How to Analyze Trading Volume | Podcast Episode #519

0:02
Hey, I’m Ryan Mallory and this is my swing Trading the Stock Market podcast. I’m here to teach you how to trade in a complex, ever changing world of finance. Learn what it means to trade profitably and consistently, managing risk, avoiding the pitfalls of trading, and most importantly, letting those winners run wild.

0:19
You can succeed at the stock market, and I’m ready to show you how. Hey everybody, this is Ryan Mallory with shareplanner.com. Swing trading the stock market. In today’s episode, we are going to talk about applying volume patterns to your trading. So today’s e-mail comes from a guy.

0:36
It’s a pretty long e-mail and I like that because it does give me a lot of background, a lot of content to work with here and just a better understanding of the trader. And it comes from a person He’s been trading for about 3 years. He’s coming out of 1 field and into another and he’s just feels a little bit behind, you know, from, from what a lot of his peers and even people younger than him are currently at in their, their financial stage.

0:59
So he’s trying to close the gap with swing trading and and seeing if he can’t pull it off there. So like I usually do in these podcast episodes, I don’t use people’s real names. I use, I give them a good Florida redneck name. Why? Because I don’t think people really want their name out there on the entire Internet.

1:14
So I always just give them a good Florida redneck name. But why is it Florida redneck? Because I’m from Florida. I’m pretty much consider myself redneck, live out in the country and everything. It’s great. But yeah, so we give them Florida red nickname. So this, this writer to the show says, hey Ryan, I started listening to the podcast in the last three to six months.

1:34
If I can suggest a name, I would like to be called Cletus Mclee. You can finish that last name for me because he only actually gave me Mick dot dot dot. I like Cletus Mclee. It has a nice ring to it. So he says they I can finish it for him, which I did. He says, I’m 41 years old and I never thought ever thought about stock trading until a few years ago.

1:56
I honestly believe the Lord showed it to me as an act of His grace because I am not successful financially or not that successful financially. And here’s how I got there. I started doing ministry in my late 20s. I worked at a union gospel mission in my area sharing the gospel for about 5 years as a case worker for men, and then I transitioned to being the lead pastor for a small church plant in my hometown.

2:20
After about five years of the church plant, despite generous church members tripling our church savings, hardly anyone was attending. At the end, people were burnt out and people wanted to go different directions. I saw this coming for about a year.

2:35
Finally, I prayed about it, fasted and believed that the Lord wanted the church plan to end. When I shared this with others from the church and with the planting church pastor, everyone seemed to agree. I was secretly hoping that everyone would say no, let’s keep on going, but they didn’t.

2:52
Long story short, we gave all the money back to the church that planted us. We did our best to connect everyone to a different church and it was over. It was sad because I poured my heart and my soul into it and it didn’t work even though I tried my best.

3:08
It was a failure in one sense. We weren’t able to maintain a healthy, strong, growing church, but it was also a success in the sense that we did in fact find some individual or impact some individual lives even to this day. And lastly, the Lord taught me some valuable things about and through failing, which I learned again and trading.

3:30
During those 10 years of ministry, I also worked as a real estate agent because ministry didn’t pay that much money. Real estate has helped me provide a living for my wife and now my 5 kids, which I began ministry or when I began ministry, I was single with no kids. My wife stays at home and homeschools.

3:47
So I’m the main provider. My wife is amazing by the way. Exclamation mark. So if you’re his wife listening to this, he put an exclamation mark on there. Now, now that I’m not in ministry, it’s been two or three years, I have found that I am financially behind a lot of people my age and my area and even people younger than me.

4:08
When I was doing ministry, I really didn’t care because I knew I was it was a sacrifice for the Lord. But now that I am not doing paid ministry, it would be nice to be a little bit more financially successful if the Lord so wills. And so I am working towards that goal.

4:31
We currently live in a three bedroom 1 bath duplex with a family of seven and rent one side of that duplex out which helps out a lot. My long term goal is to use the investment capital that I have to slowly and potentially or patiently increase this overtime exponentially through swing trade.

4:49
I first started trading after opening Fidelity account to only trade Litecoin, something my brother told me about. In my first year trading in 2024, I turned $54,000 into about $100,000 mostly through Litecoin. I also made about $4000 trading NVIDIA and I broke even about 10 on 10 other stocks.

5:09
However, because I was following my brother’s advice, I didn’t sell my Litecoin profit and I ended up losing all that profit and went negative by about 10,000. After that, I determined I would follow my own strategy.

5:30
Last year I patiently turned 54,000 into 75,000 over the course of six months from about April to October. And I did this despite taking 10 to 20% losses in a single day or on a single trading day because I didn’t know about the stop losses and or not to hold through earnings.

5:46
I figured out the stop losses around October and have been utilizing it ever since. I just learned a couple weeks ago about not holding through earnings from you.

6:06
In October I calculated my all time return to be about 30% / 2 years and as a beginner I was happy. After October I bounced between 68 to 75,000. This was actively buying and selling swing trades.

