90/90 trap. But Phil, you were talking at an event, you were telling me about, where you had someone who was ... Yeah, tell us about that story.
Phil Newton: Well it's, I'm story, because it pretty much exactly the same as yours. I had the similar experience. But I was actually gonna 'fess up and say, I have that fear of missing out, Sean. I like to have positions on. I like to be exposed to the markets. And so, how ... And it would be very easy to fall into that gambler's mindset where, "I've gotta have a position. I've gotta place a trade. Gotta put a bet on. Gotta do this." That compulsiveness to place the next trade, regardless of whether the opportunity's there or not. That's gambling.
So it's easy to fall prey to those compulsions that, "Hey, I've just gotta put the trade. I've gotta put the trade." So how do we do that? How do we get past it? How can we satisfy the personality trait? Because this is personality traits. I like having exposure to the markets, and if I've not got any positions on, I have a fear of missing out. So how do we not fall prey to that trap, and unnecessarily have positions on? One way to do it is to ... Surprisingly, Sean, the best advise, to firstly, first step, is reduce your position size. And then the second step is to adopt a portfolio type approach. Because then I can put a little trade on, every day. And this is how I deal with it. And lots of other benefits, but this is where my own strategy developed years ago. It was to have a portfolio of strategies, so different ways to recognize opportunities, and then to have a portfolio of positions within the portfolio of strategies.
So I've got lots of occurrences of trades and positions being opened, that meet a variety of different requirements that I've time tested and on average produce a positive expectance, which is, as we know, the fancy way of, it should make money.
So that's how I deal with it, and that satisfies the itch, the compulsion, the desire, to put a trade on. I'm looking for one trade every day. And it's easy, easy for me to find something that is very strictly meeting a set of criteria as determined by my strategy, or a strategy, that helps me to find, filter, and sort stocks, and as we've been talking about, that evaluates the risk profile of the opportunity that has, again, an expectancy that it will make money.
That's how I deal with it. And this is Sean, because again, I just want to admit, I still have those urges. That hasn't changed from day one. Everyone has that experience of, "I've got to," or, "I want to," or, "I need to," or, "I should be putting a trade on." Because everybody thinks that putting the trade on is trading.
Sean Donahoe: No.
Phil Newton: So how can we ... Yeah. So how can we get past the compulsive parts and the gambling danger? How do we get past that? It's to trade small, trade frequently, but within a structured approach. I think that's the message I want to deliver there.
Sean Donahoe: Yeah, it's very true, because there's a lot of psychology under the hood. And this is why gambling, and this is why Vegas is basically one of the wealthiest cities in the world, because people are pouring money into there. That's why these casinos are so large, they've got Elton John, they've got Britney Spears there, they got Wayne Newton, which again-
Phil Newton: Yeah, no relation.
Sean Donahoe: Whatever floats your boat. Yeah, no relation, dear me. You've got Sigfried and Freud or whatever the hell they were called. No, no. What is it? Sigmund and Roy? I can't remember. The two guys with the white tigers that got eaten. When the tigers strike back. But-
Phil Newton: I was gonna say, should I tell you a little story about ... Because I was talking to Mother, my elderly mother, and she's completely technophobic, and she doesn't have a clue about computers, technology, and certainly not the stock market. Not because ... It's just the way she is. She's got no interest in it whatsoever. But obviously because I'm her loving, dutiful son, she wants to take an interest. So I have to think of creative ways to describe what I'm doing, without using any of the jargon.
So when I was a lad, growing up, we had a garden nursery. So I thought I'd explain with the use of growing flowers, as an example of the difference between what gambling can be, and the emotions and the experience of gambling, versus trading a portfolio approach, and the impact that can have to you. So I was trying to describe the approaches, because she was asking me, she said, "Why do some people make it work and why do some people not make it work?" I said, "It's because people approach it like gambling." And she went like, "Give me example."
I said, "Well imagine for a moment, that you are growing one begonia, one plant at a time. You grew one plant. You plant the seed, you pot it up, you put the feed on, and then you water it, and then you sit there and watch it. And you're waiting for that damn plant to grow. Every day you're looking at that plant. Grow, grow god damn you." You put water on, you put too much on, and then you're hoping the plant doesn't die, because you need it to grow, and not only grow, but bloom, because if it doesn't bloom and it doesn't look nice, you're not gonna be able to sell it for a good price.
So just imagine growing one begonia at a time. And you're completely emotionally, physically invested in the one plant growing, and flowering, sufficiently brightly enough, and vibrant enough, that you can then sell it for a profit. And then what if the bugger dies? You're screwed, completely. You've got this emotional release of, "Oh bollocks, it's died." And now you've gotta start again, right from the beginning. You plant the seed, you pot it, you feed it. No, don't water it too much. Don't water it too much. Let it dry, then put it in the sunlight. You've got to really look after this, otherwise it's gonna die. If you look after it too much it'll die, if you don't look after it enough it's gonna die, and then you've got this ... Can you imagine the experience, Sean? You've that emotional attachment to that one begonia, that one plant, not just living and surviving but then thriving enough that it flowers and blooms. That's the emotional experience that you have when you've got one position. Does that make sense?
Sean Donahoe: Abso-bloody-lutely, it's a great analogy. It's really highlighted the fact of the emotional engagement.
Phil Newton: That can be compared to what most new traders do. They put the one trade on. And it's emotional rollercoaster. Is it dead? Is it not dead? Is the soil dry? Is it too acidy? Is it too alkali? Have I got all the right ingredients? But then compare that to having a garden nursery, or maybe you've just got a garden instead, if you're ... Because we had a garden actually growing. We had thousands of plants, and all the rest of it. But then, compare that to growing one plant versus growing a garden. You've got lots of beds of plants, and you've got some of these, some roses, some begonias, some lobelia, you've got some of this, some of that, some of the other. You've got a little bit of everything, a variety. You've got a nice garden. You've got a nice lawn.
If one begonia dies, all right, it's disappointing, but it's not a big deal. Because you've got the rest of the garden. You've got the rest of the plants. the rest of the flowers are in bloom. It doesn't necessarily matter whether some die, some wilt, some don't quite get the sunlight that they need. So you see where I'm going with this. Because you've got that portfolio approach. You've got a little bit of everything. It doesn't matter if one plant dies. It's easy to remedy. The garden's not impacted by one plant dying, or two plants, or maybe even five plants dying. I'm sure we can all get the comparison. Insert plants for positions and portfolio. You've got this very vastly different experience. And the emotional attachment is to get pleasure and enjoyment from the garden as a whole, as opposed to trying to make that one plant survive and thrive. And you can under-nurture it or over-nurture it, whereas the garden, hey if you forget about it for a day or two, not necessarily a big deal.
Sean Donahoe: Absolutely. Now, to layer on top of that, which is a very great and powerful analogy ... I'm going to have to use that in the future as a reference point, because I think it's absolutely dead on. There's another trap that comes on the other side of this, when you're looking at a wider range of positions, or flowers in the case of Phil's nursery here. But a lot of people are then playing every hand in the gate. And this is one thing. They're flicking through chart after chart, looking, and saying, "Oh, well this one could be positive. This one could be negative." And they're taking subpar positions, just because they want to be in there continuously, playing as many hands in the game as possible.
Now one thing that, just to layer on to Phil's analogy, is again, psychology here. You already have the ability to know, if you're planting a lot of seeds, what's the ideal environment for, or what should be the ideal environment? Particular watering, the particular light exposure, -
Phil Newton: We're assuming you've got a strategy in mind. Yeah.
Sean Donahoe: Yeah. So rather than flicking through chart after chart, again, setting up certain filters, certain environments and awarenesses, and limiting what your opportunities are gonna be based on the premium positions. Like I said-
Phil Newton: To help with that-
Sean Donahoe: With the poker analogy-
Phil Newton: We advocate one trade a day. Or certainly I advocate that. One trade. It's okay if you want to do two or three, but one trade a day. You're restricted to planting one seed every day. You're gonna choose what you believe is the best opportunity, not necessarily the first one that you see, which would suggest that you're just planting seeds or putting trades on, trade, trade, trade, trade, trade. You're not just looking for any opportunity. You're looking for the, capital The, opportunity for the day. And I think that's the big difference.
That's, again, that circumnavigates that ... Which is what we advocate. If you just look, what's the best thing that you can trade? If your life depended on it, what's the one thing that you can trade today?
Sean Donahoe: Well that's exactly it, and another thing is, gamblers are always looking for that big jackpot play. -
Phil Newton: Oh, swinging for the fence. Yeah.
Sean Donahoe: We see that a lot in retail markets, whether it's conventional markets or cryptocurrencies. People are putting on giant positions on these one things, looking for the big payoff, the big-
Phil Newton: Don't bet the farm.
Sean Donahoe: -reward. But don't ... Yeah, don't bet the farm. We've all heard that phrase. Well there's a bloody good reason for it. You see, successful traders are looking for the consistent returns, and they're playing with money that they can afford, not only ... Well they should be, affording to lose. But also they're really conscious of the down side risk, not just the up side reward. a very big, big thing. And one thing we always talk about is position sizing, like Phil was just mentioning, and not going all in. Not just sliding all those chips into one bloody position, because we don't just want one flower here. We want continuous return on the entire crop.
Phil Newton: The way I like to phrase it is, from the business mindset ... And we've mentioned this many times before in the past is, if something bad was to happen today, this is the managing the risk part of what we've been discussing, if something bad was to happen today. Surprisingly, Sean, the stock market's crashed recently. If the stock market was to crash, as it has done in the last few days, it shouldn't be a bad thing. But let's just say that I was at 100% bullish positions, and the stock market crashed, and all my positions are now zero. All of the positions just haven't worked out.
It should be ... All right. It's a bad thing that's happened, but if that situation was to happen, because I'm not betting the farm on every ... I'm trading very small, but frequently. And if all those positions just didn't work out that month, then I'm still in business tomorrow. That's the key element here. You're not betting the farm. You're trading small but frequently. And if this crop ... Again, we tend to have a rolling month of positions. But if that month's round of positions didn't work out, I'm still in business. I've not betted the farm. I've not put all my chips on the table, as it were. I've got the opportunity to put myself in the corner as you did earlier, or mentioned earlier, get my shit together, and get back on the saddle and be back in business tomorrow, because I've got some money in the pot still, that I can start planting seeds for the next month.
Sean Donahoe: Absolutely.
Phil Newton: Now as it turned out, when the stock market crash, or the flash crash happened, there were some bullish positions, there were some bearish positions. And predominantly it was ... A glorious time was had by all. If you've got this balanced portfolio, it's a find, filter, and sort stocks, which again is what we advocate on a regular basis. Some bullish positions, some bearish positions, maybe some neutral positions. And if such an event happened, you're gonna make money one way or the other.
Sean Donahoe: Absolutely. With this flash crash that's happened in the last few days, I was already positioned for a -
Phil Newton: Funny thing, Sean. I was overly positioned bearish. I was about 64% bearish, about 20% bullish, and the rest was neutral. And I was actually quite nervous, because I didn't have the balanced portfolio. It was biased to the bearish side, because that was what was setting up for me.
Now ironically, when you've got a strategy that is adaptive to market conditions, sometimes that'll happen. And it's happened many times before in the past where I've gone overly bullish or overly bearish, and then something has happened in the market, either a big, broad rally in the market or, like we just saw, a big, hard and fast selloff like we've just seen. And your strategy, the individual stocks are gonna start tipping over, before the actual index does. And that's what I've seen time and time and time again, looking back on these events. That's what you will see.
So I was overly bearish as it happens, and it did have me concerned. Again, with hindsight, I shouldn't have been concerned. But it does make me nervous when I've got a slight imbalance in my exposure like that.
Sean Donahoe: Well, when Phil has imbalance -
Phil Newton: Imbalance in his , yeah.
Sean Donahoe: Yes, that can get involved.
Phil Newton: ", Phil?" is what you might want to want to ask.
Sean Donahoe: Yep, that's it. Dear me. But yeah, at the end of the day, it's the environment awareness, knowing what your strategies are, going in this with full eyes open. We hate the gambling analogy compared to trading, but unfortunately we have to draw those lines, because a lot of traders are gamblers. They're not considered-
