Get Comfortable With Losing | Podcast Episode #504

0:00
Hey everybody, this is Ryan Mallory with shareplanner.com’s Swing Trading the Stock Market in today’s episode promises to be a good one. I don’t have an e-mail that I want to use for today. Instead, and I tend to do this a little bit, I’ll I’ll veer off of the emails and address a topic that I think could be beneficial to you all listening.

0:18
So that’s what I’m doing here today. I’m going to be talking about getting comfortable with losing. Now, when it comes to trading, nobody likes to lose. Everybody wants to win. In fact, if you go to different websites that are selling a service that will often tell you only about their winning. They don’t say, hey, we’re going to make you comfortable with losing.

0:36
That’s just simply not how marketing works. Get comfortable with losing. But if you’re going to be a successful trader, you have to be comfortable with losing. And so that’s the topic of today’s episode. A lot of these topics that I will come up with that I when I, when I don’t do an e-mail is largely because of something I come up with in the shower or honestly, it’s like driving in a car.

1:00
One of the things that I’ve done of late or probably like over the last year, I don’t put the Radio One in the car. I don’t listen to podcast. I know, I mean, the only one, if I wasn’t myself, I would be listening to this podcast, obviously in the car. But outside of that, I, I, I don’t listen to anything because it allows my mind time to think.

1:20
I started thinking to myself about a year ago how much I actually think of things up in the shower. And I was like, why is that? And it’s largely because my mind’s like free to think. It doesn’t have any like thing plugged into my ears. I don’t have like, you know, music that I’m singing along with in the car.

1:37
So I so I did that. I got rid of all this, all the noise in the car and I don’t drive much. I mean, I’m, I’m pretty much a home body, but but none the less, this was something that came up here just recently. And often times too, I will take walks in the morning before I trade and before the market opens.

1:55
And that’s something that I’ve actually come around to enjoying quite a bit and look forward to each one. I actually feel off if I’m not getting a little bit of nature. And just recently I’ve moved over to my, my family and I have that is moved, moved into some acreage and just really love being outside.

2:11
It’s, it’s a, it’s crazy because I’ve lost like 25 lbs since moving and I’ve not been on a diet or anything. It’s been good. I think I went from like 225 down to like 199. So I guess technically like 26 lbs, but much needed.

2:27
But I think a lot of it is just, I was living more of a sedentary lifestyle in the, in the subdivisions where they basically restrict everything that you can do. Like you can only think the way the HOA wants you to think and and so forth. But but that’s been really good and how does all that tied in trading well before we get into comfortable of losing it does it does play a large role in it because it does refresh the mind.

2:48
It gives you some sunlight and sunlight scientifically proven to actually be a very good thing for you and just allows you to touch a little bit from the market and realize that there’s a world outside of the stock market. We get so engrossed and it’s not getting any better because the NASDAQ just filed with the SEC the, the ability to trade 24, I guess, 23, five, right, 23 hours a day, five days a week, which is like the last thing we really need, but we pretty much are already there anyways.

3:17
However, that’s what they want. So it’s going to become even more important to get outside, stop, smell the roses a little bit and just be able to detach yourself from the market. So any case, all these all, all of all of me saying that is, is to say, Hey, be comfortable with losing that, you know, my walks, my my showers and all that stuff.

3:40
The times where I’m free to think and I don’t have anything plugging into my ears. I is usually where I come up with some of these one off topics for the podcast. So be comfortable losing and that that is a person who can’t take a loss is a losing trader thing about that person who can’t take a loss is an absolute losing trader.

4:01
I’ve never met a person who can cannot take a loss and is a winning trader. And it sounds weird because you’re like, well, he’s not taking losses. No, you may not be taking losses, but he’s got a lot of losses in the portfolio. You know, he might not be making it official, but he has got an absolute ton of losers likely in his portfolio.

4:18
And a lot of that comes down to they’re not willing to manage the risk. If you’re not managing the risk, you’re not taking losers. If you’re not taking losers, you’re not comfortable with losing. If you’re not comfortable with losing, you’re not a winning trader. The other aspect of that is there’s an inflated ego aspect to it too.

4:36
If you’re, if you, if your ego is such that you can’t harbor a loss, the stock market is not the place for you because the stock market will eat you alive and it will destroy your capital. You have to be able to take losses so you don’t blow up your portfolio because it’s when you stop taking losses that you start seeing your, your, your, your biggest losses.

4:57
Does that make sense? Your biggest losers will come from not taking a loss. And that’s one of the reasons why I’ve been able to avoid big losses over over the years is just because I, I stop it before it ever gets out of hand.

5:12
That doesn’t mean that I haven’t had some. My biggest loss this year was Applied Materials. Amati lost 7% on it. Why? Because it got below my stop loss. But I still manage the risk the best that I could. I that was my biggest loss. I think it was like my biggest loss in a few years, but I took the loss and I moved on to the next trade and I’ve more than made-up for that.

