Developing Your Trading Edge | Podcast Episode #51

0:07
Learn to trade, stocks successfully, learn to profit consistently. I’m Ryan Mallory. And on my weekly podcast, I’m going to teach you the in and out of a complex ever-changing stock market. You will learn to trade better trait, smarter and profit bigger.

0:26
Now let’s go trade. Hi, this is Ryan Mallory for swing trading the stock market and today I’m talking about developing your trading Edge. Now, where did I come up with this topic? Well, Twitter is a great tool. I get people all the time. They’ll listen to my podcast and they’ll say hey can you do one on such-and-such? Can you do it on this? Can you do one on risk management? Can you do one on profit-taking? I had somebody this week asked me, can I do it on developing your trading Edge? And I think that’s a pretty good one. And by the way, if you guys have a topic that you want me to do, either email me or the best. One is just a through Twitter. Just say, hey, Hey, Ryan. Do you want on this? And I’ll do it. If I have any knowledge and I’ll definitely do it. I mean, I’m always looking for new ideas, to be able to bring to you and because sometimes I feel like I talk about maybe some of the same things and I don’t want to do that. So I always want my topics to be fresh. I wanted to be Evergreen. I want it to be something that you can 10 years from now, go back and listen to It’s like, man. This is really helping me. So that’s the goal of Swing trading the stock market. So, today I’m going to talk about developing your trading Edge and what does that entail? So, I’m going to go through seven steps here, how I develop a trading Edge or how you can develop a trading Edge, because I actually already have a trading Edge.

1:36
That’s what I do in the swing trading Splash Zone every day, Monday through Friday, providing you with my swing trades, the alerts, all that good stuff. How’d you like that for a plug? That was kind of a good plug and I just kind of naturally segue into my my service but that’s really not what I’m trying to do with this podcast. Pockets is actually to get you to learn more as traders to become better Traders and And to succeed more as Traders. So the first step to developing your trading Edge is to determine what you’re going to be trading. Are you going to be doing for X? Are you going to be God, forbid Bitcoin.

2:10
I know people are actually making money off a Bitcoin tonight. You know with when it comes to bitcoin I’m not actually all that against it. I just hate the fact that it’s so heavily inundated by the crowd like people who have never traded anything in their life, their Bitcoin experts there, Bitcoin mining, or they’ve been holding since Ten thousand dollars and getting all excited about a move from 3,000 to six or seven thousand.

2:33
So actually think the the Bitcoin chart is pretty responsive. Technically, it follows, technical patterns, really good. When a couple of years ago when it was that, what 20,000 a year and a half ago, when I was at 20,000, I actually told people it was going down to 5,000 and kind of to my surprise to it, literally went straight down to 5,000.

2:51
I was kind of Pumped about that because rarely does such a bold prediction play out that well, and it did, it was like, big time. So yeah, without getting too sidetracked, here, you can trade Bitcoins, you can sedate crypto, you can trade, Forex, you can trade options, you can trade, equities.

3:11
You can there’s a whole host of things that you can trade. So for me, I trade equities. I trade stocks. I don’t use options. I don’t do any kind of other derivatives. I just buy and sell stocks. That’s my trading Edge. The Next Step you’re going to need to figure out is what?

3:28
Time frame. Are you going to trade? How are you going to determine entries? Are you going to go off of intraday moves? Are you going to determine exits by entry by five minute 30 minute charts or by a daily chart? Are you going to be generally deciding whether a stock is a good long setup or a short set up based off of a daily chart.

3:48
So, I’ll tell you what I do. I base my entries off of my intraday movements and combination of the daily chart, as well. But if a stocks up 10% and even if it sets up really well on the daily, Art, I’m not going to go buy it because I feel like that that stocks kind of exasperated it’s move for the day or at least at the risk-reward isn’t necessarily in my favor and that a bigger pool that could be had at that moment.

4:07
So entries, I’m going to base it off of a combination of the daily and the 5-minute chart or 30 minute chart exits. Those are just typically, I’m raising up my stop losses and I like to be stopped out of my winning positions.

4:23
Ultimately, I like the right of trend, as high as it can go. Sometimes that means the stock Only goes up 3% and pulls back and I take a one and a half percent profit, that’s fine. But sometimes it actually means that it goes up. 15% and it pulls back and I take a twelve percent profit so I don’t necessarily try to get out at the top.

4:39
I just try to get the chunk of the stocks move. Now, another part of trading and I think a lot of people overlook this is what actually dictates the times when you’re not going to be trading because that’s a huge part of trading. Like, when are you not going to trade because Knowing when not to trade is just if not more important than knowing when to trade.