Phil Newton: Throwing money at the market.
Sean Donahoe: Yeah. We have a professional approach and a business-like approach to trading, which is why we advocate. But we have to draw that line in the sand, and if you feel that you are maybe having those gambling tendencies to the market, we're trying to grab you by the back of the collar and drag you into the business side of it, so that you can see, okay look, here's the better, more consistent, and profitable way to trade with, again, a positive expectancy and that systematic risk evaluation, so that you can look at what you've got going on, so you can be trading today, tomorrow, next week, or next year.
And, just to wrap up here, trading is a business. It should be a business. It should be structured and executed like one. It's not about the money you win, but it's also about what you don't lose.
Phil Newton: How little can you lose? If you ... Again, that's the difference between gamblers and professionals. The gambler is looking focused only on how much they can win, whereas the professional, business type of approach is how little can I lose? Very interesting, very valid, and very important points to keep in mind.
And this is why we keep saying, trade as little as possible but trade frequently, and you will have that risk protection built into your approach.
Sean Donahoe: Absolutely. And again, be disciplined, be aware, and be consistent. With that being said, let's rock on.
Automated: And now, it's time for the Rebel Trader tip of the week, brought to you by richardgrannon.wpengine.com. Ready to take your trading game to the next level? Discover where smarter traders come to get coached by the best and learning to trade just got way easier. Trade Canyon. Smarter traders live here.
Sean Donahoe: Okay, Rebel Trader tip of the week. Now this one, I'm gonna have to stand up a little bit on a soapbox. This is a little more of a rant -
Phil Newton: Makes a change, Sean.
Sean Donahoe: Cautionary tale.
Phil Newton: Makes a change.
Sean Donahoe: I know. Exactly. I had to take it ... Had to send it by FedEx from Liverpool all the way back to Texas. But it's just so ... This one is a little more of a rant, but it's also a little bit of a cautionary tale. A little bit of self-evaluation and self-reflection as well. Here's the tip. Step up, or step away.
Now, we said in the last section that trading is not for everyone. You gotta have a certain type of mindset, and I was speaking with a student who was pack full of excuses for their trading the other day. Everything they were doing was someone else's fault, kind of like the guy I was talking about on the airplane. Every hard knock or missed opportunity or poorly executed trade or position was, it was everything to blame was the -
Phil Newton: Right because . The broker's out to get me.
Sean Donahoe: Yeah, that's it. It's Wall Street, it's all rigged, and everything else. Now here's the thing. I could give you all the best strategies in the world, and how to execute them to perfection. But no one can make you a successful trader other than yourself. You've gotta have grit, you gotta have determination, you gotta have mental toughness, and perseverance, and honestly you've gotta be able to take a hit every now and then.
Phil Newton: I think you missed one there, Sean. I think we missed tenacity.
Sean Donahoe: Tenacity.
Phil Newton: I like the sound of that.
Sean Donahoe: Yeah, I, absolutely. Yeah, absolutely. You've gotta be tenacious to be a successful trader. And anyone who tells you different, is more interested in your wallet, than making you a better trader.
Now here's the thing. We specialize in making you a better, more successful, and smarter trader, because we want you to be the best damn trader you can be. It's why we do this show every single week. But it's not for everyone. But for those who can develop the skills and apply a lot of the strategies and approaches that we bring to the trading realm and to help teach you in trading, it can be truly transformative.
We actually got a great little testimonial the other day, after our Princess Bride show, that made me smile from ear to ear, from a listener who is kicking butt with their trading, just with the content we share in this podcast. But the only one who can make a difference and make that difference is you.
So. Step up, or step away. The choice is yours, and we love to help those who want to step up.
Phil Newton: Mm-hmm (affirmative), exactly. We've got a lot of time for serious traders, but just remember, you've gotta push the buttons. You gotta do the work. We've made no false promises in that regard. There is hard work involved. But just like learning anything new, I'm sure you'll agree, Sean, like learning anything brand new, there is a learning curve involved. But understand, it is a skill that can be learned. But like with everything that's worth doing, whether it be sports, whether it be skill, whether it be learning a language, the experience, the practicing of the skill gives you experience, and then that means that you can grow. So learn the skill gives you the foundation, but then over time you get that experience that you can layer on top.
But you only get that when you go and push the buttons and take responsibility for your actions. I think that's just generally true in life, not just trading, as well, Sean. What do you think?
Sean Donahoe: Absolutely. Yeah, it's not surprising though. It's like any bloody business.
Phil Newton: It's like everything, yeah.
Sean Donahoe: And that's what we're doing. And so at the end of the day, step up, or if it's not for you, step away. Good stuff. Okay. Rock on.
Automated: If you've got questions, they've got answers. Sean and Phil dive into the virtual mail bag for this week's Rebel Traders quick fire round.
Sean Donahoe: Okay, so rummaging around in the Rebel Trader mail bag, I've got a couple of questions for you, and I love this one, because it's the one that just made me smile. "What the hell happened?" Now, that was it. But, obviously, they're talking about the markets and what's happened the last few days, and we talked about this in the Happening Now report in a little more detail, but I wanted to, now that I've got Phil here, I wanted to get his take on it as well, and we can wrestle this one to the ground, and put it in full submission.
Phil Newton: I've got a-
Sean Donahoe: So what do you think ?
Phil Newton: I've got a very short answer for you, for this, Sean. So the question is-
Sean Donahoe: Unsurprising.
Phil Newton: And just to time stamp this, it's the flash crash ... It's February 8, just for reference, because obviously people are gonna be listening to this way into the future, because we're amazing. But what the hell happened? The markets sold off the Dow, on a single day, was off 5%. As a point move, it was over 1000 points, 1100 and change, or whatever it was.
So what happened? Who cares? That's my answer. Who cares? What does it matter? Knowing what the hell happened is not gonna make me a better trader. I want to look forward. I'm already in the markets. You said earlier, the best way to combat against what the hell happens or why it happens, I don't ... Can I swear, Sean? I'm gonna swear. I don't give a damn. I don't give two hoots about what happened, or when it's gonna happen again. I'm more concerned with managing my positions and putting trades on, and following a systematic approach to find, filter, and sort stocks. Because knowing what happened is not gonna make me a better trader. Sure, it might help me protect and prepare for the next time it happens, but if you follow your strategy when it happens again, if you've got a balanced exposure to the market, you're gonna be profiting every day of the week that that slide happens. Because that's what happens. You're gonna profit.
You can't predict these things. Sure, we've been talking about it. The writing's on the wall. It's gonna happen, it's gonna happen. No one knows when it's gonna happen. So stop trying to figure out when it will happen or what happened. It doesn't matter. I'm more focused on looking forward, about the next trade, rather than looking backwards over my shoulder thinking, "Shit. What happened?" You get hit by the bus. "What happened?" It truly, for me, it does not matter. I don't care. I stopped looking at these things a long time ago, and the sooner that other people stop doing that, I think the sooner they're gonna start being more successful traders. Just get your head down, forget what everyone else is doing, just follow your systematic approach, the find, filter, and sort stocks, evaluate the risk, and put the next trade on.
And don't worry about what happened yesterday, because tomorrow is ... If you've got no positions on, it doesn't matter what happened yesterday, because you can't profit from it. You can't chase the move, chase the news. You can't trade what's already happened. So you need to put the trade on, when the setups occur for your strategy, so that when something like that happens again in the future, then you're in the market. And that's where I was. I was in the market. I didn't really care what was happening. It was clear that something was happening, but I wasn't panicking. I wasn't scared. If anything, it was benefiting at least half my portfolio, because I was bear ... If you've got a nice even split between bullish and bearish trades, at least half your position's gonna go out, you go the right way. And if the bullish trades are genuinely bullish, then they're not gonna be as impacted by a temporary down move in the markets. And when normal service is resumed, if they're good stocks, and the long term trend is holding for them, then they will recover and resume that upward trend.
So for me personally, doesn't matter.
Sean Donahoe: That's interest ... Now here's the converse of that, because a lot of people are speculating what happened, but I want to take a slightly different approach, and very much in line with what Phil's saying, is, who cares? Now my thing is, is it gonna continue? Now, having an awareness of the environment, again, I saw what was happening on Friday. Now this is before I was traveling to Vegas, and-
Phil Newton: Vegas, baby.
Sean Donahoe: Absolutely. But I'm sat there watching what was happening on Friday and it really happened in the last few minutes of the day, like last couple of hours. And they're saying, "Oh, it's because of projected interest rate hikes." And I'm like, "But this doesn't sound right to me." And here's the thing. This is what everyone was saying. They're saying, "No it's because of projected interest rates." And I'm like, "This doesn't resonate, because-"
Phil Newton: You keep telling yourself that.
Sean Donahoe: In a booming environment ... Yeah. Well, I was looking at this and thinking, we already know there was gonna be interest rate hikes. It's already in the-
Phil Newton: The talking heads can always find some bullshit reason, to explain what they think happened. The reality is, it's all bollocks. It truly ... 22 years later, Sean, it's all bollocks. I turn it off, personally. I'm anti ... And I know you like to look at the news and the headlines, and we're always gonna lock horns over this one. But it just doesn't matter, as far as I'm concerned. It does not matter. What will be will be. Turn it off, stop ignoring it, you're stressing yourself out, it doesn't matter, as long as you're in the market in some capacity. Then you'll probably be profiting from it, so what the hell does it matter? Sorry Sean, I stole your thunder again.
Sean Donahoe: Indeed. It's all right. But what I was gonna say was, the reason didn't resonate, because to my mind, that's already factored in. We already know -
Phil Newton: surprising that the talking heads are talking nonsense?
Sean Donahoe: Well indeed. bit. But-
Phil Newton: What a surprise.
Sean Donahoe: Yeah, indeed. But at the end of the day, the last two hours, there was something going on, and it wasn't clear what it was. But here's one thing that is, again, from an awareness perspective, and from what I have seen many times in the markets, and Phil has seen too, is on a Friday, if something is going on, that's gonna resonate to Monday. Because a lot of people are gonna be not sure what's going on unless something occurs. But usually on a Friday if there's some monumental thing going on, people reset their portfolios on a Monday.
And sure enough, come Monday, the markets are already way down with the futures markets. Everything's shooting down until the rest of the markets open on Monday morning. And I'm like, "Okay, there's a cacophony of cock-ups here. There's gonna be a lot of portfolio resets. There's gonna be circuit breakers tripping on funds and everything else." So just my thought, I saw this right at the end of the day, I was heavy short the main markets, and loaded up the wheelbarrow so to speak, and -
Phil Newton: Me too, it was . I didn't know that the crash was happening, but it was clear that it was selling off. And it was most of the week. So it wasn't unsurprising that there was a downward movement, just the magnitude and the velocity was absolutely glorious.
Sean Donahoe: It really was, and incredibly profitable. I've actually sat there with my cell phone and this mastermind, just watching my portfolio spike upwards, based on my short positions I had placed on a Friday. I'm smiling from ear to ear. I'm thinking, "Okay, I'm sat in a beautiful hotel, with some of the top people in the industry, relaxing, having a blast, and I'm watching my portfolio just do this wonderful thing, as the markets dip." And everyone else in the room's like, "Oh my god, the markets, the markets." And just talking about it in one of the breaks. But I just turned my phone around and say, "Yeah, it's great." So it's one of those wonderful things.
And yeah. That's the beautiful thing. If you have an awareness of what's going on, having an awareness that something is happening can often lead into opportunities, without actually knowing what happened. Now, again, they're saying that it was ... Monday, there was nothing really driving it, other than panic. And it was panic sale and stop losses closing, and people repositioning their funds and their exposure, because they've been predominantly long. And they're like, "Take the money, take all the chips off the table. All the chips." And just panicking until, again, the obvious, "Okay, well actually that was nothing. Or there was nothing really driving that. Okay, put the money back in." And it's already -
Phil Newton: Can I get the quote in again? A nice old British comedy. "Don't panic. Company meddling."
Sean Donahoe: Yes, absolutely. Dad's Army reference.