5:32
But you have to be willing to take those losses. You can’t. That would, that would have been actually a really good trade scenario for me to say, oh crap, a gap down below my stop loss. I’m going to try to get it back as close to my stop loss as possible. And then when it gets there, you feel like, oh, it’s going to keep going and then all of a sudden it takes the next leg down and you and you get wiped out.

5:50
That would have been a great scenario where I could have taken a much heavier loss as a result. But because I managed the loss, because I managed my trade and I managed the risk, I I avoid taking these huge, huge losses that are portfolio defining.

6:08
So like I said, the person who can’t take a loss is a losing trader. Why? Because he has no risk management. Two, he has an inflated ego. And then I also had a question. I’m pulling it up right here on Spotify on my last podcast episode where a person asked me, what if you were building a position in a quality large cap stock and it goes down.

6:25
You say don’t buy it when it goes down. Question mark. Yeah, so two different strategies. What my my next comment was going to be a person who cannot take a loss is a losing trader. The next point for that was going to be he also double S down. Now doubling down and and building a position are two different things.

6:44
Long term, you’re building a position you’re, you don’t mind it going down because you’re saying, OK, you know, if I have a portfolio with, you know, $100,000 and I’m going to commit $10,000 to this long term investment, I may start off with $500 in the stock.

7:00
And over the next six months I’m going to try to, you know, or maybe not even six months, maybe it’s over the next few weeks. I’m just going to, you know, every couple days I’m going to add another $500 to it until I get to that $10,000 position. That’s different from Oh my, I’m down on this trade, let’s say Applied Materials.

7:15
I’m down on this trade, I’m down 7%. That is way bigger of a loss than I expected to take. It’s gapping back down below my stop loss. I’m going to double down, cut my losses in half from a percentage standpoint in hopes that it goes back up and I can essentially get out at a much lower price and perhaps at break even.

7:36
When people do that and they do it consistently enough, they’re going to take heavy, heavy losses long term. So like I said, when it comes to losing, be comfortable with it. I know, and I’m repeating myself quite a bit, but I want it. I want the point to get hammered home, and here is a great way to give in.

7:58
In terms of an illustration, you’re going to lose at least as much as Steph Curry hits his NBA threes. OK, You’re going to lose at the same rate that Steph Curry makes a three pointer. And that kind of sounds horrific because Steph Curry hits a lot of three pointers, but but he also hits them at about a 4040 to 42% clip career wise.

8:24
You have to be willing to lose that much. A person who’s winning 60% of the time in his trades is going to be a phenomenal trader, assuming that the, the risk management is there and he’s not like, you know, you know, losing, losing $10.00 for every $1.00 that he makes. If the risk management’s there and, and the profits are there on his winning trades, he’s going to have a really good trading career with a 60% win win rate.

8:51
So what does that mean? If you’re winning 60% of the time, you’re winning a lot, but you’re also losing 40% of the time. That means 4 out of 10 trades are going to wind up being losers. That means you’re going to have losing streaks at times. You’re going to have think about Steph Curry.

9:06
We’ve seen him go off and he’ll hit 63 pointers in a row. He’s still, you know, a 40% free throw or three-point shooter, which is phenomenal, but he still will hit five or six in a row. And if you flip that over from a trading standpoint, from a losing trading standpoint, that is you’re talking about, you know, some, some losses that are starting to get uncomfortable when you’ve lost that many trades in a row.

9:30
So one, you’re going to have losing streaks, you better get comfortable with losing streaks because that’s going to happen too. You’re going to have times where it feels like the market’s picking on you and just like singling you out in those losing streaks. You’re going to have times where you get in and out of stock at $100, you get stopped out at $95 and the lowest that stock goes is 9499 and it shoots right back up to 105.

9:54
And then you’re going to start doubting your your strategy. And then that’s where you become uncomfortable with losing. You can’t handle the losing anymore. And then all of a sudden there’s no risk management. Your ego has been beaten up and bruised and so now you’re trying to protect your ego and not your your trading profits.

10:14
You start doubling down, not from a long term standpoint where you’re building a position, but from a swing trading standpoint where you’re just trying to get out of losses. And so the moment you become uncomfortable with losing, you become unhinged as a trader. You’re not going to manage the risk like you should.

10:30
Now your winning percentage at best will be like Shaquille O’Neal at the free throw line. That’s actually kind of terrifying because as an Orlando Magic fan, and I still am, I, I think we have a decent chance at making a good run in the playoffs, maybe to the finals, maybe give that elusive championship that this, that the town of Orlando has never won before.

10:53
But nonetheless, growing up in the 90s, I remember watching Shaquille O’Neal play and I would, my brother would take me to some of the games that was, it was awesome memories, right? Even went to their first playoff game against the Indiana Pacers.