4:59
So you have to know. Okay. Is that low volume conditions or is it a bear Market or when the stocks are trading below, the 200-day, moving average or trading a above the 50-day moving at? Well, I mean, what’s going to be the reason for why you’re not trading? And I’m not saying that, there’s like a perfect equation for knowing when to trade versus when not to trade for me.

5:19
It happens to be a lot about Market action. I’d pass up on a lot of good trade setups, basically, because of what the price action on, the current date is all about and whether or not there’s a strong certainty, the future price movement in the direction that it might take, like, take today. For instance, I don’t have a good strong feeling about this Market either way and so I don’t want to add more positions even though there’s good trade setups, be had out there.

5:42
I don’t want to add more trade setups to my portfolio, more exposure to the long side. If I don’t have a huge level of confidence about this, Where it wants to go the next day or even into the clothes. Next one is risk management. We all think about profits, and making money in the stock market.

6:01
Has been our primary goal, but it shouldn’t be. It should be risk management. How are you going to manage the risk? Because you’re going to have bad trades and you’re gonna have a lot of them, you’re gonna have trades that do not go right for you. I’m only write about 58 to 60 percent of the time and that’s really good. But guess what that means, that means I’m wrong 40 to 42 percent of the time.

6:18
So I have to decide for myself. How am I going to manage the risk on the 42? 42 percent? How I manage the risk doesn’t just pertain to? My losing trades far from it, pertains to every single trade that I make. Because a lot of times, the reason why I have winning trades is because I manage the risk on my winning trades. Managing risk isn’t about just when the stock goes red.

6:36
It isn’t about when the stock decides to go against you, it’s about managing the profits to managing the risk on your profits. Not just on your losing trades, but on your winning trades to. So you have to decide that. How am I going to manage my risk? I know exactly how much I’m willing to risk on every trade.

6:53
I don’t like this. Go beyond about, for Sent on a stop loss from where I’m getting in it and on average, I’m usually only about two to three percent on my losing trades. And I also don’t like a stock to be up 5 or 6% on me and watch it go, red. I just not going to let a winning trade, if I can help it at all.

7:11
I’m not going to let no matter how bullish I am on a stock. I’m not going to let us talk this up for five percent or even six percent reverse on me. And then I’m just going to bag, hold it, until it goes back instead of red. Because guess what, there’s always another trade out there. You don’t have to just hold through something because You have this undying belief that this stock is going to be your like Savior and take you to some kind of Promised Land because it’s not, there’s another trade out there.

7:32
There’s another trade right now that I can have, I can name a whole bunch of them off of it to you. There’s Twitter, there’s Coca-Cola, there’s plenty of them right now and I’m not buying them because I’m going to manage the risk of my portfolio. And then the next step number five is going to be profit-taking.

7:47
How are you going to determine when to take profits. I use a number of methods for that if it’s a market that’s very unpredictable and it’s very difficult to get any Significant amount of Trades, either to the long side or short side. Then I’m going to be a little bit more aggressive and profit-taking. If I see a stock that’s really hitting it set up against some serious resistance in.

8:04
Probably going to take my profits there. I’m not risk a huge, pull back their profit can taking can be. Used you up Bollinger Bands with stocks creep outside of an upper Bollinger band. There’s a lot of ways, but this is something that you have to decide for yourself. What am I going to take profits? Position sizing, are you going to go 20% for trade?

8:21
10% portrayed? I really recommend based on what just my own experience. What’s worked for me to keep all your position size is the same. I know that some people like to go big because they have this huge conviction about a sock. I don’t have a conviction about any stock I trait, I just don’t, I don’t trust stocks.

8:38
I don’t have a conviction about them. I don’t like stocks in the sense that I’m not going to like believe in them. A lot of people believe in Tesla, they believe in like Square. Are they believe in apple? I don’t believe in any of them. I feel like stocks are destined to let you down. If you if you believe in them, if you believe in their story, that doesn’t mean that if you bought Microsoft 30 years ago, that you’re not a much better person today.

9:00
But in general, for every Microsoft you have a crap load of stocks that are going to disappoint you over time. So you have to decide for yourself. How much are you going to dedicate to each trade again? I think it’s always best to make every position size the same. So if you want 20 positions in your portfolio at a time, then you’re probably going to have to Dedicate no more than 5% portrayed to them.

9:20
Then finally, are you going to go all in at once? Or you going to Stage your position where you’re going to go in just a little bit at a time. Okay, I’m going to put 25% of my position on now. I’m going to wait for a pullback. Add 25% more. I’m gonna wait for it more, or if I can get more pull back.

9:37
I’m going to add another 25%. That’s one way. I’m not big on that idea. There’s the other one of waiting for the stock to make its move after you get initially let’s say you put in 25 or so. It originally and then you wait for it to go up one person, then you add another 25% and then if it goes up another 1% from there, you’re going to add another 25% and so on until you have a full position and then you kind of exit the stock, the same to, I really don’t think it makes a big difference in the long run that you’re really making that much more money or if any money at all.

