[00:00:10] Show Introduction
[01:47] Phil: Talking about topical things, we might as well get started. There's been a news report and the market has gone bat shit crazy for absolutely no reason.
[02:27]Sean: The CPI report coming out it's what we call a nothing burger as far as I'm concerned, but being that the markets are jittery as Phil just said to me a few moments ago, what's going on? I said you know what, the CPI numbers have just come out and it was basically what the bloody hell is that? Because Phil's in the UK and I'm in the US.
[02:50]Phil: I obviously know what that is. But I thought I'd missed something because everything, not just one thing, was moving, which I'm not too bothered about. But literally everything across the board had moved - currencies, futures, Forex, stocks, pre-market. Everything was going mental and that is unusual. It's not something you see on a regular basis. I'm looking at the headlines and as far as I'm concerned there was nothing driving it. Unless some random event has happened, what's going on? Literally 20 minutes later the NASDAQ shrugged this off straight away as I'm looking at the futures market at the moment. You've just gotta beg the question of why do the markets move like this? I think they're behaving irrationally right now. It's an opportunity to get in on something, which I'm very anxious to do but you've gotta ask why they're irrational. What's your view on that, Sean?
[03:57]Sean: Well it's funny, this is exactly something we're going to be talking about probably in the next podcast in a little more detail. It's a little more of the psychology, and one of the things we were talking about is recency bias. We've had all the volatility in the markets given last Friday through Monday, a big shake-off in the markets, a big correction. I think what made everyone's butts clench just a little, they were wondering is this a correction or is this a crash? We had the flash crash.
[04:29]Phil: Everyone's nervous. Everyone's on hair trigger.
[04:31]Sean: Everyone's looking for a reason to take the chips off the table. We had a little bit of a kick-back, little bit of recovery, and it's really driven by nothing but fear and okay, we've been on a nine-year bull run. This CPI report comes out on a regular basis, all the time, and I really think that because of the correction last week, people are just a little nervous and they're looking, and I think a lot of this is driven by the news media as well, looking for a great hype story to get attention.
[05:08]Phil: If it bleeds, it leads is the old phrase. I think you're right, Sean. This is hype. I'm looking at 60-minute index futures right now and they've shrugged this off. They're still off on the day, but it looks like they're gonna shrug it off and I'd imagine they should be recovered as we get into the main session. The markets, as you said, are hyper sensitive.
[05:38]Sean: It's a blip on the radar.
[05:42]Phil: What are the talking heads talking about? I don't know if we're calling it flash crash but it could fall into that category. Certainly it is a point move. It's the biggest one from the DOW's point of view. The markets are oversensitive. I think because of that over-sensitivity, it's been sensationalized. It's hyperbole because the numbers themselves, there's really a great bit of difference as far as I'm concerned. It put me in mind of 2004, 2005, because on a regular basis when an important report came out like this one, the markets used to go absolutely mental. It was a fabulous time to trade news reports, but then a couple of years later, the oomph went out of these news reports and then for the next decade, whenever one came out, it was just a big bowl of nothing. The markets didn't react in the same way. As far as I'm concerned, this is one of the bigger reactions we've seen in a many a decade. It just doesn't happen on a regular basis anymore to make me interested in trying to trade it.
[07:02]Sean: That's basically it. At the end of the day, it's the news media and financial networks needing something to really get the eyeballs and keep the focus.
[07:14]Phil: Do you mean to say, Sean, that they're trying to sensationalize a boring subject?
[07:20]Sean: Just look at the numbers. The CPI, consumer price index, kind of a measure of inflation. They were expecting 1.9%, it came out at 2.1%. Guess what? That's bugger all real difference. But again, anything to sensationalize. And a lot of people don't give a monkey's. But the concern or the fear is, that is being pushed forward as a story is that any excessive inflation is gonna give more credence to the Fed raising interest rates faster than expected. Now they're projecting three interest rates hikes this year. Let's face it - the economy is booming. We're in really good times. Tax cuts coming in, it's creating a lot of excitement. A lot of money is flowing and the Fed said that if the economy is going up, we're going to increase rates. It's expected. It's all telegraphed. It's well-communicated.