11:09
That was fun. I remember that one vividly. We were up in the nosebleeds. But boy, that, that was amazing. But any case, Shaquille O’Neal was a horrendous free throw shooter. But if you can have winning trades at the same clip that Shaquille O’Neal hits his free throws, you’re going to be a dadgum good trader, a really good one.

11:29
So let’s say you’re hitting like 5758% of your free throws or your trades like what Shaq did as a free throw shooter, you’re going to have some pretty good success. Again, assuming that you’re managing the risk and and so forth. Now what you have to remember that risk management is important because if you’re not comfortable with losing, that risk management aspect on your losing trades is going to unravel and you’re going to, you’ll probably have a higher winning rate because you’ll have no problem taking a lot of win wins.

11:58
They’ll probably be smaller wins, but you’ll have no problem taking them. And because your ego will be, you know, beaten up and everything, you’ll get like a 2% gain. You’re like, I’m out, I’m out. You’ll you’ll do it every time. You’ll never let a stock run to its full potential. Now, if your win percentage was the most important part and it’s not, that’s why we have to be comfortable with losing because it’s not the most important part.

12:19
Whether you win or lose on a trade, it’s about how much you’re winning relative to how much you’re losing. So if it was only about the win rate, then what would we do? What we would get in the stock ABC at $100 and sell it at $100.02.

12:35
And we just keep repeating that every time. Every time we get up to cents on the trade per share, we’re out. And you just keep doing that thousands upon thousands of times. Why does that not really work? It’s because when you have that one losing trade, it’s not going to be 2 pennies, it’s going to be 100 pennies or 200 pennies.

12:53
And so one loss is catastrophic to that kind of trading strategy. So it’s not about just the win rate, it’s about how you’re winning and how much you’re winning relative to how you’re losing and how much you’re losing. And then that’s where the win rate, when you know those two numbers, your win rate is the basically the multiplier.

13:12
Now, one of the other things that would tell you about is the self-made trader. This is my training course. This is something I took about four years to make, going all the way back to about 2021. I was developing this course. I, I started it over, then restarted again because I wanted to make it right. It’s over 25 hours of instructional videos with me where I’m teaching you everything that I know.

13:32
It’s over 100 different lessons taking you from the very beginning basic of trading and, and and getting you set up in that manner all the way through my advanced strategies. It’s not an easy course. It’s a lot of work. There’s a lot of information that you’re going to have to consume, but it’s a really good course and would highly recommend anybody check that out.

13:50
Go to shareplanner.com, click on trading Academy and you can get all the information right there. So let’s talk a little bit more about the three-point shooters. OK, we, we talked about Steph Curry just being a phenomenal 1. You got to be as comfortable with losing at the same frequency as he is with the the amount of threes that he makes and he makes him at about a 40 to 42% clip.

14:19
But let’s talk about some of the other 3 point shooters like Trey Young. Trey Young, for those who don’t know, he plays for the Hawks. I think he’s extremely overrated. I don’t think he’s all that great at all, especially from a team standpoint. Now, if you’re at La fitness and and you’re playing pickup ball, get him all day.

14:38
You may not, you know, ever touch the ball and shoot it, but you know, you, you guys probably will win and it’ll probably be fun and exciting. But from an NBA standpoint, I think he’s horribly overrated. And one of the reasons why is he doesn’t, even though he’s regarded as this like sharpshooter 3 point guy, he doesn’t connect hardly at all.

14:58
He I think he’s like at a 33% rate and I think career wise he’s like 34 or 35%. He’s not that good at all, not from not for what kind of money that he makes. Now am I going to be able to go out there and hit it, hit it at no, I, I probably can’t even hit it at a 10% rate. But from ANBA standpoint, and they’re considering the amount of money that he gets paid, he probably should be up there with like Steph Curry in terms of like being somewhere between like 38 to 42%.

15:22
But his his approach to three-point shooting is a lot like a lot of traders. He goes across half court and he’s immediately thinking, can I shoot the ball here? He’ll shoot it literally from half court. And the worst thing that can happen for an Atlanta Hawks fan is for him to actually make it, because that means he’s just going to do it 25 more times down the road because he’s going to have made it that one time.

15:45
And it’s like trading where you, you take this crazy risk and what do you think’s going to happen if it pays off? It’s one, it’s the worst thing that could possibly happen for that kind of a trade to play off. Let’s say you get into a penny stock, probably new volume, and they happen to get a news release the next day and you make some bank off of it.

16:02
That’s the worst thing that could have happened to you because you’re going to have the confidence to do it again and again and again. There’s one reason why I don’t break my risk management rules is because I don’t trust myself not to do it again and again and again. Because it’s human nature to think that because it worked one time, it’s going to continue to work thereafter.