Phil Newton: But that's absolutely what was going on. As you just said though, Sean, it was over the ... People evaluate things over the weekend rather than get caught up in the day to day minutiae, so at the end of the day Friday, over the weekend, the big fund institutions, the swing traders, the end of day traders, they're evaluating over the weekend, and they're thinking, "Better lighten the load here," and they're putting all those orders in on the Monday for the rebalancing. And that caused an exaggerated movement, that followed through on the Monday.
I think that explains what it was looking back. But again, come back to, it doesn't matter. But here's what we do know. How can we trade it going forwards? So look back to the times that it's happened. It's happened around about half a dozen times, where prices sold off quite sharply and quite dramatically. Not necessarily a flash crash like we saw or to the same magnitude, but if you look back on the weekly charts of the stock indexes, and just look at the one-week, two-week corrections that we've seen over the last nine years, and you'll see that they've been very short-lived. And this'll give you a clue and set a precedent for what might happen next.
As I'm looking at this now, it's a few days after, we've seen a little bit of a reaction. I think we're gonna see a retest of near these recent lows. I don't think it's gonna get all the way down, but maybe about halfway down. As I'm looking at the S&P, we're around about 2660. I think we could get down to about 2575, just to ... About halfway down that spike, from the recent rally. Because guess what? That's what happened last time. That's what happened the last six times, the last seven times, the last half dozen times, where prices sold off. We're gonna see a little bit of a retest, we're gonna develop a higher low, and as Sean's mentioned, fundamentally, nothing really significant's changed. There's no fundamental drivers. It's just panic selling, and that always typically recovers, and then it will be back to normal service being resumed.
This is, as far as I'm concerned, this is a buying opportunity, from the long-term perspective. I think we're gonna see the retest, and then it's, fill your boots, it's going up. But that's just my personal viewpoint. Please don't take that as factual advice. We've gotta put that disclaimer in. But that's just what I think's happening. Why can I say that? I'm not any cleverer, or smarterer, than anyone else. Just look back on the charts, and look back at the last time these things have happened. Whether it comes true or not, what my forecast is, I'm confident in it, because I'm a firm believer that history repeats itself, because it keeps on doing it over the days, the weeks, the months, the years. Just look back, and you'll see what happens. That's how you can prepare yourself for what might happen next.
And surprise, surprise. If you've got a systematic approach to find, filter, and sort stocks, evaluate the risk, and when the trade sets up, the trade goes on. Your strategy will provide the opportunity for you. And that's how I deal with it. It's just, put the trades on, the trade sets up, and pop the trade on. That's it. So little bit of ranting again. It's just, and I think we managed to get in at the last minute and say, "Where's the trade?"
Sean Donahoe: There you go. Abso-bloody-lutely. All good. Now, on the flip side of that, again, just ... Like we say all the time, just have an awareness of what's going on. Who really cares what's driving it? Just be aware of what's going on, and position yourself accordingly for the future. What's next? Like with this, we've seen obviously a huge volatility spike. But it collapsed very quickly. And we're talking about, if you follow anything that we've talked about here, or in the Happening Now report, Andrew and I are always talking about volatility plays, and we're gonna get into that in the BS of the Week maybe, in a moment.
But again, there's always opportunities. If you see something happening, having an understanding or an awareness of what's going on, can help. But again it's, is it gonna continue, or is it gonna snap back like it has ... Like right now, it's snapping back. It's getting back to a comfort level right now, it's pausing a little bit, but there's always a kickback. Because again, in a panic selling environment, there's a very quick, "Oh, shit. Everything's okay." Fine. Everything's reset. So yeah, absolutely brilliant.
So anyway, next question. My wife-
Phil Newton: My significant other.
Sean Donahoe: Yeah, there you go.
Phil Newton: My significant other-
Sean Donahoe: Perfect.
Phil Newton: Just so we can be politically correct. My significant other is concerned with my trading, any time I lose or take a hit. What can I do to convince my significant other that everything's okay?
So basically, you're worried ... So the partner is worried that the other partner who's trading is maybe gambling, and betting the farm. I suppose we've touched on this, but what's essentially your thoughts? How can we appease our partners, our loved ones, our significant others that, "Hey, you know what? I might be new to this, but I'm not being stupid. I'm not being a dick with our money, love. The rent's fine this month. Don't worry about it."
Sean Donahoe: First of all, the clearest thing is, talk about it as a business. Talk about it as-
Phil Newton: That's how -
Sean Donahoe: -the strategic . Okay, it's adaptive, you have ups and downs, but again, it's accounted for in our strategy, that you're not betting money or using money that you can't afford to lose, but you're also talking about your portfolio, that you've got multiple positions that are balanced, that adapt and account for any market conditions. And while we've taken a hit on this one, talk about what's happening on the other side. Talk about your year to date, or your overall portfolio.
The thing is that whatever you're getting questioned about, from people who are not traders, who don't have the awareness, again, a lot of the outside perception is that it's gambling, that you're just risking or throwing money into the markets, and whoop-de-do when you win, and oh, you're an idiot when you lose. It can actually have a psychological toll on yourself, if you don't -
Phil Newton: It's stressful, if you've not got a supportive partner. Yeah.
Sean Donahoe: You'll have ... Exactly. So you're obviously wanting to have a supportive partner. But talk about it like it's a business. And here's the thing. They will hear from your confidence of talking about it as a business, it'll reassure them that while you've taken a hit, or if you've had a downturn in your portfolio, that you are aware of it-
Phil Newton: Every business experiences this.
Sean Donahoe: -that you're moving forward and you have a plan. Because that's what they want at the end of the day is-
Phil Newton: Confidence.
Sean Donahoe: -they want to make sure that first of all, that they're confident in you, that you know what you're doing, and that there is a plan. There is a future. there is a strategy. That it is a business, that you're not just rolling the dice and hoping for a seven. That you can continue. That's really what it's all about. And if you talk in those terms, and you don't ... Again, just like, "Oh, don't worry about it." No.
Phil Newton: Don't fob it off. Be honest. "We've had a bad today."
Sean Donahoe: Because if you don't ... If you fob it off, and if you dismiss and say, "Oh, you won't understand," you're just gonna foster more and more-
Phil Newton: Oh that's the worst. That's the worst thing. Yeah. I talk in a lot of examples. As I said earlier, my mom regularly asks me how I'm going. But if I started talking jargon, she literally doesn't understand. But rather than fob her off, so we can have a conversation, I'll talk in stories, things that she might understand. And I'm not saying that you patronize your partner, but to explain the concepts, maybe you give examples that are in terms and contexts that can be understood by your partner or significant other. And then as they get familiar with what you're doing, they'll have more confidence with you.
I like to use business comparisons all the time, because most people have ... Even if they don't own a business, they have an understanding. Because as a consumer, you're on the other side of a business every day, multiple times every day. So maybe a good comparison would be, compare it to a shop on the high street. My retirement shoe shop, as I like to always think about it.
If you had a real world shop, if you had a shop on the high streets, "We're selling lots of shoes," and if you're having a bad day or a bad trade, you can just say, "We had a few refunds today." If we had a shop on the high street, this would be considered a refund. "It's cost me a little bit of money, we've had a defective product," or put it in a context of, "Oh you know what? We've had a bad delivery, and all the fresh produce is rotten," and it's that type of experience. These things happen in the real world, as well as the trading world. So if you try and draw those comparisons that, "Hey, this is normal. And yes it frustrates me. I'm a little bit miffed today. We've had a little bit of a refund in the markets, but overall the business is still healthy." That's maybe a good way of comparing what goes on to maybe a real world business.
Sean Donahoe: Abso-bloody-lutely. Abso-bloody-lutely. And at the end of the day, it's just about reassurance that you know what you're doing, you're not throwing the money away that is the house money. Not the houses in the casino, but the houses in what is in your home, what you are risking is not ... Basically that there's a plan, and that everything's okay. Because not having that understanding, not having that background or the skills and experience that you have acquired or are in the process of acquiring, it's a case of, "Are we doing the right thing?" And it's always down ... And this is one thing that I really want to reiterate, because I'm very fortunate. My wife is incredibly supportive of what I'm doing, because she knows this is my skill, my core competency, that I'm ... But she also did start learning what we do.
Now again, she hasn't pursued it and everything else, but it gave her a base understanding, so that when she has an awareness, and when she sees things being reported in news like the stock market crash and everything else, she asks me, "What's actually going on?" Because here's the thing. She defers to my knowledge, obviously because we've been doing this. This is what we do, and ... She asks me, "Okay what's the real story?" And again, she's interested, because she also wants to make sure that what I'm doing, is also in line with my knowledge and everything else, and that, am I aware? And she knows I'm always aware of what's going on. But again she wants to also know that we, not me, we ... What are we doing? Where are we with our portfolio, and everything else?
And if you do it as you and them, you're creating a separation. So always talk in the factor of we, just from, again, a preservation of relationship status. We are, yeah, we're doing fine. We've got this. We took this hit. We did this. If you talk in terms of we, that includes them, they don't feel excluded, and it'll also help with confidence.
Now again, this is way outside of what we usually talk about. I thought this was a great question, because a lot of us are solo traders. A lot of us, as retail traders, are not trading as a couple. We're not trading along with them. They're not making decisions on our portfolio, we're not making decisions on their portfolio. But you're still a partnership, you still have that reliance on each other and that confidence in each other. And it's great when you have that support, and that's the way to foster that support going on. Because when you don't have that support, when you're continuously having your ear chewed off about what the market's doing or any losses or any hits you take, everyone loves the wins, but everyone hates the losses. And without having an awareness of what's going on, if you've got a partner who is not supportive of what you're doing, and is chewing your butt off when you take a hit, that just adds to the stress and it will affect your portfolio and your future success and decision-making, even if you have the perfect strategy, because you're bringing emotion into it. So again, having a supportive partner is very, very important, for you to actually succeed as a trader. So -
Phil Newton: Again, life advice there, not just with trading. It's good advice that's, whatever the event is that could impact your family, I think just sit your partner down and include them in the what's going on. They don't necessarily have to be involved in the decision-making. You don't have to go that far. But just include them in, involve them in some way, and I think that's just good life advice.
Sean Donahoe: It is, and it's certainly why my marriage has succeeded for the last 17 years. It is very important.
So, okay. Moving on from the Dr. Phil segment. Why is-
Phil Newton: Lie back on the couch and tell me how you feel.
Sean Donahoe: Yeah, exactly. Dear me. So where has the best charting data, and does it really matter? Am I best to use my broker's platform? There's a question for you, Phil. I know you've got some interesting perspectives on that one.
Phil Newton: Where to start with this one? Again, most of the time, I'm gonna say these things don't necessarily matter too much, because it might be that you're on a budget, or it might be that you've got deeper pockets than the next person. So whether you go with a budget platform or what the broker offers you, or you go for some premium, high-end premium charting that you pay extra for ... What do you want it for? What do you need to accomplish the task at hand? You can get away with a 10, $15 a month online platform, to do everything that you need to do. It might mean that you've got to press a few extra buttons and the user interface sucks, or if you're using a brokerage, that the charting or packages that the brokerage provides, and it's not got a fantastic user interface. It might not be a great experience. I can think of a few brokers that, they're good brokers, but they don't necessarily have a great user experience because the software that they have is something from the '90s.
You can use that software fine. So really it comes down to, what do you want? And as we've explained, I think we've mentioned this in the past. If you imagine brokerage and charting and the tools that you can use, like a vehicle, like a car, your car will get you from A to B, because that's its purpose. It will execute, or your broker will execute the trades. Your charting platform will display the charts. The only question is, is are you buying a clapped out banger, or are you buying a Rolls Royce? They both do exactly the same thing. But are you gonna feel every bump in the road, or are you gonna drive along in luxury? That's the spectrum.