6:23
I did this three times before dropping significantly down to 62,000. So he started after October moving between about 68 to 75 and then dropped down to 62,000.

6:40
I was over trading despite my indicators telling me sit on cash and wait but I didn’t. Part of the reason I didn’t is because I was afraid the stock was going to shoot up without me, which did happen.

6:59
Many times I would get stopped out only to find the stock shoot up past my stop and and pass my purchase price only to keep going.

7:15
Then I would back. I would buy back in, set my stop loss and then get stocked out. I did this over and over losing 100 to $300 here and there.

7:36
I ended up going from 65 or from 75,000 down to 62,000 in just three months, January to the beginning of April.

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I learned some valuable lessons through through that time, though I won’t detail all of them here.

8:18
Main thing I learned is that I have to know what market I am trading trading in and trade accordingly.

8:40
I now have two very distinct strategies, one for an upward market and one for a downward market.

8:56
To help me know what market I am in. I started tracking the major indices, the S&P, the NASDAQ, the NYA, RUT, and Dow Jones Industrial on top of the MAG 7 I just learned about from your podcast I think from 2024 about ETFs that track each industry which I will incorporate soon.

9:15
My strategy has been successful without using any volume indicator. It seems that when I simply just track price over time I am the most successful.

9:36
I know that volume is a key part of long term successful traders, however I don’t know how to properly interpret the volume in any helpful manner. I use Fidelity Trader Plus Web and it’s the only platform I’ve ever used or do use.

9:57
When I check out the stocks I watch, I genuinely don’t see any clear patterns with regards to price and volume that helped me actually know when to buy or sell.

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In fact, I just sold out of a stock today ALAB because the stock price jumped post market yesterday on April 20th from about 175 up to 190.

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When I looked at the volume chart it seemed like the volume wasn’t supporting the price. I expected to drop down today, but the price continues to go up and is currently even higher at 195 as I write this.

10:56
Here’s my question. How do I incorporate volume into my my strategy? I’ve looked at the daily chart, the weekly chart, the monthly, six months, years, yearly charts, etcetera, and I haven’t been able to see a clear pattern that would help me to know when to buy or sell.

11:18
I can look back and say that in hindsight, this is good or bad, but in real time, I just don’t know how to put together, put it together with my current strategy. Thank you. Cletus Mclee

11:34
OK, that was a long e-mail and that was great. I, I really don’t mind the emails being that long because it really helps me to understand more from, from, from where Cletus is coming from.

11:49
And, and one of the things that I did notice and, and as I always do, especially in an e-mail this long, I pick up on little, little subtleties that that he might say that it’s not really part of the main point that he’s trying to make, but it, it’s part of a bigger point that that I think is worth calling out.

12:06
One of them. I always find this interesting. You know, he says the Lord taught me some valuable lessons through failing in ministry, which I learned again in trading.

12:22
One of the things I know, and you guys have been listening to this podcast, you know, that I’m a Christian.

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One of the things that my dad told me growing up and still sticks to me to this day is that if you’re a Christian, you don’t really have a right to say whether or not you’re having a good or a bad day.

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There’s days that obviously feel good and feel bad, but as a Christian, you just don’t know how the Lord is really trying to incorporate the, the struggles and of everyday life into the bigger picture of accomplishing his will.

13:15
So keep that in mind.

13:32
The other thing I would say is I, I noticed down here where you made about 4K trading NVIDIA and even broke even on, on about 10 other stocks.

13:49
But what if you would have taken profits along the way?

14:05
How would that have eased it?

14:24
I think one of the things that really puts us into a bind when and if you go back to my earlier podcasts, I, I, I was always all in or all out. And then I migrated away from that. But and to where I do take partial profits, a lot of that came with the commission’s not racking up against you when you take partial profits along the way.

14:51
Just really wasn’t as beneficial back in those days. But now it makes perfect sense to take profits along the way. And a lot of that isn’t, isn’t so much because you’re being overly conservative or you don’t believe in your trades. I, I tend to not believe in trades in general.

15:06
It’s just whatever it tends to do after I get in, you know, I’ll manage the risk accordingly. But I also know that by taking profits along the way allows me to get a bigger part of the game because if I’m just going all in and all out, which I, I do go all then, but I take profits after that, I’m taking profits after that.

15:23
It allows me to to have less emotions when I’m up 10% and I haven’t taken any profits yet. That’s going to weigh on me from an emotional standpoint. It’s to where is like, well, what if, you know, there’s bad news next day and it drops 9%?

15:44
Well, if I’ve taken 1/3 or 2/3 out of the trade by that point, I’m not as worried about that because even if it did, I’d still come away with a profit. But as as people who who don’t take profits along the way, it’s a much more emotional right.

16:04
And so one of the key components of trading is not necessarily eliminating emotions because you can’t do that we’re human, but reducing the impact that they have on your trading. One of the best ways to reduce the impact of emotions by taking profits along the way.

16:30
So I think that could have been been really beneficial.

