How To Increase Your Stock Market Profits | Podcast Episode #9

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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 ins and outs of a complex, ever-changing stock market. You will learn to trade better, trade smarter, and profit bigger.

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Now, let’s go trade. Hi, my name is Ryan Mallory with shareplanner.com and this is going to be my 9th episode of the Swing Trading the Stock Market. And today’s episode is going to be about how to increase your stock market profits.

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So, with that said, trying to find the right trading strategy that will help increase your profits is incredibly important. Maximizing your stock market profits is done by minimizing the risk whenever and wherever you can. These are two elements of trading that go hand in hand.

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This is such an overlooked aspect of trading, but did you know that you can actually increase your profits simply by losing less on your losing trade? Well, I know when I say that, it sounds painfully obvious, but is it really that obvious? I, I mean, think that, think about that for a second.

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When we get into a trade, are we simply considering the hope that surrounds the trade of making big bucks in the stock market, or are we focusing instead on the risk and how we can keep it to a minimum? So, let’s continue on that thought then with a little bit of questions for you.

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Number 1, are you looking At the stock market, profits as what you can make off an individual trade or are you looking at it from a collection of well-managed trades, both winning trades and losing trades over a period of time. So, basically, the two choices here are, are you looking at stock market profits from how much money you can make on just one trade or from a collection of trades.

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Now, if you are not looking at it from the latter perspective, that is from the collection of trades, both winning and losing, you’re going to be in big trouble. But no worries though, because that’s what I want to focus here on this podcast is the trading strategy that you are using and what it takes to increase your profits in the stock market and your collective trades as a whole.

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And even if you go to shareplanner.com, I have in the free resource library that you can get access to. Um, you can get access to this risk reward table that will help you increase those profits, so be sure to check that out too. So, increasing your stock market profits, let’s go into some tips here that I can give you.

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Number one, don’t get out at the top. What? Exactly. Don’t get out at the top. We all want to get out at the top. You do, I do, we all do. When we get out of the stock, what do we do? We watch the stock trade for a couple more days, maybe a couple of more months even to make sure that we got out at the high tick of the trade.

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Oh, and, and it can sure wreak havoc too on our trading strategy when we think we are making decisions that doesn’t result in us getting every penny out of our trades. So do yourself a favor, stop trying to get out at the top. I mean, seriously, do you know how utterly crazy that is?

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How many times have you had a stock go up 3% on a breakout, you get all excited, think that you’ve picked a real winner, you go to the kitchen to grab a snack and find out it is only up 2% now. You panic, you start to worry, but you say to yourself, I’ll just wait for it to get back up to 3%, and then I’ll sell it.

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Well, there you go. You’re trying to get out at the top, and the market doesn’t really care about rewarding you with that 3% you find yourself entitled to suddenly, and it really doesn’t care that it sold off while you were going to the bathroom or stealing a snack from the refrigerator. Instead, you have to ask yourself whether this chart is starting to break down here or whether the chart is actually still valid valid to trade in.

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If it is still valid for trading, fine. Raise your stock loss and trade in the and stay in the trade. If the chart is breaking down, take the 2% that you just made in stock and move on to the next trade. Think about what you just did. You made a solid 2% on the trade.

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Sure, 3%, it was up at one point, but that was not in the here or now, and instead, you have an opportunity to build on that winning trade with your next trade that could be an even bigger winner. You follow me so far? Otherwise, before you know it, that chart that is breaking down, that chart that that you felt like I should be getting 3%, I’m gonna hold on to it until I can get 3%, but you realize that it’s breaking down, it suddenly goes down to 2 from 2% down to 1%, and then to where you’re just flat on the trade.

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So now you’ve lost 3% in the of the profits, and then all of a sudden you’re taking a loss on the trade. Also, you can somehow recapture that 3% that you thought that you were entitled to and that you thought the market should be giving you. Don’t stubbornly take a loss simply because you want that 3%.

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Still, it is a slippery slope for individual trades when you want to get out the top. All traders want to get out at the top, I get that, but the profits come from when you protect the majority of what you have, get out with a profit and move on to the next trading opportunity.

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That was my first point. Don’t get out the top. My next point to make here, the next tip is, know your winning percentage and average winners and losers. This is key here, y’all. You have to know this stuff. If you don’t, your trading strategy will suffer, and along with it, any and all of your profits from trading in the stock market.

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First off, calculate the percentage of winning trades that you have had over the last 3 years, -52%. Anything over 40% is usually a winning frequency. But It doesn’t stop there because you need to know what the average losses that you take and then go about calculating what your average winning trade makes for you.

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Once you have done that, then go ahead and calculate what is your, your average losing trade, and for the purposes of this post, let’s keep it simple and say that you win 50% of your trades. You have 4% that you average on your winning trades and 3% on your losing trades.

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Your reward for every 1% risk is only 1.33 to 1. That is simply not good enough. You need to be at least 2 to 1 if you are winning 50% of your trades, that is. So, you need to start identifying trading opportunities that allow you to place your stop loss just 2% below your entry point.

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This will allow you to maximize your profits on your 4%. Average winners and your 50% winning frequency without putting more pressure on you to press winners for more profits. But all things being the same, let’s assume that your average losing trade was 5%.