So where you are on that sliding scale, will be determined by budgets, and what do you actually want from your charting platform or your brokerage of choice? Not exactly the best answer, Sean, but there is no single right answer here. What do you want it for?
Sean Donahoe: Well, exactly, and that's it at the end of the day. -
Phil Newton: Best is relative. Yeah. Best is relative. If you've got unlimited funds, then the best is gonna be probably very expensive. But if you're on a budget, then the best budget choice is a very different answer.
Sean Donahoe: Absolutely. I've spent a lot of money on data over the time, and I've really found that there isn't-
Phil Newton: For what we're doing, we don't need to shave off a nanosecond. We're not scalping, that extra half a second on the speed of the data doesn't really matter that much to be quite honest. Predominantly I'm making my decisions end of day most of the time. And if I do trade intraday, I'm looking at 60-minute charts. I'm not really scalping off the one-minutes. I know I can do it, but it's a heart attack sport. I don't want to do it. -
Sean Donahoe: Well that's exactly it.
Phil Newton: So what do you want the tools for? That's really what it comes down to. If you've got something ... To be fair, Sean, I think we'll put it out there. If you've got something specific in mind, and you can get to us on richardgrannon.wpengine.com/rebeltraders, if you follow one of the contact buttons there, if you've got something specific in mind of what you need it for, we're very happy to try and answer your specific requirements if you want to get in touch. So that's, what, richardgrannon.wpengine.com/rebeltraders.
Sean Donahoe: Abso-damn-lutely. So yeah. With the ... Some of the stuff I do, I do need data fast. I need the tick data, I need it to be accurate, because I'm developing algorithms and everything else. But for my general trading and outside of the tests and experiments and software developing and the HFT side, it's really minimal difference, as long as you're ... I'm more concerned not so much with the data, but the speed of execution and the actual fulfillment of my trades when I decide to and anything else. That's more of my concern. There's always liquidity, but that comes down to the actual instruments, that we trade to make sure the liquidity's there.
And that's why we use our universe of stocks. Because we really only trade where there is liquidity, for the most part, so again, we want to make sure that our positions are filled, and if we're using end of day data, then honestly that's really available from even Yahoo Finance, and stuff like that. You don't have to pay anything for that. So it just depends, again, what you want.
Phil Newton: For the most part, it's 10-minute delayed these days. Even for trading off 60-minute charts, that can be good enough. If you're really on a budget, you could use 10-minute delay data to make a lot of the decisions that you might need to make. And you'll have the exact live price with your broker anyway. You just might not be having that fed into a charting platform.
Sean Donahoe: Abso-damn-lutely. At the end of the day, indeed. Indeed, indeed. And so there you go. That is the Rebel Trader mail bag. With that being said, let's move on.
Automated: Don't forget. If you have a question you want to ask Sean and Phil, just go to richardgrannon.wpengine.com/rtquestions, and your question may be featured on a future show.
Uh-oh. What's that smell? It's time to call out the Wall Street shenanigans, mainstream confusion, and outright hijinks and hokum of so-called experts. Yep, it's time for Bullshit of the Week.
Sean Donahoe: Okay. So, Bullshit of the Week. Phil's favorite section, and honestly, mine as well.
Phil Newton: What's that smell? What's that smell?
Sean Donahoe: Exactly. I always look at the markets and the finance networks and everything else and see what's going on, and it just astounds me the amount of staggering bullshit that is out there. But we have to filter down to one item. And I want to-
Phil Newton: You're starting to see why I go out of my way to ignore ... And maybe you can then start to understand some of my comments. It's because of this experience, that ... Most of it's nonsense. It's not gonna make me a better trader, so over the years, I've just tuned it out. But anyway. Bullshit. It's hard to avoid sometimes. Sometimes you're just walking down the street and you just happen to step in it. So what did you step in this week, Sean?
Sean Donahoe: Well, I had to look at the XIV collapse. Now this is an ETF that's an inverse ETF based on the volatility index, and -
Phil Newton: What's an inverse ETF, just for the poor farm boys, like me?
Sean Donahoe: Well it's basically, if you look at the main volatility index, sorry the VIX, the index as it's called-
Phil Newton: It tracks the VIX, but it tracks it backwards, essentially.
Sean Donahoe: Yes. It allows you to take, if you want to short the VIX without shorting the VIX, and taking futures, you can actually buy the inverse, and take a long position, on the decline or the ever-declining VIX. Now we've been talking about this being a pressure cooker for a long, long time. And what happened was, the XIV ... Now again, we did a greater breakdown in the Happening Now report, we went into a little more of the minutiae, but I'm gonna keep it general broad strokes here.
So what happened is, Credit Suisse took a 96% hit, with the massive volatility spike. We're talking-
Phil Newton: Huge.
Sean Donahoe: -way over, in one day, 100% increase in the volatility that was already on the rise, and then it jumped up more, and then jumped up again, and basically XIV said, "You know what? We have to shut down, because we are worth sweet Fanny Adams. Sweet F.A."At 96% drop and then continuing with the volatility, they basically said, "No, we're shutting down this entire fund."
Phil Newton: Just so I can translate this for the poor farm boys, so XIV is basically tracking volatility, and it allows ... It's a fund, essentially, isn't it Sean? One of these ... It's a fund.
Sean Donahoe: exchange-traded network.
Phil Newton: Yeah, it's interesting, those.
Sean Donahoe: An ETN, not an ETF.
Phil Newton: But essentially, it's a fund, that people can invest in. And that's most commonly how people might get exposure to volatility. They'll buy into this fund. And essentially, the fund collapsed, is what you're essentially saying here. And they didn't have any ... Well as you mentioned earlier, they didn't have any circuit breakers in place to protect against what is essentially the doomsday event for a fund, which is the fund has just collapsed. That the instrument that they're tracking has had an end of the world event.
Sean Donahoe: It really has. But this isn't the BS. Because this -
Phil Newton: interpreting the landscape into words that I understand, Sean.
Sean Donahoe: Yeah, there you go. No, that's fair enough. So basically, it was known that if there was a giant volatility spike, that this fund was likely to collapse. It was known. We've talked about it in previous shows. -
Phil Newton: So dare I say, Sean, that gambling, that a volatility spike of such a magnitude, wouldn't happen?
Sean Donahoe: Exactly. However ... Now I feel bad for this one guy, but it's a prime lesson in what we talk about all the time. This guy, this one trader, and I'll include the links in the show notes, lost $4 million, three years' worth of work, and a significant portion of friends and family money, because of this collapse. Didn't have a hedge, didn't have an awareness of the environment he was in, the greed driving everything else. And again, with the collapse of XIV, lost a bloody ... For him, an absolute fortune. And also for his family and friends.
And so I feel bad for this guy on one hand, but again, it's a situation that could have been avoided by hedging your positions, understanding the environment. And again, here's the thing. If you are betting against something not happening, for a certain length of time, it's going to happen. A spike-
Phil Newton: Statistically, it's unlikely, but it's not impossible, as we've-
Sean Donahoe: Exactly.
Phil Newton: And to be fair, something similar has happened, as I just had a glance back on the weekly charts as I mentioned earlier, something similar has happened a half dozen times in the last half dozen years. It's not an uncommon ... Sorry, it is an uncommon occurrence, but it's an occurrence that will happen from time to time. The one that we've just seen, the magnitude at which this one happened I think's what people are gonna be talking about for years to come. But the bullshit elements, I have to agree with you. You've got to have a contingency in place for if that event happens. And these guys didn't have a contingency in place for when it happened. That is some kind of bullshit. That is, you're gambling with people's livelihoods, and it's cost him dearly, not just financially, but probably in reputation as well. He'll never work in this town again, dare I say.
Sean Donahoe: Well this is like Russian roulette. Here's the thing. And this is, again, you're talking about probability factors. Let's just say that you have 100%. From 0 to 100%, over ... Factor a time of one year. Let's just say that. This event is a 1 in 100 event. As you get through the time period, and if that 1% hasn't happened yet, as further you get through the year, the greater the chance of that now being, instead of 1%, it's a 10% chance, because you're running out of time factor, based on the average time that those events happen.
So again, it's just a case of, you're right, you're spinning that one chamber, with that one bullet, again and again and again every day. Eventually you're gonna get shot in the head. It really is Russian roulette.
Phil Newton: And volatility, if you look back at the charts, a volatility spike similar to this, it happens two or three times a year. You know it's gonna happen. It's gonna happen.
Sean Donahoe: So you're gonna take that hit, you're gonna rock on, it's gonna happen, and if you're not prepared for that, don't blame the market. Look in the mirror. Lot of the times, that is where the problem is gonna be. So-
Phil Newton: Again, with the whole theme of what we've been talking about today, he was gambling that it wouldn't happen, whereas you and I both know statistically, it will happen, just infrequently. So-
Sean Donahoe: And where's your cover and where's your insurance?
Phil Newton: He's an ass, for not covering his ass.
Sean Donahoe: Exactly. So I feel sad for the guy, but on the other hand, saw that one coming a long way away. So, it's a shame, but yeah. You have to call that one out, and as I say, I'll put the link.
Phil Newton: In fairness, I can't feel too sorry for him, because there's other volatility tracking instruments, ETNs and suchlike. They've not collapsed, because they had some sort of contingency in place for that, "What if it does happen?" And they've -
Sean Donahoe: which is what we talked about. Yeah.
Phil Newton: Yeah, and then they have had that contingency in place for just such an event. And hey, it worked, as it was supposed to work. And they're fine. Weathered the storm.
Sean Donahoe: Abso-bloody-lutely.
Phil Newton: All right. They're not gonna what they had yesterday, or this time last week, but they'll be fine. Guess what. Our philosophy is, they're still in business. They can be still in business tomorrow. That's all that matters.
Sean Donahoe: Abso-damn-lutely. So with that being said, that is the end of the show. And again, this is a very poignant one, because we were talking a lot about some of the misconceptions of this industry, and where to draw the line. But again, we want to make sure that we're giving you the absolute best information every week, we're giving you insights, we're giving you things to think about in your trading, and if you could shoot us a five-star review on whatever platform you're listening to, we'd greatly appreciate it because this does help us get the message out to more and more traders just like you.
To do that, just go to richardgrannon.wpengine.com/rebeltraders, link that Phil dropped earlier on, where you can subscribe and review us. And again, other ways to contact us as well. And if you want to drop us and hit us up on Facebook, again you'll find all the links of everything else there, including the Twitter machine as Phil likes to call it. So yeah, richardgrannon.wpengine.com/rebeltraders.
And in next week's show, we're gonna be talking about two traders, probably me and Phil, who walk into a bar, and we'll take it from there. So with that being said, any last words Phil?
Phil Newton: No that's it. And it's been an interesting, eye-opening, and perhaps, dare I say, enlightening session. The difference between gambling and a business mindset. And it's all in how you evaluate risk. As we said, I think that the key takeaway phrase is, is gamblers, they will look at how much they can make, and as long as you look back and say, "How little can I lose?" you'll never fall prey to that gambler's gambling trap that people fall into.
But yes, it's been a fabulous show. Absolutely, thoroughly enjoyed myself again this week, and if you'd like to send you some fan mail, sure will appreciate that as well, Sean.
Sean Donahoe:
Phil Newton: I'm still getting comments. I do love the feedback, so if you can leave us a review, that'd be fantastic. Have we got any giveaways, actually? If anyone leaves us a five-star review, if you take a screenshot of it, send and let us know that you've left a review, think we can find something in the goodie bag?
Sean Donahoe: Might be able to. We'll have to think about it, because I can't think of anything off the top of my head. But we'll figure that out.
Phil Newton: We'll figure something out.
Sean Donahoe: Yeah. We'll figure something out. Maybe what we'll do is we'll put up an extra link on the page, and we'll figure something out as a thank you for letting us know about your reviews and everything else.
Phil Newton: Perfect.
Sean Donahoe: So we'll keep that in mind, and we'll solidify something for that next week, maybe. So with that being said, rock on, enjoy the rest of your week.
Phil Newton: Bye for now.
Sean Donahoe: We'll see you next time. Take care.
Automated: For more cutting edge trading advice and a free trader workshop to help you build a personalized trading plan, and make smarter trading decisions, go to richardgrannon.wpengine.com now.
Automated: Futures. Options on futures. Stock and stock options. Trading involves a substantial degree of risk, and may not be suitable for all investors. Past performance is not necessarily indicative of future results. Trade Canyon, Incorporated, provides only training and educational information. If you actually understood and listened to this, then that means you are awesome. Congratulations, and well done. Notice. This product may contain nuts.