[08:10]Phil: And that's positive, well-advertised, like the deal with oil. 2003, 2004, it was well-advertised that oil prices were gonna go up. It was explained to the layperson that it would impact them at the fuel pumps. When these prices hikes happened, in this case interest rate increases, people aren't gonna be protesting in the streets. If you remember in the mid-90's when oil prices were similarly soaring back then, people were out protesting in the streets. Fast forward to when a similar event happens again, they're not protesting because it's well advertised. Interest rates, this time around, I think it's a good thing that it's been so well-advertised. We're gonna put them up not just once, but maybe a couple of times this year. Be prepared for it. I don't think we're gonna see the markets react in anything other than a knee jerk, spasmodic reaction of okay, today's the day. I think they'll be just fine. I like the word you used - telegraphed. It's well-telegraphed.
[09:35]Sean: Very much so. This leads into a thing I was thinking about for a future show. It's a little bit like kung fu. Take any martial art because people may or may not know I used to be nuts about martial arts. One of the things in martial arts, does their opponent telegraph their next move? If they're coming in and leaning back on their left foot, and they're twisting their hips, you know they're probably coming up with a right roundhouse.
[10:17]Phil: A subtle indication. A novice might look to where they're aiming. The markets will similarly telegraph about what's going to happen in the future. I think that's a good thing. There's no shock to the markets. Years ago, you could get away with it and I think now the governments especially need to be very vigilant in notifying what they're doing, why and when. I think that's a good thing, because shocking the markets post-financial crash is a bad thing. That's the lesson they've learned. They're keeping everyone informed. I think that's a good thing.
[11:10] Sean: Absolutely. Using the same martial art analogy, when you see something being telegraphed, you can pivot position, prepare for it.
[11:19]Phil: You might still get hit in the face, but you can prepare for it.
[11:20]Sean: There you go. Or you can block it or you can duck. The markets are just looking for any reason to duck and cover and take the money off the table and put it in the pocket and run to the back of the room and see what happens.
[11:43]Phil: To stick with the analogy, Sean, I think Sean Connery in the Untouchables said it a couple of weeks ago the markets brought a gun to a knife fight. Everyone's a little bit jittery at the moment and it's a knee jerk overreaction to an otherwise normal or semi-normal news item release. If the report had been released prior to this market sell-off, I would imagine that the markets would not have reacted in the way they have been. It would have been a little bit of a hiccup but nothing to the magnitude we've seen today. The markets are off what, 22 S&P points and 200 or so DOW points? It's shrugging off but it would not have reacted in the way that it did. Don't panic, as we said last show.
[12:48]Sean: I won't do the -back in 1991 when the tanks were rolling through Iraq and saying there's nothing to see, nothing going on. It's one of those things though with our style of trading I've got to give us a pat on the back somewhat because we're immune. We're looking at these markets like it's a hiccup, a pause, and a recovery from the correction or the psychological bounce back. We can position ourselves with time to be right. We look at the markets. We don't care about this. Funnily enough, we have a lot of our best conversations before the show because we're just generally chit chatting like we are now.
[13:45]Phil: We're chewing the fat, aren't' we?
[13:48]Sean: Abso-bloody-lutely. Just like well this will be forgotten about tomorrow. That was realization that there was nothing going on and that is our style of trading. We look at the general momentum, the general attitudes. We need volatility. It's going to happen very soon. That's the beautiful thing because you can have your portfolio adjusted for what's going on in the markets or expectations of things, rather than a lot of what I call home run traders who are looking for that one big move and they're waiting, waiting, waiting.
[14:31]Phil: Swinging for the fence.
[14:30]Sean: We'd rather take multiple positions, a quick first base, and load up the bases.
[14:40]Phil: It's a higher probability trade. Swinging for the fence, sure, you might get on the NVDA-type trade where it doubles or triples in a short space of time relatively speaking over several years. Try and do that every time. It's difficult. It's stressful. We've compared this to hunting vs. farming many times. Trying to swing for the fence is that hunting, I need to be right otherwise I'm not going to eat. I'm going to go hungry. That brings its own levels of stress and anxiety, vs the portfolio-style of approach which is to trade smaller and more frequently and have lots of occurrences in many different positions. Lots of fingers in lots of pies. You're then not dependent on one position working out. You're farming, you've got a crop. You can just pull the ones that are ripe and ready to farm and the ones that don't work out you can literally forget about. It doesn't matter. You know there's gonna be a small portion of your crop that's not gonna work out, but you've got a crop is the point. What we know is that 65% of the time, we're making money. We're right. We know that 35% are gonna be plowed back in. We're not gonna do anything with them. It's a numbers game. But you've got that opportunity to farm vs hunt. I think so many people are focused on trying to hunt and it's a very unique skill set to develop. I have done it and I can do it, but it raises unnecessary anxiety and emotions when trading.