16:48
Now another thing is he talked about, you know, the success that he had despite taking 10 to 20% losses in a single day. That that tells me right there probably if you’re doing that in a single day, taking on massive amounts of volatility.

17:07
So I would be looking at the beta of the stock. If you’re just trading nothing but like stocks of like 3-4 and five betas versus the S&P 500, that’s going to be an issue. If you’re leveraging yourself through options a lot, I would probably look at how many options contracts that you’re calling or whether you should be trading options in the 1st place.

17:31
Because if you guys know me, I don’t think people should just start off trading options. I think that’s one of the craziest things that you can do. Start with equities and if you get good enough at equities, then consider options, but not until then.

17:48
But the draw downs, if you’re taking 10 to 20% though, that’s just, you can’t survive that. Even if you’re successful in the short term, long term, that’s going to eventually come back and it’s going to to blow up your account. And you just, you can’t afford to take those risks. If you’re going to do this for the long term.

18:04
If you’re, if you’re wanting that kind of volatility, you’re probably better off going to Vegas and, and putting it on red or black.

18:20
Another thing that I picked up on and we are going to talk about applying volume patterns to trade, but I like to get some of this housekeeping stuff out of the way because I think they are very important points to make, he says.

18:36
Part of the reason I didn’t take profits when he let’s see, after October I bounced between 68 and 75,000. This was actively buying and selling swing trades. I did this three times for dropping significantly down to 62, 1000. I was over trading my account telling me to sit on cash and wait, but I didn’t.

18:58
Part of the reason was as I was afraid I was going, it was going to shoot up without me. The fear of missing out. I mean, that’s exactly what that is. You’re you’re staying in it because you fear of missing out. That’s what’s plaguing a lot of retail traders right now, the FOMO.

19:17
And I think it’s almost become mainstream to where some people brag about it. You know, think about the term diamond hands. What is that? It’s staying in trade because you’re you’re afraid of missing out.

19:34
I see it if you follow me on Facebook, if you look at the comments, there’s so many crazy comments. There’s some good comments, you know, here and there, but I would say 75% of it, it’s just totally crazy what people are saying.

19:51
I’ll put a chart out there. Sometimes I don’t even really put an opinion out there, but they come up with the craziest takes and one people was like, well, it’s different this time because retail we’re just not selling the bag.

20:09
We’re we’re diamond hands, we’re holding on and cool, OK, it doesn’t matter. Tell that to people who traded car. Was there diamond hands in car when it went from 100 to 840 and then it pulled back back down to like 100 or so?

20:25
No, that wasn’t diamond hands. That was just a bunch of bag holders that was created. So you can’t tell me it’s different this time. Everybody wants to say it’s different this time.

20:51
It’s never different that that the same things that happened in the market before. Sometimes you may not get recessions as as early as you think that it should probably happen.

21:08
And I think right now we’ve extended that that big sell off quite a ways because of favorable Fed policy, because of federal spending that keeps the market propped up.

21:30
But essentially want some point those catalysts that has sustained the market for so long won’t be able to do that anymore.

21:46
So the, the, the going back to the, you know, fear of missing out there, it’s a huge problem with retail traders taking some profits like we were talking about along the way, having stop losses that will help to curb that, but it doesn’t fix everything.

22:10
And a lot of that is because if you start to revenge trading, you get back into stocks after you getting knocked out, that that can also lead to some heavy losses.

22:28
Another thing I would, I would tell Cletus here is that look at where your successes took place.

22:44
You talked about, you know, from April to October that was a very favorable time for traders.

23:10
You look at March and February from that, from that, from the two months prior to that bull run that took place in April 2025, it was a very unfavorable market, but it didn’t last that long.

23:29
So if you were using really bad risk management techniques, you were quickly forgiven by that huge bounce in the market that took place.

23:51
So you were able to despite a huge draw down probably get back to profitability very quickly just because of the extent of the rally even just here lately with this, with the sell off that took place as a result of the Iran war.

24:11
And then you had this 11 plus Sigma event where we go from correction territory where we’re down 10% on the year on the S&P 500 to all of a sudden we’re making brand new highs in the the semiconductors runs for 18 straight days and positive territory still hasn’t come down yet even once this month in April.

24:32
You’re benefiting from a very rare and unlikely event.

24:50
So as swing traders, if you’re, if you’re a successful swing trader, those events are less likely to benefit from.

24:32
You’re benefiting from a very rare and unlikely event.

24:50
So as swing traders, if you’re, if you’re a successful swing trader, those events are less likely to benefit from.

25:06
And the reason for that is because you’re dealing with probabilities that are in your favor getting, you know, let’s say, you know, 100% long back on whatever day was like, what March 30th, the last day of the sell off.

25:27
If you would have gone along on that day, First of all, the people who were getting probably along that they were probably the more inexperienced traders were like, oh, the market’s sold off, let’s buy the dip and they buy the dip.

25:44
And then fortunately it was incredible timing. But the people who are looking at this from a pure probability standpoint is like, yeah, the market is due for a bounce.

26:00
All the best and I look forward to trading with you soon.