Let the Profits Take Care of Themselves | Podcast Episode #6

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

0:26
Now, let’s go trade. Hey, everyone, this is Ryan Mallory with SharePlanner’s Swing Trading the Stock Market. So, all right, let’s, let’s wrap up this 3-part, um, series or episode that I’ve been on for the, for the last 3 episodes.

0:46
Um, the first one. Was entitled Trade What You See. The second one was manage the risk, and today we’re gonna talk about letting the profits take care of themselves. And what does these three episodes have all in common?

1:01
Well, these are the three points that I live by when it comes to my trading. These are the three points that I believe if you embrace them. Understand them, comprehend it. They will make a revolutionary difference in your trading and.

1:19
And so if you are just listening to me for the first time, I recommend going back to the. The, the, the episode entitled Trade What You See, when you do that, then go on to manage the risk and then listen to this particular episode because this, these three episodes are very, very important and they’re not something that any other trader out there is talking about.

1:43
In fact, all the other traders, all the other people who are publicly discussing their trading or have a website or. Um, selling you a service or whatever, they don’t talk about this. They don’t talk about it at all. Instead, they just want to tell you about how good their stock picks are, and I am just, I’m here to implore with you that.

2:04
Stock picks are not the kind of stock picks or, you know, having some kind of secret method or something like that, that is not what makes you a good trader. All the methods, all the stock picks, all the, all the secret sauce of somebody’s trading methodologies, all of that stuff means nothing if you don’t follow what I’m telling you here.

2:28
So, and this really applies to. To the technical analysts out there, the people who trade based off of what the chart is saying, who do technical analysis, who follow what the charts are doing, that’s what I am as a trader, but I also think these things also have.

2:45
A, a great impact on for those who are fundamental traders too. So for instance, when I talk about trade, what you see. I’m, I’m primarily talking about the charts, OK.

3:16
We as traders have a tendency, and I think probably more so just like a human condition, OK, to wanna force upon the markets what we believe the market should do for us, what we believe that the market should do based on what our political opinions are, what our economic.

3:32
Opinions are based on what we’re reading in the news, based on religious values. I mean, I mean, crazy, but there is some, some really crazy approaches to the stock market and people go into it with these assumptions and these false narratives that the market.

3:50
Should conform the market, let me just say, the market does not conform. It doesn’t conform to me. It doesn’t conform to you, doesn’t conform to anybody. The market only does what the market wants to do, OK? So when I say you gotta trade what you see. I really mean trading what you see, conforming yourself to what the market’s doing, OK, not what you think.

4:12
That’s where everybody gets themselves in trouble is they start trading what they think, what they think the market should do, what they think, uh, the market will do in light of what Donald Trump does as president, as what Obama did as president or what Bush did as president.

4:28
They let these things, these opinions, these beliefs permeate their minds, and it directly impacts what they’re doing as traders, and then they wonder, why am I not successful as a trader? Well, because you don’t get out of the way of yourself. Trade what you see, OK? On the charts, trade what the chart is telling you, OK? Sometimes you don’t, you don’t have to like the stock, OK? You don’t have to be in love with the stock. In fact, it’s better if you are not in love with the stock, OK?

5:02
But if you trade what this, what, what the, what the charts are telling you, you are gonna be so much better off because you are not going to be trading based off of what your opinion is of the market, but what the market is telling you your opinion should be, what the market is telling you how you should conform to this trade or to this market or to this condition, so. With all that said, how does that work with fundamentalists or fundamental, you know, analysts? Easy, take, take Amazon, OK? This is, this is about trading what you see.

5:19
What was happening, I don’t know, it’s probably like 10 years ago, you start seeing like Blockbuster’s going out of business. You start seeing where JC Penney’s can’t, can’t keep a store open hardly, Macy’s is going down, um, all the stores, I mean, and, and then you fast forward it to today, and, you know, you’ve got like CVS stores closing up stop.

5:37
You’ve got, uh, Christian bookstores, family Christian bookstores, they’re closing up shop. You’ve got Sears, you’ve got, I mean, Sears have been shutting. Stores, I think since I was born, but I mean, nonetheless, I mean, you’ve got this phenomenon and if you go all the way back to like even just 10 years ago, you saw it with Kmart, you saw it with, um, all these different major retailers who have been the backbone of, of American retail history, and they can’t stay open.

6:00
So that tells you something right there. There is something that’s hurting these businesses, OK? Well, what is it? What Just look at what’s going up. What, what is the retail stock that, that is driving these, these big business retailers out of business?