[16:18]Sean: Very much so. I'd much rather be relaxed trader.
[16:28]Phil: I want feet up. I want the smoking pipe on. I want the slippers on. I want the nice pipe, a good book, and a brandy. That's what we want, isn't it? Feet up, pipe smoking, and reading the paper. Don't want to be glued to screen, stressing out over one position.
[16:43]Sean: Exactly. To my mind, it's oh look at what's going on. Look at my portfolio. I'll find my opportunities, put them on, walk away, and I enjoy the rest of my day.
[16:54]Phil: It's farming at its finest. I'm quite passionate about this particular subject. I've mentioned it many times before. Think about it, if you plant a field full of your crop. Some of it will grow better than others, but imagine that you can plant your crop and your field and you've got your irrigation in place, twice a day. It waters the fields for you. You can keep track of the soil acidity, the alkali. You put the fertilizer down. You walk away and you let the crop grow. You let the field do what it's gonna do. It takes time for those crops to grow. It's more relaxing. When you've planted the crops and the fields full of lettuces, you literally walk away and let nature take its course. It's far more gratifying to trade that way because you've not got the stress of trying to grow one lettuce at a time, and then you're completely and wholly dependent on one lettuce growing at a time. If it doesn't grow, you're buggered. You really are snookered.
[18:23]Sean: That's exactly it.
[18:28]Phil: Farming, for me, works every time. Till the lands, plant the fields, and your crops will work or they won't work. Even if some of them work out, it will cover the cost of the ones that don't work. It's the law of averages. You only get that when you start trading more frequently.
[18:42]Sean: That's exactly it. We've talked about these many times. We developed these strategies and have refined the reasoning behind it. Like this farming method is a way to describe it, but the method's really come about because we developed these strategies for busy traders like me. I'm busy. I run multiple businesses. I've got my fingers in multiple pies and I use trading as a way to make my profits from all of my other ventures grow. Basically every dollar now becomes worth $2 or $3 over a period of time, or $5, $10, what have you. For every business I run, even the ones with slim profit margins, that means the dollars plowed into my trading grow. I developed a lot of my attitude and my approach based on that, and Phil's developed his basically because we doesn't want the stress of being a full-time trader.
[19:51]Phil: I was 12 years a day trader. That takes its toll. I just want to do other things with my time. I don't want to be at the computer all day, every day, flicking through chart after chart. It is as simple as that. I think it's funny that for different reasons, we came to a very similar methodology. You're busy, you don't have the time. I don't want to be busy and I want more time.
[20:23]Sean: And it works for a lot of different people for that very same reason. It just stops you being obsessed with things like CPI reports or whatever the issue du jour may be.
[20:39]Phil: The only reason we were chewing the fat about it earlier is because everything was moving. It was unusual. It wasn't really affecting my portfolio - it's affecting a portion but not the other. It's favoring the other portion. Guess what. We've got a field full of flowers. Some are gonna grow. Some are gonna bloom. Some are gonna die and wilt. It ain't over until they expire because we're trading with options. Today is a little bit of a knee jerk reaction. That's it.
[21:10]Sean: Funny stuff. Okay with that being said, let's move on.
[21:23]Phil: Jog on, kitty.
[00:21:24] Rebel Trader Tip of the Week
[21:44]Sean: Okay so, this week's Rebel Trader Tip of the Week. Don't run before you can walk. You've heard this in many different things, but one of the things I really like to empower traders with is laying that foundation. You have to have a foundation that you can build on. If you don't, you're gonna trip and go head first into a margin call. We know a few people who had their margins called because they were on the wrong side of volatility plays and things like that. If you create a foundation that allows you to be adaptable to any market conditions like we said, you can build on that with any different flavor you might bring to your trading. Mine and Phil's flavor is very similar.
[22:53]Phil: We've got a fundamentally-based foundation. If you've got that knowledge or skill set, you can build whatever house you want on it.
[23:07]Sean: Phil is very much a chart pattern trader.
[23:15]Phil: I'm very visual, very pattern-oriented.