10:05
I think sometimes you miss out on some really good opportunities. I personally don’t do any of that. I just get all in at once and I get all out at once. I don’t need to take half my profits. I don’t need to trim my position. I just get in and I get out because once again, I may get out in the stock may keep going up.

10:25
Oh well, that happens. There’s another trade out there though and I will take advantage of it. So, in any case these, these are just some of my thoughts on developing your trading Edge. Is this every variable that goes into it? No, I was writing these down on what I thought was some of the key parts of developing a good trading Edge.

10:41
You’re also gonna have to decide things like You’re charting platform. What kind of patterns you’re going to go after? I think I probably I should add that as one of them, is that what kind of technical patterns? Are you going to go after? What kind of are you going to be more of a fundamental Trader? You going to be going through their balance sheet, technical versus fundamental or a blend of the two.

10:58
Now, I’m a pure technical Trader but at times I do pay attention to the macro events. Like, for instance, right now, Apple kind of staying away from Apple because there is a macro flash, fundamental news story out there about China and the possibility that they’re going to get hammered by the Terrace.

11:15
Not trading Ali. Baba right now because I’m a A little bit leery of them being a Chinese stock and the effect that Chinese that the terrorists that the United States are imposing on China. Could have on a stock like Ali. Baba, even though you wouldn’t think that there would be a much exposure, it could just be a Guilty By Association so I’ve been trying to stay away from that kind of a company.

11:36
So yeah, there’s there’s definitely that. I also avoid the fundamental earnings reports, right? That’s a big fundamental news piece, earnings reports, I will not hold a stock, no matter how technically, Great. It is, I’m not holding it through a earnings report because there’s been far too many. Good technical patterns on charts that just get destroyed by like 20, 25 30 percent because of earnings season, it’s just a huge Pitfall to avoid.

11:55
So that’s another 12 G’s. I’m just adding them on here. I had seven of them written down. And as I’m talking, I’m just creating more bullet points for you to consider, but what are you not going to trade? It goes back to the third point of what dictates a note. Trick, I don’t trade through earnings season, I’m going to sell any stock, that’s getting ready to report earnings. The next day, I just will not hold through an earnings report.

12:14
So, the day before I’m out of there, or if it’s reporting in the afternoon, I’ll get out before the market closes that day, but you have to get out, it’s just not worth pointing. I don’t trade biotechs, I’ll trade IB B, which is the biotech ETF that encompasses all the biotechs or the big large ones at least. But I’m not going to trade individual. Once, there’s too much bad news that can happen overnight and just crush your position or your holding.

12:34
So So I don’t touch those either and for good reason, I really don’t want to be down 50% one day because of some company didn’t get FDA approval and I don’t want to do the research and figure out what stocks have potential hazards. Because and biotechs, they all seem like they have some and it always seems like at some point or the other, whether your Johnson & Johnson, Burke Eli, Lilly, or your some penny stock garbage. That that’s just trying to get us first FDA approval or the rumor of one. They’re all going to have some really bad days out there, so I try to avoid the biotechs.

12:58
So that’s going to do it for today. If you guys have any questions, feel free to email me. ryan@shareplanner.com we try out the Splash Zone. It’s a pretty awesome place or some really good traders in there. I like to consider myself a pretty good Trader. I’ve been doing it since I was 11 years old and I kind of feel like it’s like walking and breathing.

13:33
I’ve been through just about every kind of bad Market condition. I’ve been through the NASDAQ.com bubble. I had, that was my first really big learning experience because that’s only like 18, 19 years old, at that time. So that was an eye-opener because I was just got done trading one of the most amazing bull markets ever and that really just knocked me off my feet there.

13:52
But again, I was a teenager at the time, so it was more of a learning experience than anything, but then 2008 came around the Great Recession and then you’ve had, you know, a little mini crises along the way or since then and a 10-year bull market. But nonetheless, I’m done pretty good through all of them. You know, I try to my goal is to profit every month.

14:09
No matter if it’s a bull market or bear Market, I feel like that I Have the ability to succeed every month that I trade. So if you have any questions, feel free again emailing Ryan. It’s your pointer and check out the SharePlanner swing trading Splash Zone. Thank you. God bless.

14:25
Thanks for listening to this week’s podcast of Swing trading with Ryan Mallory. I’d like to encourage you to join me in the SharePlanner Splash Zone where I navigate the financial markets every day with Traders from around the world. With your membership you’ll get a 7 day trial access to my reading room and text and email alerts.

14:45
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15:04
If you have any questions, please feel free to email me ryan@shareplanner.com or call the office at 32 15. 226, 733, all the best to you and God bless.