6:18
It’s Amazon, Amazon, right there. You don’t even have to do any great in-depth. Um, Look into their balance sheet or anything else to know that people are buying from Amazon. That’s what you’re buying from, OK? It’s, so you’re trading right there off of what you see because, you know, from a fundamental standpoint, you’re seeing where traders.

6:42
Or I’m sorry, where, where retailers cannot stay in business, and the direct reason why is because Amazon’s driving them all out of business. So what does that tell you about their stock? It means you probably should be going long on their stock. God forbid you definitely don’t want to short it. But, and if you do that, what, what happens?

7:10
You have, and, and obviously, I’m, I’m speaking from hindsight here, but I do think that if I was a fundamental trader and I was looking for the next big play, you know, that that probably would be, um, one that would stick out like a sore thumb.

7:40
But Amazon. Amazon was driving all these things out of business and you could have gone along, and I think since then it’s been up like, you know, 1,000s upon 10,000%. So, um, I, I mean, I think there was like one point where it’s trading at like 20, excuse me, I just hit my microphone, but, um, there was actually a point where it was trading at like, I think like $25 a share, and if you bought 1000 shares of it back then, I think that investment’s like well over a million dollars now.

8:00
So, um, so yeah, I mean, I’m not a fundamental analyst. I’m not a fundamental trader. But if you were trading what you see also applies to you guys too. So, all right, so that is the trade what you see and then you, of course, you have the, the manage the risk, OK? And the manage the risk, we talked about this pretty in-depth. And that, and that simply implies. You don’t let the risk take you out of your, your abilities to succeed in the market. You keep the rewards bigger, you keep the risk tighter, you let the winners run, you cut the losers short.

8:18
You’ve heard a lot of these, um, sayings before, and it’s probably falling on deaf ears for some. But if you embrace that, managing the risk is, after, after you trade what you see, managing the risk is all that matters, OK?

8:36
Once you decide what you’re going to trade, You then have to manage the risk. You have to move up the stop loss. You have to make sure that winners are not turning into losers. And if you do that, you’re going to do quite well in the market because, look, anybody could come up with a winning trade, OK? You can get it, you can get into a winning trade just by sheer luck.

8:59
I mean, I remember one of the first trades that I ever, um, did, and I can’t remember what the name of the company was, but it was a biotech company and, and, uh, I bought it. I, I thought I was doing fundamental. Uh, research on it and, and I said, oh, I think the stock is gonna go up, and I think I bought it at like $4 and the next day it was up like $7 and now it was up almost, you know, like 75% or whatever. And I was ecstatic. OK.

9:14
Now, today, if I get into a stock and it’s up 75%, I’m going to book the gains in that trade. But back then I didn’t do it. Why? Because I didn’t manage the risk. I actually ended up taking ultimately a loss on that trade. Now, this was like decades ago, but I don’t, I, I took a loss on that trade, and that blows my mind, OK?

9:35
But I mean, If I’m gonna be completely honest, those lessons are what really molds me as a trader because I’ve understood that even the best of gains can’t be taken for granted, OK?

9:52
If you’re up 10, 15%, that’s great, but it’s not guaranteed that you’re gonna make 10, 15% just because you’re up 10, 15%. You can, um, Ensure that by managing the risk and not, you know, um, letting the trade when it decides to, uh, not go up anymore to be holding on to it until it wants to wipe out all those gains. No, you gotta be proactive, you got to book the gains, but, um.

10:10
But yeah, that one trade, I wish I could remember what the name of the stock was. I’m sure it’s not even in business anymore. It’s like a biotech stock, which I don’t even trade anymore, those kinds of stocks, unless it’s the ETF, but, um, yeah, I was up, I was up 75% on that trade. And I ultimately lost money on that.

10:29
I mean, just let that sink in. Losing on a trade that you were once up 75%. Um, so yeah, I had to, I, I. I have to manage the risk on a trade, and, and that, that’s an extreme example, but then when you get into other trades.

10:49
Where you’re up 3%, it’s very easy for that 3% gain to turn into a 2% loss or a 5% loss. And if you have like these insane, you know, and very wide stop losses to lose 10 or 15% when you were once up 4 or 5%.

11:06
So you can’t. You can’t. Ignore the fact that you have to manage the risk, so. With that 10 minute introduction, that brings me up to the final part of this. 3 part series.

11:22
So let’s go ahead and review the first two points. The first one was trade what you see. Second one was manage the risk. And the third was, and is gonna be the topic today. Let the prophets. Take care of themselves.