[23:19]Sean: And for me, I'm very much, I lean toward volatility. I lean toward AI, although I do the chart pattern and everything else as well, but I'm looking at a lot of cluster-based analysis with some of the stuff I do with AI and algorithms, although our buildings look very similar.
[23:47]Phil: We've both painted them a different color. You've got a patio front, I've got a walk-through lounge.
[24:00]Sean: It's our own individual style we've built on that because of that solid foundation. You can't just jump into the markets and be Gordon Gekko or Warren Buffet.
[24:13]Phil: Especially because they ended up being in prison. You don't want to do anything stupid that gets you arrested.
[24:19]Phil: We're talking lots of different stories and analogies, maybe I just want to phrase it a different way. All we're talking about really is have a plan. It could be as simple as what you want to make based on your background. Mine is very simple because I'm a simple farm boy, whereas Sean's is more technical in nature because he's got that technical, computer-coding background. It took my 20 years of stripping it down from building it up to complex systems. I firmly believe you do not need to know much to make this work. My first strategy was a very simple moving average crossover system and all that was was a framework to help me recognize what phase of movement the markets was in. I used to use moving averages to help recognize whether the markets were ranging or trending and then as such I could adopt the right entry mechanism and based on patterns, I could select the right target. The point is, it's very simple. If the moving averages were crossed bullish, and the market's going up, I'm gonna be buying pullbacks and vice versa. If the moving averages were crossed down, I'd be selling rallies. And then I add another identification method using moving averages if the price was range bound. As a new trader, it was a nice, simple framework to basically help determine what I should be doing in the markets. That is as simple as it gets. When the moving averages cross, look to trade pullbacks in that direction. There's a good chance the markets are trending in that direction. It doesn't have to be complex. Add in a target and some money management, but it can be a one-page strategy. That gives you the foundation, a mechanical way of approaching the markets. As you were saying, you can then start to layer on discretionary elements as your knowledge and skill grows, as you evolve your personality in trading. Mine evolved from day trading to swing trading with going from very much intensive, screen-based trading to the exact opposite now, which is as little time as possible to get the same results. As you evolve as a trader, your strategy will change on the specifics. That foundation form will change on the specifics. That foundation form is still the same. It's which way is the market going - up, down or sideways? That hasn't changed in 20 years.
[27:13]Sean: That's exactly it. I came to this with a similar mindset. We want to keep it simple. For me, I want to keep it robotic so it can be algorithm-itized, if that's even a word. It is now. I wanted to be simple, check box, so it can be rule-based, decision made, and then I can automate it, and again, that's kind of where my background comes into this. You don't have to overly complicate it. Look how complex my system is and I'm the only one who can do it, and then you create all sorts of single points of failure. The simpler you can keep it, the faster it can be executed, the more it can be adapted to particular environments, and then boom- you have a foundation you can evolve, twist, tweak, and turn into your particular advantage.
[28:06]Phil: Consider it like default settings. Discretion is you're tweaking under the hood with your knowledge and experience. You recognize something that can't quite be quantified yet. But if you ever get beyond that you can always hit the reset button and go back to default settings. That's your base level strategy. As you're going through that, looking for opportunities, it might be that you go, there's your layered on top, your discretion. It might be that you spot something. You've just learnt about Elliot Wave for example. Ooh, I think we're in wave 5. That's why it's important, because if you're ever not sure what you should be doing, it's that foundational strategy. It's the base level plan that you set in stone. That's what you're gonna do every day, every single time.
[29:07]Sean: That's exactly it. Lay and develop a foundation and use that to create the home of your dreams. Then we can rock on from there. So, with that being said, let's jog on, kitty, as my friend over here likes to say.
[00:29:28] Quickfire Round
[29:39]Sean: So, with that being said, jog on kitty. What was that from?
[29:47]Phil: Hot Fuzz. Run Fat Boy Run?
[29:52]Sean: It was a Simon Pegg movie.
[29:56]Phil: No it was Hot Fuzz. Jog on kitty.
[30:00]Sean: I've been saying that now for the last few days and it's stuck in my head.
[30:06]Phil: It might even have been used in Shaun of the Dead.
[30:10]Sean: Might well have been again. I think we're both huge Simon Pegg fans.
[30:13]Phil: I think it's a phrase they've used in all of them. It might be that recurring joke.