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[00:00:10] Show Introduction

[02:29]Sean: Perfect. Okay so rocking on. What are we looking at? If you consider what the common perception of trading is, everyone thinks...

[02:41]Phil: Swing for the fence. Close your eyes and hope for the best?

[02:46]Sean: Yeah, absolutely. We want to draw a line in the sand.

[03:00]Phil: We should draw a line through it, let alone under it. It's inaccurate. As we've said many times, it's an easy comparison to make. Most people have some familiarity. It is inaccurate.

[03:09]Sean: It really is, although there are parallels which is what forces this perception. We talk about this as a retail trader trap because most people do live with the uncertainty as opposed to the business approach which is what we take and we reinforce in all of our trading, which is systematic risk evaluation. We're gonna go into this in a little more detail, but I just want to draw a line right through the middle of this and smack it on the nose - business vs. gambling. It's all about the numbers and an analysis versus just closing your eyes, rolling your eyes, rolling the dice, and hoping for the best.

[03:52]Phil: It's true with any business. It's not just the trading comparison. If you approach business in the same way that people assume you approach trading, to hang a shingle up outside, throw the lemonade stand on the front porch... If you didn't have a business plan, funding, budgeting, or how to perform and operate your business plan, then starting a business would be comparable to gambling. You're just hoping for the best. No one thinks that if you don't have structure, you compare that to gambling, but that's what people do in the trading world. What are your thoughts on that, Sean?

[05:07]Sean: Here's the thing. It's absolutely dead-on what you're saying. We talk about the rule of 90/90/90, which is 90% of retail traders lose 90% of their money within 90 days. The entire industry relies on that because they're gamblers. They're not coming at this with a process or a positive expectancy strategy, or a systematic risk evaluation. This cycle will always continue as people are encouraged to trade without a strategy that they can rely on that they're disciplined enough to use. Don't get my wrong. I love Vegas, it's my second home. I was gonna become a professional blackjack player. There's a big difference between the guy who goes to Vegas on a weekend and he's got some money in his pocket he wants to throw down and have a bit of fun and relax because it's entertainment. They're just there for fun. As a professional gambler, there's an entire business behind that.

[06:29]Phil: Most professional gamblers don't call themselves professional gamblers. Whatever the game is their forte, they're a professional poker player, professional craps player, or professional blackjack player. In their mind, gambling suggests something other than what they're actually doing.

[06:53]Sean: You'll hear me say I was gonna be a professional blackjack player, not roulette, not craps, not poker. Blackjack. That was my specialty. I'll tell you an interesting thing. I was at an event in Vegas with a good friend who is a professional poker player. I sat down. I've played a lot of online poker, but I'd never sat down in a casino to play poker against other people. I was very good online and when I played online, bringing the business aspect to it, I had all sorts of additional software that would statistically analyze all of my opponents in their seats, their playing styles and everything, because you can do that. I would play multiple tables at once.

[07:43]Phil: You've got a software team to support the ability to do that.

[07:45]Sean: I would have all sorts of probability analysis that would take and analyze my hands and the probability of success based on my opening hand. I'm not just doing this playing the cards in front of me, I'm doing detailed systematic risk analysis. I was very successful at that online, made a lot of money. I did it for entertainment and also because I'm a nerd. It allowed me to be very successful. The problem was I put myself in a false sense of security by sitting down at a table with a whole lot of professional poker players, and very quickly, including my friend who is professional, I bet into him thinking I had a great hand. I kept check raising as they were. He sat on pocket rockets, or two aces. I had king and a queen. I think I ended up with three kings, but I raised into three aces. He had me beat. I had gone all in.

[09:07]Phil: It's a pretty decent hand.

[09:12]Sean: But he had a better hand and he knew it. He let me check raise into him because he knew what would happen next. So anyway, I got wiped out. I wasn't pissed at my friend. I was pissed at myself for being so reckless and gambling, not being systematic of my approach. While I was doing this for fun. I was taking a business mindset into a fun state where my friend, a professional, was treating this like a business and was gladly taking all the money out of my pocket into him. I was mad at myself for allowing myself to gamble rather than be systematic. Where I'm at home with all this software, I can be systematic. Here, I didn't have it.

[10:10]Phil: What's the difference? I heard you say there you were doing something completely different to what you normally do, through no fault of your own. You've normally got that software support, comfort of your own environment, playing multiple tables, multiple hands, in a portfolio-type approach. Whereas, when you went to Vegas, you had one table, time is slowing down for you because you're not playing as fast as you might normally, and also you've not got the support of the software helping you work out the probabilities and the percentages, making the statistical suggestions. There's a big difference. You're playing a different game to what you'd normally be playing. Your strategy is very different as well. You're not doing what you'd normally do and afterwards you realize you were probably gambling there. You thought you were doing the same thing.

[11:14]Sean: Yes.The market, being surrounded by professional poker players, taught me that lesson very quickly. Here's the follow-up to that story. I took a break because I was on full-tilt. I was angry. But unlike a lot of gamblers who then blame the casino or the game, I realized it was my own fault. So I sat down and said I'm going to play some blackjack.

[11:51]Phil: I think the phrase you're looking for is you got your shit together.

[11:53]Sean: Basically. That's what I did. I sat down to play some two-hand blackjack. I found a table by itself and basically monopolized playing multiple hands. One thing you mentioned is the speed difference. When I'm playing multiple tables, I'm playing four hands at once. It's fast. Playing in real life, one hand can take five to ten minutes. It was dead slow and boring. It was outside my strategy.