11:40
Now that sounds kind of weird because I’m talking about manage the risk. Oh, but let the profits just take care of themselves, OK? And there, there’s a lot to. Dig around with here or uncover so. We get into trading, we want to get into trading because we want to make profits. That’s why we become traders. We have oftentimes a misleading pie in the sky dream that, hey, if I start trading, I bet you in like a few days I can become a millionaire if I follow, you know, Joe Schmoe’s stock picks who says, you know, you can be an instant millionaire by, you know, 12 o’clock on Wednesday.

12:06
Um, and of course, I think we’re probably all guilty of it. We believe some of these crazy sales pitches and they don’t even provide past performance. And we get into the um. We get into their service and then we realize that it’s just, you know, they’re just churning through users and not keeping them and basically blowing up accounts in the process, OK?

12:28
Um, so it, it kind of like shatters that dream of becoming the instant millionaire or for even some maybe the instant billionaire from the stock market, you’re not gonna, you know, subscribe to a service and all of a sudden, you know, flying around in private jets and everything, it’s just unrealistic.

12:46
But uh. In any case, what in an ideal world, we would get into the stock market because we want to manage risk. But who does that? Nobody gets into the stock market to manage risk. It’s not exciting.

13:01
It sounds scary, and it doesn’t sound very profitable, but that couldn’t be further from the truth. Managing the risk is what. Makes you the money in the stock market.

13:33
If you’re managing the, the, the risk, and you’re constantly increasing the stop loss to areas that are appropriate on the chart, that if it’s hit signals a change in the direction of that stock or a likely change in that direction of that stock, because sometimes you can get stomped out and it happens to all of us and it goes right back up.

13:53
It’s it’s infuriating. I hate it. It still happens. But it’s part of the stock market and you have to just basically accept that stock losses are not perfect, but it’s the best. Medium for protecting profits in the long term, OK?

14:10
It’s not perfect. It’s not something that says, oh, if this hits, it’s guaranteed that the stock will never go up again because that’s very unlikely, OK? But what we’re trying to do as traders is to go from one trade to the next, continuing to make profits and continuing to build the size and the value of a portfolio.

14:28
And if we’re not doing that. You know, uh, we’re wasting our time. We’re we’re, we’re turning in place.

14:48
Now, some people say, well, well, isn’t it better to to trade long term? Well, for some people it is, yeah, but some people don’t have the patience for it. Some people don’t have the resources for it, and some people don’t have the time frame to just sit back 30, 40 years and, and, and let the profits come to them.

15:05
And then on top of that, you’ve got to hope that you’re getting into the good stock and, um, and then the risk parameters, it takes a long time from a long-term standpoint to figure out if you’re in a bad trade or not because you have to give. A trade time to figure itself out, so.

15:33
So for the rest of us, there’s trading, and I think trading is better than investing now with the market being on an 8-year rally, there’s a lot of people have gone back to saying trading is the way to go or long-term investing or passive investing is the way to go, and I don’t necessarily agree with that either. Um, I think that’s a hindsight argument that says, well, because we’ve been in a great market for the last 8 years, that’s what we should be doing now going forward and that it’s almost kind of like a good sign when everybody wants to start doing passive investing.

15:50
Letting the profits take care of themselves means it’s, it, it’s only applicable if one, you trade what you see, OK?

16:09
That means that you’re not injecting your own personal opinion into it, and it’s, it’s basically a summary of the first two points, trading what you see and then managing the risk.

16:28
But if you continue to manage the risk, yeah, the profits are going to take care of themselves. You continue to manage the risk, keep raising the stock losses, take profits at target points where it’s obvious that the stock’s starting to run into major resistance or getting ready to report earnings tomorrow and the risk is not worth holding through earnings because you don’t have any idea where it’s gonna go.

16:46
When you’re managing risk and you’re managing risk effectively, you’re staying out of crazy biotech stocks that are trading at $2 a share. When you do that, yes, you are managing the risk and letting the profits take care of themselves. So it’s a simple concept, OK?

17:02
You manage the risk, you trade what you see, and those two concepts together, when you combine them together and do it effectively. And make sure that the reward is out outpacing the risk that you’re taking on each of your trades, yeah.

17:20
You’re gonna do all right and um. Your, your profits are gonna reflect that because you manage the risk all along, but if you don’t, if you start trading based off of opinion or you start trading. Based off of the market’s just gone too high, it’s due for a pullback.