[30:18]Sean: There you go, anyway. Let's have a look in the Rebel Trader mailbag here. The first one here is, I've been trading smaller positions for a while now, but how do I know when it's time to scale up those smaller positions into larger positions? That's kind of an interesting one because we keep telling people to scale down, but how do you know, if you're trading smaller, when it's time to scale up?
[30:44]Phil: There's a couple of ways you can do this. I'm of the view of trade more frequently. One way is to start being a bit more aggressive by trading a bit more frequently. You can keep the small position size, but you may increase your universe of stocks. My universe of stocks is about 500. That means I've got the 500 stocks that I believe are the best and only stocks that I need to look at based on how they move, liquidity, and a few other factors...
[31:18]Sean: Can I just throw out there guys that you can download our exact universe of stocks from the website. We give it to you for free.
[31:25]Phil: Give it away. Give it away, give it away, give it away now.
[31:28]Sean: Oh my lord, I knew he was gonna go there.
[31:32]Phil: Phil was gonna rap! Why not, it's February the 14th, it's my little loving gift to the world.
[31:37]Sean: Dear, please can we get a receipt for that and take it back to the store. But yeah, we give our internal universe of stocks away. It's one of the most important documents inside our business, but we'll give that to you. Phil is our senior analyst as well as many other hats that he wears within Trade Canyon.
[31:55]Phil: Jerk. Idiot. General fun time boy.
[32:02]Sean: For a fee. Dear me. We do give that away so you can download the stocks that we trade and our students trade every single day. Outside of the little plug for that, you can access this and again, focus on this particular group where you have the prime opportunities as we like to look at. Go ahead with what you were saying there.
[32:28]Phil: I lost my train of thought, thanks Sean. I now know how that feels! Revenge is sweet. So universe of stocks, mine is about 500. While I advocate passive trading, I'm looking for at least one trade every day, potentially 2-5. It depends on what sets up. I've got this universe I can draw from. It might be when you start out, your universe could be 5 stocks. It could be 15 or 20. One way of increasing or to scale up might be to increase the universe of stocks to look at more opportunity. You might go from an average of 3 or 4 positions being open at once to 4 or 5 or 6 or 7 or 10 or 12 or 15. You can increase the frequency without increasing your individual per trade risk. For most people, that's probably what you'll do. You'll start with a small pool of stocks and slowly increase as your confidence builds. It might be you've got to that point, you're averaging one trader a day with a rolling portfolio, you've got a nice comfortable account size that justifies it. One simple way would be to start increasing your risk as a percentage of your portfolio. For most people, that point is when you get past $100,000 in your account. A half to one percentage point of your available equity is what I often suggest to people. It allows you to trade as small as possible, but then you can trade frequently. Most people get past that $100,000 mark, that's when it starts to get interesting. But then you're gonna start increasing from a $500 per trade risk to $550 or $600, as a percentage of your overall portfolio.
[35:12]Sean: Yeah. Compounded positioning.
[35:15]Phil: Personally, I wouldn't stress about this. One trap that can be fallen into is evaluating it on every position. Every time you put a new trade on, you look at what your cash position is. You're constantly stressing over it. I work it out once a month. It's nice and simple. I'm not stressing over it. I'm gonna have a month of position size. I'll evaluate it at the end of the month and then reevaluate it for the following month. I'll do that rolling portfolio with that position size. It's a lazy approach. It could be more efficient. We go into this in our training, but to give you the back of the envelope version. If you're starting out, increase your number of positions, and then as a percentage of your overall account. Usually I'm gonna go for a half percentage which will give you a dollar amount, then work out your position size as your personal risk.
[36:30]Sean: That's very cool. I could also take it and twist it around. My average position size is 1%. It allows me to break up my portfolio. One thing I do, I have a couple of strategies that are very high probability strategies that are very much based on particular environments. If you want to use a scale of 0-100, these are the 1% hands I might like to play.
[37:33]Phil: They don't happen frequently. Once a month, once a quarter.
[37:51]Sean: I'll find one a week. And then I'll scale up and go from 1% to 5% because I know that's a really good trade. 1% or do I do 5%? What's my remaining checkboxes? Okay are they all checked? 5%. That is a big position, or a larger position, but if I have a much higher percentage chance of being successful on that then boom, golden. I've got that foundation.