[12:47]Phil: I think the lesson to take home here for the loving and adoring listeners, is sometimes when you think you're trading one way, you think you've got the business mindset, but the reality is you probably don't. You're letting the emotional influence of your decisions impact your decisions. You were used to a faster game and a different style of trading. When you went to the tables in the real world, your style of trading was completely different. You thought you were doing one thing but you were doing something very different. That's a trap a lot of new traders can fall into, when real money gets put on the line. Recognizing that can be quite difficult. You do need to sit yourself down in the corner and evaluate. This is another good reason why keeping track of your trades and your emotional state of mind. Write down I'm feeling this, or I'm having a bad day trading. It helps you recognize the moods that ebb and flow when you're trading, when you're perhaps being over-influenced by the internal monologue we all have with ourselves.

[14:14]Sean: Absolutely. Funnily enough, two hours later, my friend came away from this little satellite tournament we were in and asked me if I was okay. I said yeah, fine. Then he recognizes the big pile of chips where I've recovered all my losses in the poker game because I'm back playing blackjack where I'm good at, at a speed, a veracity that is more in line with my strategy. I recouped all my losses and was still ahead after a very short period of time. It's a recognizing of the environment, the market, you're strategy and style. It all comes down to that systematic risk evaluation. Knowing that you can have a significant advantage when you're back where you're good at your strategy dictates, this is the best place for your style of trading or in this case, gambling. I hate using the world gambling because... I'll use the word betting.

[15:27]Phil: Gambling suggests something other than what it actually is. I don't like using the word at all. I'm very particular with how I use some of my terms. I want to eradicate that from my vocabulary in every sense. It's risk evaluation. We're placing an evaluated bet on the market.

[15:54]Sean: We were talking just before the show. I haven't actually listened to it. I've skimmed through an executive summary of Ray Dalio's book, Principles, an internal document they gave to members of staff and he was giving away to the public for a while. Now it's a commercial venture. He turned it into a published book and podcast. He refers in the book to the bets they place as the world's largest hedge fund. They're managing their bets, not the trades, their bets. It might not be considered a trade. It might be an investment. They're talking about them as bets, not as gambled bets, but their strategic risk. Even someone like Ray Dalio considers them bets, but it's not gambling. That really is a mindset shift a lot of people need to take. I'll tell you this story. I was coming back late last night and I'm at the baggage claim and then listening to this guy who was non-stop talking on the plane. I just wanted to choke him. He was talking at that volume where you can't ignore him. Phil was mentioning the movie Daredevil.

[17:42]Phil: A bad movie, generally, but the character Bullseye, played by Colin Farrell, was on the airplane with the old lady talking next to him, jabber, jabber, jabber, and then all of a sudden he flicks the peanut in the old lady's mouth because he just wants to choke the crap out of her. Kind of what you want to do to me Sean, because I'm nonstop talking.

[18:06]Sean: There you go. This guy was talking about his addictions. Oh, he was addicted to gambling and it's the casino's fault. They encourage you to gamble and they even give you cocaine. He was addicted to cocaine for three years and he keeps going in and out of rehab and it's all the casino's fault. And I'm just like look in the mirror. The problem is right there, dude. It's the mindset. Trading is not for everyone. If you have that addictive personality, if you don't have the discipline to create a barrier between you and your activity, then again you are gonna fall on the bad side and lose your shirt. You're gonna be part of that 90/90/90 trap. You were talking at an event. Tell us that story.

[19:18]Phil: It's pretty much the same as your story. I was gonna fess up and say I have that fear of missing out. I like to have positions on. I like to be exposed to the markets. It would be very easy to fall into that gambler's mindset, that compulsiveness to place the next trade. Regardless of whether the opportunity is there or not. How do we get past that and satisfy the personality trait? How do we not fall prey to that trap and unnecessarily have positions on? One way is to reduce your position size. The second step is to adopt a portfolio-type approach. Then I can put a little trade on every day. This is how I deal with it, and lots of other benefits. This is where my own strategy developed years ago. It was to have a portfolio of strategies, different ways to recognize opportunities, and then to have a portfolio of positions within the portfolio of strategies. I've got lots of occurrences of trades and positions being open that meets a variety of different requirements, that time-tested, on average produce a positive expectancy. It is the fancy way of it should make money. It satisfies the compulsion to put a trade on. I'm looking for one trade every day. It's easy for me to find something that is very strictly meeting a set of criteria as determined by my strategy. Does that make sense, Sean? I just want to admit I still have those urges. Everyone thinks that putting the trade on is trading.

[21:56]Sean: No.

[21:57]Phil: Yeah, so how can we kind of get past the compulsive part and the gambling danger. It's to trade small and trade frequently within a structured approach. I think that's the message I want to deliver then.

[22:09]Sean: It's very true. There's a lot of psychology under the hood. This is why Vegas is one of the wealthiest cities in the world, because people are pouring money into there. It's why these casinos are so large. They've got Elton John, they've got Britney Spears there, Wayne Newton (whatever floats your boat). You've got Siegfried and Freud, wait no... Sigmund and Roy? Whatever the two guys with the white tigers that got eaten. When the tigers strike back.

[22:47]Phil: Should I tell you a little story? I was talking to my elderly mother. She's completely technophobic. She doesn't have a clue about computers, technology, and certainly not the stock market. It's just the way she is. She's got no interest. But because I'm her loving son, she wants to take an interest. So I have to think of creative ways to describe what I'm doing without using any of the jargon. When I was a lad, we had a garden nursery. I thought I would explain growing flowers as the difference between what gambling can be and the emotions and experience of that, versus trading a portfolio approach. I was trying to describe the approach. She was asking why do some people make it work and others not make it work? I said it's because people approach it like gambling. She said give me an example. I said imagine you were growing one begonia, one plant, at a time. You plant the seed, you pot it up, you put the feed on, you water it, and then you sit there and watch it. You're looking at it everyday waiting for it to grow. You put too much water on, then you're hoping the plant doesn't die because you need it to grow, and not only grow, you need it to bloom. If it doesn't bloom and it doesn't look nice, you're not going to be able to sell it for a good price. Just imagine growing one begonia at a time. You're completely emotionally, physically invested in the one plant growing and flowering. And then what if it dies? You're screwed. You've got this emotional release of oh, it's died. Then you have to start again. You've got to really look after it. If you look after it too much, it's gonna die. If you don't look after it, it will die. That's the emotional experience you have when you've got one position. Does that make sense?

[25:12]Sean: Absolutely. It's a great analogy. It's really highlighted the facts of the emotional engagement.

[25:17]Phil: That can be compared to what most new traders do. They put the one trade on, and it's an emotional roller coaster. Compare that to having a garden nursery. You've got lots of roses, some begonias, some lobelia, a nice variety. If one begonia dies, it's disappointing, but you've got the rest of the garden in bloom. It doesn't matter if some die, some wilt, some don't quite get the sunlight they need. You've got that portfolio approach. It doesn't matter if one dies. It's easy to remedy. Insert plants for positions in portfolio. The emotional attachment is to get pleasure and enjoyment from the garden as a whole, as opposed to trying to make that one plant survive and thrive.

[26:59]Sean: To layer on top of that, there's another trap that comes on top of that when you're looking at a wider range of positions, or flowers. A lot people are playing every hand in the game. They're flipping through every chart saying this one could be positive or negative, and taking sub-par positions, just because they want to be in there continuously. You have the ability to know if you're planting a lot of seeds. What's the ideal environment? Rather than flicking through chart after chart, setting up certain filters, creating certain environments and awarenesses and limiting what your opportunities based on your premium positions, like I said.

[28:24]Phil: We advocate one trade per day. It's okay if you want to do two or three, but you're restricted to planting one seed every day. You're gonna choose what you believe is the best opportunity. You're not just looking for any opportunity, you're looking for THE opportunity. If your life depended on it, what's the one thing you could trade today.

[29:08]Sean: That's exactly it. Gamblers are always looking for that big jackpot play. We see it in retail markets, conventional markets, cryptocurrencies, people are putting on giant positions looking for the big payoff.

[29:25]Phil: Don't bet the farm.

[29:31]Sean: We've all heard that phrase. There's a good reason for it. Successful traders are looking for the consistent returns. They should be playing with money they can afford to lose, but also they're really conscious of the downside risk, not just the upside reward. That is a very big, big thing. We always talk about position sizing and not going all in, not sliding all those chips into one bloody position, because we don't want one flower here, we want continuous return on the entire crop.

[30:09]Phil: The way I like to phrase it is if something bad was to happen today, if the stock market was to crash as it has done in the last few days, it shouldn't be a bad thing. Let's just say I was at 100% bullish positions and the stock market crashed and all my positions are now zero. They haven't worked out. I'm trading very small but frequently and if all those positions didn't work out that month, I'm still in business tomorrow. If that month's round of positions didn't work out, I've not betted the farm. I've not put all my chips on the table. I've got the opportunity to get my shit together and get back on the saddle and be back in business tomorrow. I've got some money in the pot that I can start planting seeds for the next month. As it turned out, when the flash crash happened, there was some bullish and some bearish positions. Predominantly, it was a glorious time had by all. If you've got a balanced portfolio with some bullish, some bearish, some neutral positions, and something happened, you're gonna make money one way or the other.

[32:01]Sean: Absolutely. With this flash crash that's happened the past few days, I was already positioned for a short. I saw, and we've been talking about this in the podcast, the pressure was gonna blow. Already positioned.

[32:16]Phil: Funny thing, Sean. I was overly positioned bearish. I was about 64% bearish, about 24% bullish, and the rest was neutral. I was actually quite nervous because I didn't have the balanced portfolio. It was biased to the bearish side, because that was what was setting up for me. Now ironically, when you've got a strategy that is adaptive to market conditions, sometimes that will happen. It's happened many times before in the past, where I've gone overly bullish or overly bearish, and then something has happened, either a big broad rally or a big hard and fast sell-off. Your individual stocks are going to start tipping over before the actual index does. That's what I've seen time and time again. I was overly bearish as it happened and it did have me concerned. With hindsight, I shouldn't have been but it does make me nervous when I've got a slight imbalance like that.

[33:19]Sean: When Phil has imbalances in exposure... At the end of the day, the environmental awareness, knowing what your strategies are, going in with full eyes open, we hate the gambling analogy to trading, but unfortunately we have to draw those lines because a lot of traders are gamblers. We have a professional and business-like to trading but we have to draw that line in the sand and if you feel that you are having those gambling tendencies to the market, we're trying to drag you by the back of the collar and drag you into the business side of it and say here's the better and more profitable way to trade with a positive expectancy and systematic evaluation, so you can be trading today, tomorrow, next week, or next year. Just to wrap up here, trading is a business. It should be structured and executed like one. It's not about the money you win, it's also about the money you don't lose.