16:22
So I don’t make any exceptions. Sometimes I feel stupid about getting out and and honoring my stop losses because I know based off of when I got stopped out and what the markets doing, it’s only a matter of time before that stock comes right back up. But if that’s the case, I can always get back in it as a new trade setup.

16:37
But what I can’t afford to do is take a bigger loss on that individual trade because it creates bad practices. And so like Trey Young and he goes across the court and he makes a long 3 pointer, he’s going to probably shoot 25 more of those, but that doesn’t make him good. You know, it it’ll be flashy, it’ll it’ll definitely, you know, make the SportsCenter top ten.

16:59
But does that necessarily make him a good three-point shooter or no? And it’s the same thing with trading there. There’ll be people out there and they’ll say, hey, look at these calls that I made. Look at this one. Look at the, you know me on CNBC, you know, buying this stock, but they failed to mention all the other stocks that did not play out well for them.

17:17
And so you want to be more of this, this journeyman 3 pointer and I don’t he doesn’t play anymore. I mean, I don’t remember when he retired, but Kyle Korver, that dude was money in the bag. He was there was there was seasons. No, let’s back up.

17:34
I I was just thinking of another one. John Barry. He was good. I think it was actually a dunk contest champion at one point too. But some of these guys, they could almost converted their their three pointers at like a 50% clip, like they didn’t take a ton of shots, but when they did, they were usually wide open.

17:53
They hit the threes and they didn’t force shots. And I think that’s so true about trading one of the things that we can do. I know we were talking earlier about 3 point shooting, you know, from a from a losing standpoint, but think about it from a winning standpoint too. If we can be like the John Barry’s in the Kyle Korvers and remember Robert Ori, that guy, that guy was good too.

18:13
I mean, he was clutch as well. But those guys, JJ Reddick, they consistently made their threes. They they didn’t necessarily for maybe JJ Reddick to a certain degree did for some shots, but by and large, he was still pretty good. But like the John Barry’s and the Kyle Korvers, they knew their role.

18:29
They waited for those open shots. They took them. If it wasn’t there, they passed it. And but they converted at an incredible clip. And so in our trading, we want to be more like the Kyle Korvers, the John Barry’s. I know if some of you guys don’t even know who the heck I’m talking about when I say John Barry, maybe you do with Kyle Korver.

18:46
But look at their highlights that I mean, you’ll see they’re pretty much the same player. But yeah, be like them. Don’t be like Trey Young, don’t be like James Harden. Those are like 2 guys that would never won on my team because they’re they’re 3 point shooting. Yes, they make a lot of threes, but they miss a ton at far too high of a clip.

19:06
Now Steph Curry, yeah, he misses more threes than he makes, but at 42% you’ll take that all day. But but there’s a fine line though and three-point shooting between 42 and you go start going down to these guys, they’re only converting 1/3 that There’s a big difference in that.

19:21
I don’t want the people who are only making a third. And so in our trading, we have to make sure one way to not do that is don’t. Don’t heave half court shots. Don’t go after these penny stocks or high risk plays that you’re taking 2030% risk on. Go for the ones that are going to give you a better, better, be more consistent return.

19:38
That’s what you want and you’re trading. So what does this all come down to? For one, you have to be diligent in your risk management. You have to be comfortable with losing. You’re going to lose at least as much as Steph Curry makes his three pointers and if you can win as much as Shaquille O’Neal makes a a free throw, you’re going to be doing OK.

19:58
Assuming that you’re being ardent managers of risk that you’re making sure that you’re winning trades are far outpacing your losing trades and you do that pretty sure that you’ll be a pretty good trader for yourself. If you enjoyed this podcast episode, and I hope that you did, be sure to like and subscribe.

20:16
If you’re listening to me on YouTube, also make sure. 2 leave me a five star review on whatever podcast platform you’re listening to me on. Those do help me out and I appreciate it greatly. Check out the self-made trader on shareplanner.com. If you buy the course, you’re definitely supporting the podcast in the process.

20:35
And remember this and especially during the Christmas season, it’s so important. What is the profit of man if he gains the whole world but loses his own soul? Trading, winning at trading, it’s great, but don’t lose sight of the plan of salvation that God has for you through his Son Jesus Christ.

20:52
Thank you and God bless. Thanks for listening to my podcast, Swing Trading the Stock Market. I’d like to encourage you to join me in the SharePlanner Trading Block where I navigate the stock market each day with traders from around the world. With your membership, you will get a seven day trial and access to my trading room, including alerts via text, e-mail and WhatsApp.

21:12
So go ahead, sign up by going to www.shareplanner.com/trading-block. That’s www.shareplanner.com/trading-block and follow me on SharePlanner’s, Twitter, Instagram and Facebook where I provide unique market and trading information every day. If you have any questions, please feel free to e-mail me at ryan@shareplanner.com.

21:33
All the best to you and I look forward to trading with you soon.