[38:27]Phil: Two takeaways that I heard there - add a strategy. If you've got one methodology to find, filter, and sort stocks, you can add a second. It can be a once and every now and again strategy. The other thing is increase your risk when you've got a higher probability trade. So if you've got a strategy that is higher probability, you can increase your per trade risk allowance.
[39:09]Sean: Dead on the bull. It's really a case of looking at it, additional confirmation is required because of the higher risk or that is a higher probability, but then I'm confident enough in that strategy and approach and returns over time, that even though I am doing a 5x of my usual position size, I can sleep at night because I have that confidence. But it only comes with laying that foundation.
[39:45]Phil: I like that. I always forget that side of things because I've always traded multiple strategies. I always forget that's a way you can start to scale it up. It's not always a case of increasing position size as a way to start scaling up, especially if you've got the small account. If you're trading one contract, then scaling up is not always a case of going from one contract to two contracts, because you've doubled position size. There's other ways of doing it when you've got stock options. There's lots of ways to increase your position size without having to increase your position size. You can start looking at different options strategy or strike selection which is what Sean was mentioning. That will increase the frequency of what you trade as well. Very good advice.
[40:58]Sean: It just shows the different ways we trade. So okay, the last question we will do today for time purposes is, I keep exiting trades and then getting back in because I feel there's more meat on the bone. However, sometimes I'm right, and sometimes I'm only a little bit right and still lose money. How can I fix this? I think this is a great one because it's something I used to do back in the day as well. I'd cap off my profits.
[41:32]Phil: Doing the hokey cokey with your trades. You put your left foot in... in, out, in, out, and suddenly you get shaken all about. It's one of those things we've all done. I think sometimes it's not a case of how do I do more of something, I think this question's more how can I do less of something? I personally set a target. I'm in a trade. When my position sets up, I always set a target and I'm out. There may be more meat on the bone and I don't care about it.
[42:08]Sean: It's a discipline thing.
[42:11]Phil: If the trade sets up again, I will re-enter.
[42:15]Sean: That's exactly it.
[42:18]Phil: But that's just the way I do it. It's difficult because we all want the home run trade. Even to this day, I want it. But when you start to trade more frequently, you reduce your position size, and as I keep saying with this farming analogy, farming vs hunting. If you've only got one position on and you're hunting for that wild boar to feed the family, if you don't spear the boar, you're completely and emotionally invested in that working out, and then you start to think I'll let it right. You get greedy. You want to kind of re-enter. You start looking for more opportunity than is available. Whereas you've got the farming mentality and you're planting fields, you're planting crops, you're not so concerned about that one position having more in it because you've got a portfolio. You've got a field to manage. I'm always setting a target. When it gets to that target, I am out. If it sets up again, it will come back on my radar. But I've got a portfolio to look after and the farmer is not worried about one plant working out.
[43:47]Sean: It's like going for the boar when you've got a field full of rabbits.
[43:50]Phil: Yeah. It's just unnecessary. So how can you fix that? It's the same suggestions we've given many times. Reduce your position size and trade more frequently. It's counter-intuitive. And always set a target. When it gets there, get out. Jog on. Look for the next one.
[44:09]Sean: Now there's one other angle, if you think there's more meat on the bone and you want to capture that upside before you exit a trade, take off half your position. Take some chips off the table. Leave a little bit on if you want to. If you really feel there could be a little bit. But generally, set a target and who cares is there's more meat on the bone. Take it off the table and put it on where you've got a higher probability of a better setup, rather than a continuation. At the end of the day, more opportunities, more fish in the sea.
[44:51]Phil: Just blending of the two there, you could set a second target. If it blows past the first one, it allows you that flexibility to say there's more meat on the bone here. Let's do a trailing stop to the second target or take half off and run it to the second. That gives you the flexibility to get the best of both.
[45:22]Sean: A couple of different perspectives of similar things.
[45:24]Phil: You're making me think this week, Sean. I'm not liking this. I don't like to think.
[45:28]Sean: I was wondering what that sound of grinding gears and smoke was coming from. So okay, with that being said, let's rock on.