[34:38]Phil: How little can you lose? That's the difference between gamblers and professionals. The gambler is focused only on how much they can win. Whereas, the professional, business-type approach is how little can I lose? Very interesting, valid, and important point to keep in mind. This is why we keep saying trade as little as possible but trade frequently and you will have that risk protection built into your approach.

[35:08]Sean: Absolutely. And again, be disciplined, be aware, and be consistent. With that being said, let's rock on.

[00:39:15] Rebel Trader Tip of the Week

[35:34]Sean: Okay, this one I'm gonna have to stand up on a soap box. It's a little more of a rant but also a bit of a cautionary tale and little bit of a sell reflection as well. Here's the tip: step up or step away. We said in the last section that trading is not for everyone. You've got to have a certain mindset. I was speaking with a student who was packed full of excuses for their trading. Everything they were doing was someone else's fault. Every hard knock or missed opportunity or poorly-executed trade was it's Wall Street, or it's all rigged. I could give you all the best strategies in the world and how to execute them to perfection, but no one can execute them other than yourself. You've gotta have grit, determination, mental toughness, perseverance, and you've got to be able to take a hit every once and a while.

[36:49]Phil: I think you missed one there, Sean. Tenacity.

[36:54]Sean: Absolutely. You've got to be tenacious to be a successful trader. Anyone who tells you different is more interested in your wallet than making you a better trader. Here's the thing. We specialize in making you a better and more successful trader because we want you to be the best damn trader you can be. That's why we do this show every damn week. It's not for everyone. But for those who can develop the skills and apply a lot of the strategies we bring to the trading realm, it can be truly transformative. We've actually got a great little testimonial after our Princess Bride show that made me smile from ear to ear from a listener who is kicking butt with their trading just with the content we share in this podcast. But the only one who can make a difference is you. So, step up or step away. The choice is yours and we love to help those who want to step up.

[37:52]Phil: We've got a lot of time for serious traders, but just remember you've got to push the buttons. You've got to do the work. We've made no false promises in that regard. There is hard work involved. But just like learning anything new, there is a learning curve involved, but understand it is a skill that can be learned. Like with anything that's worth doing, whether it be sport, skill, learning a language, the practicing of the skill gives you experiences and that means you can grow. You only get that when you go an push the buttons and take responsibility for your actions. I think that's generally true in life, not just trading, Sean. What do you think?

[38:42]Sean: Absolutely. Not surprisingly, it's like any business and that's what we're doing. At the end of the day, step up, or if it's not for you, step away. Good stuff. Okay, rock on.

[00:39:00] Quickfire Round

[39:07]Sean: Okay, rummaging around in the Rebel Trader mailbag, I've got a couple of questions for you, because it's the one that just made me smile. What the hell happened? That was it. But obviously they're talking about the markets and what's happened the last few days. We talked about this in the Happening Now report in a little more detail. Now that I've got Phil here, I wanted to get his take on it as well and we can wrestle this one to the ground and put it in full submission.

[39:39] Phil: I've got a very short answer for this, Sean. The question, just to timestamp this, it's the flash crash. It's February 8th, 2018. What the hell happened? The markets sold off. In a single day the DOW was off 5%. As a point move, it was over 1,000 points. 1,100 and change. But my answer is who cares? What does it matter. Knowing what the hell happened is not going to make me a better trader. I want to look forward. I'm already in the markets. I don't give two hoots about what happened and when it's gonna happen again. I'm more concerned with managing my positions and putting trades on and following a systematic approach to find, filter, and sort stocks. Sure, knowing might help me protect and prepare for the next time it happens, but if you follow your strategy, when it happens again, if you've got a balanced exposure to the market, you're gonna be profiting every day of the week that that slide happens. You can't predict these things. Sure, we've been saying the writing's on the wall. It's gonna happen. No one knows when it's gonna happen, so stop trying to figure it out. I'm more focused on looking forward at the next trade, rather than looking backwards over my shoulder thinking shit, what happened. Truly, for me, it does not matter. The sooner other people stop doing that, the sooner they'll start being more successful traders. Just get your head down, following your strategy, evaluate the risk and put the next trade on. Don't worry about what happened yesterday. If you've got no positions on, it doesn't matter what happened yesterday, because you can't profit from it. You need to put the trade on when the setups occur for your strategy so that when something like that happens in the future, you're in the market. That's what happened to me. I didn't really care what was happening. I was panicking, I wasn't scared. If anything, it was benefiting at least half my portfolio. If the bullish trades are generally bullish, they're not going to be as impacted by a temporary down move. When normal service is resumed, if they're good stocks and the long-term trend is holding for them, they will recover and resume that upward trend. For me personally, it doesn't matter.

[42:41]Sean: That's interesting. Here's the converse of that. A lot of people are taking speculating what's happened. I want to take a slightly different approach, very much in line with what Phil's saying. Who cares? My thing is, is it gonna continue? Having an awareness of the environment, I saw what was happening on Friday. This is before I was traveling to Vegas. It really happened in the last few minutes of the day on Friday, last couple of hours. They're saying it's because of projected interest rates hikes but it didn't sound right to me. I was thinking we already know there's gonna be interest.

[43:42]Phil: The talking heads can always find some bullshit reason to explain what they think happened. Twenty-two years later and it's all bollocks. I turn it off. I know you like to look at the news and headlines. We're always gonna lock horns over this one. It just doesn't matter. What will be will be. Turn it off. You're stressing yourself out.

[44:16]Sean: Anyway the reason didn't resonate. The last two hours, there was something going on and it wasn't clear what it was. From an awareness perspective, and from what we've seen many times in the markets, is on a Friday if something is going on, that's gonna resonate to Monday. A lot of people are gonna be not sure what's going on unless something occurs. But usually on a Friday if there's something monumental going on, people reset their portfolios on a Monday, and sure enough, come Monday the markets are way down with the futures markets until the rest of the markets are open on Monday morning. There's gonna be circuit breakers tripping on funds. I saw this at the end of the day. I was heavy short the main markets and loaded up.

[45:36]Phil: Me too. I didn't know the crash was happening, but it was clear it was selling off, and it was for most of the week. It wasn't surprising there was a downward movement. Just the magnitude and the velocity was absolutely glorious.

[45:51]Sean: It really was, and incredibly profitable. I sat there with my cell phone in this mastermind just watching my portfolio spike upwards based on my shorts. I was smiling from ear-to-ear. I'm thinking I'm in a beautiful hotel with some of the top people in the industry, relaxing, having a blast, and I'm watching my portfolio just do this wonderful thing as the markets dip. Everyone else is like oh my dog. I just turned my phone around and said yeah it's great! It's one of those wonderful things. If you have an awareness of what's going on, it can lead into opportunities, without actually knowing what happened. Again, they're saying Monday, there was nothing driving it other than panic. It was panic sale and stop losses closing and people re-positioning their funds and their exposure because they've been predominantly long. Take all the chips off the table, just panicking, then realizing it was nothing. Put the money back in.

[47:12]Phil: Can I get the quote in again? A nice old British comedy, don't panic! That's what was going on. People evaluate things over the weekend rather than get caught up in the day-to-day minutia. Over the weekend, the big funds, institutions, the end of day traders, they're evaluating over the weekend and thinking, better lighten the load here, and they're putting all those orders in for the re-balancing. That caused an exaggerated movement. Here's what we do know. How can we trade it going forward? Look back to the times it's happened. It's happened half a dozen times where price has sold off quite sharply, not necessarily a flash crash like we saw, but if you look back at the weekly charts or look at the stock index, just look at the one or two week corrections we've seen over the last nine years and you'll see they've been very short lived. This will set a precedent for what might happen next. Now, it's a a few days after. We've seen a little reaction. I think we're gonna see a retest of near these recent loads. I don't think it's gonna get all the way down, but maybe halfway down. Looking at the S&P, we're around about 2660. I think we could get down to 2575, about halfway down that spike from the recent rally. Guess what? That's what happened the last half dozen times. Price has sold off. We're gonna see a little bit of a retest, develop a higher low, and as Sean's mentioned, fundamentally, nothing's changed. There's no fundamental drivers. It's just panic selling. That typically recovers. Then it will be back to normal. As far as I'm concerned, this is a buying opportunity. Then it's going up. That's just my personal viewpoint. Please don't take that as financial advice. Why can I say that? I'm not any smarter than anyone. Just look back at the charts. Whether it comes true or not, I'm confident that history repeats itself. If you've got a systematic approach, it will provide the opportunity. So Sean, little bit of ranting again.

[50:30]Sean: There you go. On the flipside of that again, just have an awareness of what's going on. Who cares what's driving it? Just be aware and position yourself accordingly for the future, what's next. We've seen a huge volatility spike. It collapsed very quickly. In the Happening Now report, Andrew and I are always talking about volatility plays. We're gonna get into that in the BS of the Week. There's always opportunities. An awareness can help. Is it gonna continue or is it gonna snap back? Right now, it's snapping back. There's always a kickback. In a panic-selling environment, there's a very quick reset. Anyway, next question.

[51:42]Phil: My significant other is concerned with my trading any time I lose or take a hit. What can I do to convince my significant other that everything's okay? So basically, the partner is worried the other partner is gambling and maybe betting the farm. What are your thoughts? How can we appease our partners that hey I'm new to this but I'm not being stupid. I'm not being a dick with our money, love. The rent's fine this month.

[52:19]Sean: First of all, talk about it as a business. Talk about it as an adaptive strategy. You have ups and downs, that you're not betting money or using money that you can't afford to lose, but you're also talking about your portfolio, that you've got multiple positions that are balanced, that adapt and account for any market conditions, and while we talk about what's happening on the other side, talk about the year to date or overall portfolio. The thing is though, whenever you're getting questioned about this from people who are not traders, who don't have the awareness, again, a lot of the outside perception is that it's gambling. Oh, whoop-dee-doo when you win and you're an idiot when you lose. It can have a psychological toll on yourself.

[53:20]Phil: It's stressful if you've not got a supportive partner.

[53:21]Sean: Exactly. You want to talk about it like it's a business. They will hear your confidence in that and it will reassure them that while you've taken a hit, or if you've had a downturn, you're moving forward and you have a plan. That's what they want at the end of the day. They want to be confident in you, that you know what you're doing, and there is a future, there is plan, that it is a business, you're not just rolling the dice. If you don't fob it off and dismiss and say you won't understand, you're just gonna foster more and more...

[54:13]Phil: That's the worst thing. My mom regularly asks me how I'm going. If I start talking jargon, I'm just gonna fob her off. I talk in stories, things she might understand. I'm not saying you patronize your partner, but as they get familiar with what you're doing, they'll get more confident with what you're doing. I like to use business comparisons all the time. Most people have an understanding of that. Maybe a good comparison would be compare it to a shop on the high street. If you had a real-world high shop, just say we had a few refunds today. Or we've had a bad delivery. All the fresh produce is rotten. These things happen in the real world as well as the trading world. Draw those comparisons to show this is normal. Yes, I'm frustrated. We've had a little bit of a refund in the markets, but overall, the business is still healthy.

