Big Sell Offs and Big Emotions | Podcast Episode #124

0:00
Hey everybody, this is Ryan Mallory with Swing Trading the Stock Market, and I got a good show for you guys. You know, whether you’re listening to this show 1 year, 2 years, 3 years down the road from when I recorded it, or whether you’re listening to it the same day or the very next day that I recorded it.

0:16
I think it’s relevant, but to give you an understanding of where I’m at when I’m recording this, we had a massive sell-off today in the stock market, and it created a lot of emotions for people. I don’t think a lot. People were necessarily expecting it on a Monday to come in after two solid days to the upside, it started seeming like the market was gonna break out of this full flag pattern that it was trading in.

0:36
And what happens, it drops over 100 points intraday and closes 64 points lower on the day or 1.9%. So this show’s episode is going to be about big sell-offs and big emotions and how do we handle it, man? What do you do in the midst of all this stuff, and this isn’t something that I just like figured out a magic solution for or a magic potion or or hypnotize myself like they did in office space, no, nothing like that.

1:03
A lot of it came from experience, but there’s not a lot of people that are gonna tell you out there how to handle it because most people don’t know how to handle it themselves, but. Before we can get any further on that, what do we gotta do? Well, of course, you know what I gotta do. We gotta talk about whiskey, man. What is the whiskey that I’m drinking for this podcast?

1:18
It is whistle pig, remember? Previous to, I did a whistle pig 15 year and I did a whistle pig 12 year. I got these little samples at Total Wine. It’s not paying me to do this. They should be. And I’m on the last bottle of it. I think I’m gonna get this for my brother for, uh, Christmas, man.

1:35
I think he’d like it. That’s the plan anyways. And I’ve poured it already, so I haven’t tried it yet. I think I may have tried this in the past. I’m not positive. I know I’ve had a whistle pig in the past. I’m not sure if it was 10 year. I think it was the 10 year, but, uh, nonetheless, I’m gonna be, you know, fair about it. I know it’s a pretty harsh one. So I used the Ice Cube for, I don’t expect it to be as good as the 12, and I don’t expect it to be good as the 15.

1:55
Why? Because those are always going to be better. They have a much higher price point as well. So looking forward to using it. I got a cool ice cube too. It’s crystal clear. You can see all the way through it, so that makes it even more awesome. Oh, yeah. Definitely harsh. It’s not as good as the other ones. Um, it’s still pretty good.

2:10
It’s still very good. Um, it’s got good color to it. You know, I was out in the sun a lot this past weekend. I was in the Disney World, uh, theme parks. Let me tell you, I, I don’t know if I got sunburn or if I just got chapped lips, not sure what it was, but man, this thing is like burning my lips right now because whatever it is, that alcohol is just burning my lips up.

2:30
Right now. I don’t care. I like whiskey more than I like my lips. So, uh, that’s what she said. No, that’s not what she said. But it’s good. It’s good flavor. Again, I’m not a huge fan of the whistle pig tenure. I’m gonna go, I’m gonna go 38 on this. 38, 3.8.

2:48
Like those other ones, you know, you go up to like a 4.6, you know, but this is such a far difference of flavor and taste. It’s very basic compared to those other ones. It’s not bad. It’s not like Jack Daniel’s Apple or whatever that one was called.

3:03
That was atrocious. It shouldn’t even registered as a 0.1 of a point. That thing was disgusting. But this one, this is good. It’s basic though. It’s just not, it’s not telling you, hey, I’m unique. It’s not unique. It’s just basic. It’s got good color.

3:19
If you want something harsh, it’s definitely gonna be harsh, but there’s not like a smoothness. There’s not, there’s not anything else to it. It’s just harsh, not a ton of flavor. I mean, I had an old fashioned over the weekend. Weekend at the Gaylord Palms because I was staying there for a birthday celebration, going to Disney World and everything else.

3:36
And let me tell you, they had this thing called the Efuego old fashion. No, they just called the Infuego fashion. I was like, is this like old fashioned or they like dropped the old for some reason. So I asked the bartenders like, what’s enfuego fashion? Is that an old fashioned? Is like, yeah, we just smoke it. It’s like, So it’s just a smoky old fashioned. I don’t know why they call it infogo.

3:52
I, I think that’s Spanish for hot or on fire, but smoke doesn’t necessarily mean it’s on fire. That’s where I was getting a little bit mixed up with it. So they called it. I got a video of it too, man. It was, it was atrocious, absolutely atrocious. I think they were missing the bitters on it. And, uh, it was crazy. I talked to one of the people at one of the sports bars the following night.

4:09
It’s like, we went there, I got the inflate. he’s like, oh yeah, yeah, that’s the good stuff. I’m like, are you kidding me? That was like one of the worst old fashions I’ve ever had. And now, yeah, I’m, I’m a little, when it comes to whiskey, I’m not like a whiskey snob. I do like good whiskey, but I’m not going out, you’re not going to see me go out and pay like $300 for a bottle or anything like that.

4:26
I don’t really get higher than like $100 on a bottle of whiskey, and that’s a rarity. I’m usually more like I enjoy like a good 50 to $60 bottle. Four Roses is good, good flavor for the price point. I think I get like a bottle of it for 24 to $25 at Sam’s Club. I mean, you can’t beat it.