[00:45:38] Bulls**t of the Week
[46:05]Sean: Okay, Bullshit of the Week. This one is a little bit of a head-scratcher. I'm not sure how I feel about this one. There has been a story about market manipulation and an alleged whistleblower. They're saying that the fear gauge, the VIX, is being manipulated by the markets with what they're calling painting the tape. In other words, they are posting but not executing certain trades. I think we have talked about this before in one of the earliest podcasts. They're basically talking about how the fear gauge is being rigged and they're doing this position placing but not executing and it changes the volatility and as they call it, painting the tape in a certain way, because it's being reported but not actually executed to create that manipulation. And then they're also talking about how the XIV because of this "manipulation", and here's why I call it "manipulation". The SEC and the CFTC, if they saw an tracked a lot of this painting of the tape, they'd be all over it like a rash. The amount of money you have to virtually throw out there to paint the tape on something as liquid as the VIX...
[48:16]Phil: I know what you're saying, it's old news. When I saw it's old news, it isn't new news. The guy you're talking about was anonymous. Tell me something I don't know. People paint the tape all the time, but you're right, to do it on something as liquid as the VIX, you need deep pockets and lots of money, but it's not illegal to place orders in the markets. For that reason, that's why the SEC is not over it like a rash as far as I'm concerned because there's nothing technically wrong. Is it immoral? Yes, it's manipulating the markets, but it's within the confines of what you can do. If you're gonna prevent people from putting orders in the markets, and then canceling those orders, if that act becomes illegal, then the markets will stop working. Complete bullshit news. Painting the tape, it happens all the time in penny stocks, they call them pump and dumps. Surprisingly, it's happened in cryptocurrencies to drive prices up. They're basically swapping prices back and forth, painting the tape, and it's driving the prices up and there's no substance behind it. It's old news as far as I'm concerned. If there's any substance behind this, the guy would be called a whistle blower and his name would be there, the FBI would have him somewhere and they'd have a big list of the people doing it, doors being kicked in all over the place. But there ain't. So, it's probably just a slow news day.
[49:48]Sean: The fact that they're saying this is being entered but not executed...
[50:01]Phil: I can paint the tape right now. I can put an order in and cancel it. Technically, I'm doing exactly the same thing. You can't make it illegal. This is what makes it bullshit. It's complete and utter nonsense. Nothing can be done about it. It's just a scam-mongering piece of slow news item.
[50:18]Sean: So there you go, that is the BS of the Week and with that being said, that is the end of this week's show. A little bit of conversation corner here. We're having a virtual pint across the ocean and it was an interesting show - some stuff to think about. Some different angles, some different aspects, and that's what we do. And with that being said, that's it for this week's show, this unscripted podcast. So Phil, any last words?
[51:07]Phil: I have to agree. The sun is over the yardarm and a glass of the short stuff is certainly in my hand. It's been quite an interesting show simply from the point of little snippets we tend to overlook sometimes, we've managed to squeeze out of us this week. Lots of insightful information.
[51:33]Sean: Cool. And if you enjoyed the show, guys, ladies and gentlemen, go tohttps://richardgrannon.wpengine.com/rebeltraders/, where you can leave us a five-star review because this really helps us, it encourages us and leave us your opinion. Review us on your favorite way to hear us and as I said, that helps us reach more traders and investors just like you.
[51:49]Phil: Absolutely. If you also want to get to us on the social media things, the Facebook or the Twitter Machine, you contact us at the same link,https://richardgrannon.wpengine.com/rebeltraders/. I think you can also get access to the universe of stocks list and we'll get that over to you as well. So Sean, what have we got in next week's show?
[52:15]Sean: We're gonna be talking about Freudian trading. This is a little bit of what we touched on earlier on, it's the psychology of trading - the different pressures and mindsets that can dramatically affect your trading success. We're going to talk about different biases.
[52:32]Phil: Good. For a moment, Sean, I thought you were gonna ask me about my mother.
[52:38]Sean: Well, if you want to lie down on the couch and tell me all about it...
[52:41]Phil: Wasn't Freud into all that other stuff?
[52:43]Sean: Yeah, well he's a little weird in that regard, but we're gonna talk more about the psychology, not the tell me about your mother, and for Mrs. Newton, who's listening, it's okay. I won't put him on the couch and we won't be talking about anything weird.
[53:00]Phil: I think her knee jerk reaction would be she's fine and I ain't dead yet.
[53:10]Sean: Awesome stuff. Terry Pratchett references we'll throw into every show. It's like that hidden Easter egg. With that being said, ladies and gentlemen, we're gonna rock on out of here. Take care and we'll see you all next week.
[53:20]Phil: Bye for now.