[56:03]Sean: Absolutely. At the end of the day, it's just about reassurance that you know what you're doing, you're not throwing the money away that's the house money, as in what is in your home, what you are risking is not, basically that there's a plan and that everything is okay. Not having that background or the skills and experience you've acquired or are acquiring, it's a case of are we doing the right thing? This is one thing I want to reiterate. I'm very fortunate. My wife is incredibly supportive because she knows this is my skill and my core competency. She also did start learning what we do, but it gave her a base understanding so that when she sees being reported in news, the stock market's crashed, she asks me what's actually going on? What's the real story? She defers to my knowledge. She's interested because she also wants to make sure that I'm aware. She knows I'm always aware, but she wants to know that we, not me, we, what are we doing? How's our portfolio? If you do it as you and them, you're creating a separation. Always talk in the factor of we. Just from a preservation of relationship status. We're doing fine. We includes them. They don't feel excluded and it will also help with the confidence. This is way outside of what we usually talk about but I thought this was a great question. A lot of us are solo traders. A lot of us as retail traders are not trading as a couple, but you still have that reliance on each other and that confidence in each other. It's great when you have that support. That's the way to foster that support. When you don't have it, when you're continuously having your ear chewed off about the markets or any losses or hits, everyone loves the wins but everyone hates the losses. That just adds to the stress and it will affect your portfolio and your future success and decision-making because you're bringing emotion into it.

[59:03]Phil: Life advice there. Whatever the event is that could impact your family, just sit your partner down and let them know what's going on. They don't necessarily have to be involved in the decision. Just include them in some way. That's just good life advice.

[59:27]Sean: It is and it's why my marriage has succeeded for the last seventeen years. Okay, moving on from the Dr. Phil segment, where has the best charting data and does it really matter? Am I best to use my broker's platform? There's a question for you, Phil.

[59:55]Phil: Most of the time, these things don't matter too much, because it might be you're on a budget or you've got deeper pockets than the next person. Whether you go with a budget platform or what the broker offers you, or you go for some premium charting you pay extra for, what do you want it for? You can get away with a $10-15/month online platform to do everything you need to do. It might mean you've got to push a few extra buttons or your interface sucks, or if you're using the brokerage's package and it's not got a fantastic user interface, it might not be a great experience. I can think of a few brokers that are good but don't have a good user experience because the software they have is from the 90s. You can use that software fine. It comes down to what you want. If you imagine brokerage and charting and the tools you can use like a vehicle, like a car, your car will get you from A to B. That's its purpose. Your broker will execute the trades. Your charting platform will display the charts. The only question is are you buying a clapped-out banger or are you buying a Rolls Royce. They both do exactly the same thing. But are you gonna feel every bump in the road, or are you gonna drive along in luxury? That's the spectrum. Where you are will be determined by budget and what you want from your charting platform or brokerage. There is no single right answer. What do you want it for?

[1:01:54]Sean: Exactly. That's it at the end of the day.

[1:01:57]Phil: Best is relative. If you've got unlimited funds, then the best is going to be very expensive. But if you're on a budget, the best budget choice is a very different answer.

[1:02:09] Sean: I've spent a lot of money on data over time. I've really found that there isn't a huge difference. Some of the stuff I do, I need data fast, I need the tick data, I need it to be accurate because I'm developing algorithms, but for my general trading and outside of the tests and experiments we're developing on the HFT side, it's minimal difference. I'm not as concerned with the data, it's the speed of execution and the fulfillment of my trades. It's always liquidity, but that comes down to the actual instruments that we trade. We really only trade where there is liquidity, so we want to make sure our positions are filled and if we're using end of day data, that's honestly available from even Yahoo Finance. It's free.

[1:04:10]Phil: For the most part, it's 10 minute delayed these days, even for trading off 60 minute charts. That can be good enough. If you're on a budget, you can use 10 minute data to make a lot of the decisions you really need to make. You'll have the exact live price with your broker anyway, you just might not be having that fed into a charting platform.

[1:04:31]Sean: Absolutely. Indeed. That is the mailbag. With that being said, let's move on.

[01:04:39] Bulls**t of the Week

[1:05:05]Sean: Okay, so Bullshit of the Week, Phil's favorite section and honestly, mine as well.

[1:05:14]Phil: What's that smell?

[1:05:18]Sean: I always look at the markets and the finance networks and see the amount of bullshit out there. But we have to filter down to one item.

[1:05:30]Phil: You're starting to see why I go out of my way to ignore. Most of it's nonsense. It's not going to make me a better trader. But bullshit, sometimes you just step in it. What did you step in this week, Sean?

[1:05:56]Sean: Well, I had to look at the XIV collapse. This is an ETF, an inverse ETF based on the volatility index.

[1:06:06]Phil: What's an inverse ETF?

[1:06:10]Sean: If you look at the VIX, the fear index as it's called.

[1:06:18]Phil: It tracks the VIX but it tracks it backwards.

[1:06:22]Sean: Yes. If you want to short the VIX without shorting the VIX, you can actually buy the inverse and take a long position on the decline or ever-declining VIX. We've been talking about this being a pressure cooker for a long, long time. What happened was, the XIV, now again, we did a better breakdown in the Happening Now report, but what happened is Credit Suisse took a 97% hit with the massive volatility spike. 100% increase with the volatility that was already on the rise and then it jumped up more and then again. XIV basically said we have to shut down because we are worth sweet Fanny atoms. Sweet FA. With a 96% drop and volatility, they basically said we're shutting down this entire fund.

[1:07:26]Phil: Just so I can translate this for the poor farm boys. XIV is tracking volatility. It's a fund?

[1:07:37]Sean: It's an exchange-traded network. It's an ETN, not an ETF.

[1:07:46]Phil: It's a fund that people can invest in. That's how most commonly, people might get exposure to volatility. They'll buy into this fund. Essentially, the fund collapsed. It didn't have any circuit breakers to protect against what is the doomsday event for a fund. The instruments that they're tracking has had an end of the world event.

[1:08:16]Sean: It really has, but this isn't the BS.

[1:08:19]Phil: I'm just interpreting the landscape.

[1:08:32]Sean: So basically, it was known that if there was a giant volatility spike, this fund was likely to collapse. It was known. I feel bad for this one guy, but it's a prime lesson in what we talk about all the time. This guy, this one trader, and I'll include the links in the show notes, lost 4 million dollars, three years worth of work, and a significant portion of friends and family money because of this collapse. Didn't have a hedge, didn't have an awareness of the environment he was in, the greed driving everything else. The collapse of XIV, he lost an absolutely fortune. It's a situation that could have been avoided by hedging your positions, understanding your environment, and again, if you are betting against something not happening for a certain length of time, it's going to happen.

[1:09:36]Phil: Statistically, it's unlikely, but it's not impossible. Something similar has happened as a half dozen times in the last half dozen years. It is an uncommon occurrence, but it will happen from time to time. What we've just seen, the magnitude, hasn't happened in a long time. The bullshit elements, I have to agree with you, you've got to have a contingency in place for if that happens. These guys didn't have a contingency in place for when it happens. You're gambling with people's livelihoods and it's cost them dearly, not just financially.

[1:10:38]Sean: This is like Russian roulette. From 0 to 100% over one year, this event is a one in a hundred event. As you get through the time period, if that 1% hasn't happened yet, the greater the chance of that now being a 10% chance because you're running out of time. You're spinning that one chamber with that one bullet, and eventually you're gonna get shot in the head.

[1:11:16]Phil: If you look back at the charts, a volatility spike similar to this happens two or three times a year. It's gonna happen.

[1:11:26]Sean: So you're gonna take that hit. You're gonna rock on. If you're not prepared for that, don't blame the markets, look in the mirror. A lot of the times, that is where the problem is gonna be.

[1:11:41]Phil: He was gambling that it wouldn't happen, whereas you and I know it will happen, just infrequently.

[1:11:49]Sean: And where's your cover and where's your insurance?

[1:11:52]Phil: He's an ass for not covering his ass.

[1:11:55]Sean: Exactly. So I feel sad for the guy, but on the other hand, saw that one coming a long way away. It's a shame, but have to call that one out.

[1:12:04]Phil: In fairness, I can't feel too sorry for him because there are other volatility-tracking instruments, ETNs, they've not collapsed because they've had some sort of contingency in place for that what if it does happen.

[1:12:22]Sean: Yeah, SVXY is what we talked about.

[1:12:24]Phil: They have had that contingency in place for that event and it worked. They're still in business tomorrow

[1:12:46]Sean: Absolutely. With that being said, that is the end of the show. This is a very poignant one because we were talking a lot about the misconceptions of this industry and where to draw the line. We want to make sure we're giving you the absolute best information. Every week, we're giving you insights, we're giving you things to think about in your trading. If you could shoot us a five star review on whatever platform you're listening to, we'd greatly appreciate it because this does help us get the message out to more and more traders just like you. To do that, just go to richardgrannon.wpengine.com/rebeltraders. If you want to hit us up on Facebook, you'll find all the links there, including the Twitter Machine and Phil likes to call it. In next week's show, we're gonna be talking about two traders, probably me and Phil who walk into a bar and we'll take it from there. With that being said, any last words, Phil?

[1:13:49]Phil: No that's it. It's been an interesting, eye-opening, and dare I say, enlightening session. The difference between gambling and a business mindset. It's all in how you evaluate risk. As we said, the key takeaway phrase is gamblers will look at how much they can make, and as long as you look back and say how little can I lose, you'll never fall prey to that gambling trap. It's been a fabulous show. I thoroughly enjoyed myself again this week. If you'd like to send us some fan mail, we sure will appreciate that as well. I do love the feedback. If you can leave us a review, that will be fantastic. If you leave us a five star review, take a screenshot of it, do you think we can find something in the goody bag?

[1:14:42]Sean: Might be able to. Have to think about it. We'll figure that out. Maybe we'll put up an extra link on the page as a thank you. With that being said, rock on, enjoy the rest of your week.

[1:15:09]Phil: Bye for now.

[1:15:13]Sean: We'll see you next time. Take care.

Resources & Links Mentioned in This Week's Show

3 Key Takeaways From This Show

  • There is a huge distinction between Gambling and Trading. Gambling is leaving things to chance while smart traders choose to exercise Systematic Risk Evaluation.
  • Ultimately you are responsible for your success or failure in the markets. Even with the best strategies in your pocket, it's you that has to execute them.
  • Gamblers are always looking for the jackpot play. Successful traders are looking for consistent returns

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