17:43
You know how many times people bury their portfolios because they think something is due to happen? OK. Nothing is due to happen. There’s no due date on the market. The market does not care if it’s too hot or too cold or if it’s trading sideways for too long or if it’s due for a breakout or due for a breakdown or due for a pullback or due for a bounce.

18:01
It doesn’t. It’ll keep going down, OK, but you have to trade what you see. Eventually, yeah, it does become due for a bounce and it bounces, but you gotta let the chart develop that for you. You can’t just say, oh, it’s in a complete freefall for the last, um, 17 days, and it’s due for a bounce, so I’m getting in right here.

18:25
It’s, it’s dropped far enough. No, because guess what, it might. Go down for another 17 days, OK? We saw that in 2008, and there’s a lot of people who’s so scared to death of this market because they used all of their mental capital trying to fight a market that wasn’t going their way in 2008, that they’re still trying to short the market or they’re still trying to, uh, uh, wait for it to pull back again before they get back into the market, OK?

18:43
And they’re missing out on the opportunity, OK? Just, just trade what you see. Don’t, don’t be trading what you think, because the moment you think something, you’re probably wrong. The moment you think that oil can’t go any lower or it can’t go any higher, you’re probably wrong, OK?

18:59
But if you say, hey, look at this breakout on the chart, the S&P is clearly wanting to rally, it’s coming out of the consolidation, it’s wanting to push higher, the charts dictate that.

19:22
Then you’re trading what you see the moment that you say, hey, look, all these retail giants are going out of business. Amazon continues to go up. Now you’re trading what you see or you’re investing in what you see. The moment you start thinking something, that, that, that’s when, that’s when you’re digging yourself a hole, and that’s when you’re getting yourself in trouble, and that’s when the prophets cannot take care of themselves because you’re worried more about your personal feelings or your personal opinions.

19:38
Trade what you see, OK, let these profits take care of themselves, OK? Let the profits take care of themselves because when you do that and you manage the risk. The profits will fall in line, OK. My stomps are consistent.

19:56
I pass up on a lot of good trades at times. It’s because I don’t feel like that I can manage the risk appropriately, and it’s frustrating, OK? It, it’ll make you question yourself, but it doesn’t make me question my approach to trading because I know long term I’m going to be profitable by.

20:12
Pushing forward with this strategy, this is something that I’ve developed, something that I’m very passionate about, and I know that it works regardless of the trading strategy in play.

20:27
You have to do these things and forget about the profits, OK? They will come to you, OK?

20:44
You don’t have to worry about the profits, they will come, but you have to trade what you see, you have to manage the risk and when you do that. Dad gum it, man, you’re gonna like what you see, but you have to embrace what I’m telling you here, OK?

21:04
This isn’t a magic formula. This isn’t, this isn’t something that. You know, You have to put on some kind of indicator to do or some kind of oscillator to to to make it work. This is something that falls in between the two, your two ears.

21:25
This is something that makes sense. This is something that makes sense when you completely embrace it and so do that with your trading, trade what you see, manage the risk, and let the profits take care of themselves. I appreciate you guys, um, continuing to follow me on my podcast.

21:48
I’ve been getting a lot of good. Feedback from people saying that it’s definitely making an impact on their trading. Some of the emails are really nice coming from you guys, and I appreciate it. Keep it up.

22:04
And, um, you know, if you have any questions, always feel free to email me, ryan@shareplanner.com, and I will definitely get back to you and, um.

22:19
If, if you want to follow me in my trades, see how I do these 3 things every day in my trading, you can join the SharePlanner trading block. I’m in the chat room every day, from the day the from the moment the market opens until the moment the market closes and a little bit before and a little bit after.

22:37
But with that service, you’re gonna get all of my swing trades that includes the stops, the targets, the rationale, the entry prices. The charts showing you exactly how I’m trading, what I’m seeing, how I’m managing the risk with those stop losses, and anytime I update those stop losses, you’re gonna be the first to know via the chat room, via email, via text.

22:55
You’re gonna like what you get. So try it out. It’s free for the 1st 7 days. You’re not gonna get charged. So give it a shot, see what you think, and, uh. Hope to see you there.

23:14
Go to Shareplanner.com/zone. So once again, that’s Shareplanner.com/zone, and uh look forward to trading with you. Take care. God bless. Enjoy your weekend. 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. 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 www.shareplanner.com/trading-block. That’s www.shareplanner.com/trading-block. And follow me at SharePlanner on Twitter and on SharePlanner’s Facebook page where I provide unique market and trading ideas every day. If you have any questions, please feel free to email me, ryan@shareplanner.com.