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That means, and the flaw, the flaw in your trading is that you are losing too much on your losing trades, and that alone is what is keeping you from having a profitable trading strategy. It has nothing to do with your winning trades. So adjust your risk and stop losses accordingly.

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As for myself, I aim to keep my losing trades within about a 1 to 2% range. In doing that, I’m looking to make 3 to 1 return on my trades for what I am risking. Now, that brings me to my 3rd point, and that is to identify resistance overhead.

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It drives me nuts how people will buy a stock simply because it is balancing while totally ignoring huge levels of resistance that is clearly marked overhead.

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For example, let’s say that part of your trading strategy is to to identify inverse head and shoulders patterns following large sell-offs.

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That is a legit trade setup and one that I personally like to take a lot.

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If you, however, are getting into one of those trades at $100 but there is multi-month or year-long resistance at $102 then why would you get into it? There is a very good chance that your stock that you are trading will not allow you to profit a great deal because once that resistance level is reached, a lot of previous buyers that were trapped in the trade are going to be looking to get out of that trade that they had originally bought at 102.

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That’s your resistance, and as a result, the stock will have a very difficult time pushing beyond that area being occupied by the bears.

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Therefore, even though that you thought that you might have had a 2 to 1 risk. reward that you were going to trade with that you were, you, you really never had more than a 1 to 1 reward to risk ratio. So be mindful of the resistance overhead. It comes in all shapes and sizes and it also goes for shorting stocks too.

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If you are shorting a stock that has a 2% stop loss. But there is massive multi-year support levels just below the, or just 2% below your entry price, you are not getting a good trade at all.

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And no, no matter what the likelihood you think that you have had a success, the reward to risk ratio does not justify it one bit. So don’t do it.

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Support and resistance are real obstacles, and when they stand in the way of the direction that you want a stock to take, when that happens, just move on to the next trade. There’s no shame in it. There’s plenty of trades out there and there’s plenty of ways to profit. You don’t have to. Hinge all of your efforts on one particular trade being profitable for you.

9:46
So, let’s put all this, this trading strategy stuff that we’ve talked about here, put it all together. Because you see, sometimes, the key to improving your returns isn’t in finding a better chart pattern or trade or, or a trade and finding more volatile stocks or getting rid.

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Of large caps and focusing on solely small caps, a lot of people will abandon large caps and go into penny stocks or in these like 2 and $3 stocks simply because they think they can make more money and that’s because they’re totally ignoring the risk aspect of trading, which means that they’re immature traders.

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What it really comes down to is how you manage the risk of a trade and how you’re going to minimize the risk impact to your profits, because when you, when you start trading the smaller dollar stuff, you’re not increasing your odds of being more profitable in the stock market, except, instead it’s the exact opposite.

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You’re actually increasing. The risk in your portfolio and you don’t want to do that, OK? Increasing risk in order to make more profits is, is usually not a winning recipe. I, I very rarely find that.

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You want to try to minimize risk and expand on the reward side of the ratio so that when the stocks go your way, you’re able to run it up uh as high as it’ll go.

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Buying stocks that are crappy and are $2 to $3 a share and that are prone to overnight massive news reports that can spike it, you know, 20, 30% lower, that’s a losing trading strategy.

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In the end, risk eats away at your profits. Keeping risk to a minimum will always help you to maximize your profits on your winning trades. Those winning trades take a lot of hard work.

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So why then would you let it get eroded away by risking equal amounts of risk compared to what you are bringing in on the profit side? And that’s what I am trying to tell you here, and that’s why it makes sense. And as a result, you should thoroughly vet your trading results.

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That’s gonna be it for today’s podcast. I hope you were able to learn something new from what we’ve discussed here, how minimizing the risk side of the risk reward ratio can greatly impact how much money you bring in on a regular basis from trading stocks and the stock market.

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So, put these 33 tips that I’ve put together and really try to apply them to your own trading. If you have any questions, feel free to. Email me, ryan@shareplanner.com or uh one of the best ways to really learn hands-on is to subscribe to the SharePlanner Trading Block.

11:53
You get a free 7-day trial and with your membership, you’re going to learn firsthand what it’s like to manage risk and how to let your profits. Run wild on the reward side of things, and you’re gonna get all my trade alerts via via text, email, and in the chat room, which is a place that I am in every trading day.

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Rarely do I ever take a vacation and I probably should, but I do like the stock market so much that I really don’t take vacations. So, um. But yeah, join up, see what you think, and uh I hope you see, see you there.

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You can sign up by going to shareplanner.com/zone and uh check out the membership options we have for you there and, and be sure to join. Thank you all and God bless.

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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 Trading Block where I navigate the financial markets every day with traders from around the world.

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With your membership, you’ll get a seven-day trial, access to my trading room, and text and email alerts. So go ahead and sign up by going to shareplanner.com. That’s www.shareplanner.com/trading-block.

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And follow me at SharePlanner on Twitter and on SharePlanner’s Facebook page where I provide unique market and trading ideas every day.

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If you have any questions, please feel free to email me, ryan@shareplanner.com.