4:42
I still have some of it. I like it. And, uh, it’s, it’s just easy to drink. It’s very good. So about these emotions, about these big sell-offs, because when you have big sell-offs, you have big emotions. That’s just the meat and potatoes of it, right? If you have a small sell-off, your emotions aren’t going to get all crazy because your, your positions, unless there’s some kind of news-driven or sector, uh, news-driven event, you’re not going to see a, a big sell-off in your stocks.

5:08
More than likely unless it’s just got a through the roof beta or it just had a huge run up for no reason. But a big sell-off, you’re gonna have a lot of big emotions. And so I, I run a trading room every day and it’s called the trading block, and a lot of people are in it each day, and it’s a great group of people, it really is, but you could see the emotions in a, in a number of traders, especially people who are probably new to trading that’s not really dealt with this before.

5:32
And I, and I see the I see the emotions in it, I see the questions and I could tell by what they’re saying that there is some emotional impact in the market, especially after a day like today where it really took people by surprise and and kind of left them helpless, you know, there’s, there’s always this thing about big sell-offs where you want to sell it at the lows of the day.

5:50
I’m, I’m guilty of selling at the lows of the day. I really am. But the big thing for a massive sell-off, and especially when you’re just seeing nonstop consistent selling because that really starts to wear on you. And at one point today, the S&P 500 had sold off for like 4 straight hours and I could tell it was wearing on people.

6:08
People were getting tired of this nonstop selling, and even on the 30-minute bar, it was just 1 30-minute bar after another of people just getting hammered on their positions. I got stopped out of two positions. I didn’t want to get stopped out of two positions, but guess what? Stop losses are made for times like this.

6:25
People love stop losses when the markets are good. It’s like, yeah, I got a stop loss and, you know, I’m disciplined. I’m going to go ahead and take the stop loss if it gets hit. And it’s easy to say that because the market’s going up. And you’re not really that concerned about your stop being hit. But when the market starts to sell off in an extreme way, and you might have raised up your stop loss like I did today on one of my trades, and then it gets hit, you know, it’s like, oh, I don’t want to take the stop loss.

6:49
And I don’t want, I can’t tell you how many trades I’ve ever taken that I’ve actually wanted to take the stop. I wanted to get stopped out. I don’t, I don’t even want to place these things in the morning. I despise them, but I know that’s why I’m still trading to this day is because those stupid stop losses. I despise them.

7:05
I despise them when they get hit. I despise them when I have to put the order in. But you wanna know what? They work. They work because I lived to trade another day. I got stopped out of Apple a week ago at 118. You know what? Pissed as hell about it. Didn’t like it, but you know something, it’s trading at 113 right now.

7:21
I would have lost almost all my profits on the trade. And so you gotta keep it in perspective. Like, in the moment that you get hit with a stop loss, it’s not ideal. It’s not what you want. But in the long term, it’s what’s going to save you and preserve you in the stock market. Yes, there’s going to be times where you get stopped out and you immediately see it go back up.

7:39
I got stopped out of COUP today. I got stopped out of it. I was really optimistic on it. I had a good day when I originally got in on Friday. It broke out of the bull flag, and I was feeling good. What did it do today? It went up for a little bit early on and then it completely fell apart. And I was bummed about it, you know, it wasn’t that I was like emotionally about it where I’m like chucking keyboards across the room.

7:59
It wasn’t a LinkedIn gets bought out 30 minutes after I get stopped out of it, kind of a moment from 4 or 5 years ago. But it’s still, I don’t like it. And, uh, I still think it’s probably a good trade setup because it kind of rallied with the market at right after I got stopped out of it. And that’s just gonna happen.

8:14
But being disciplined about taking those stops, even when you don’t want to take them, which is pretty much every time, is what’s going to save you. Because when you’re in a good trade and you get stopped out of it, what are you saying to yourself? I was like, oh man, this is such a good trade. I hate to get out of it now. It probably will keep going up higher. It’s just having a bad day.

8:30
And then when you get stopped out because the stock is just trash, the trade setup isn’t going for you. It’s like, watch once as soon as I get out of it, it’s going to go straight back up. And what does it usually do? It goes straight back up. But ultimately, managing risk is always the right way. I teach students this all the time in my one on one coaching.

8:48
I’m like, you got it. That’s the first thing I tell them. It’s like, I want to become a full-time trader. They’re a part-time trader right now. I want to learn more about trading. Can you teach me about the technical analysis? And I’m like, no, not at first. Not, not until we start getting an understanding of what risk analysis is, not until we understand what risk management is and how to identify places to put our stop losses that because all the technical analysis that you might know won’t help you a bit if you don’t manage the risk.

9:14
And, uh, that that’s gonna be the number one way to do that is through stop losses and on a day like today, as much as it hurts, you hate those gap downs, you hate the gap downs and you rally a bit and thinking in the 1st 3 months, hey, we’re gonna, we’re going to keep rallying higher and then all of a sudden the floor falls out and we’re down 100 points.

9:31
That’s what happened today. And then the stock market rallies, you know, 30-something points, 40-something points off of the lows into the close after you get stopped out of a few positions, maybe for some of you guys, you got stopped out of everything. And then you’re like, man, that stinks. But you did live to trade another day, you kept r tight and you did the right thing.

9:48
You always do the right thing by following your trades. And here’s the thing too is that when you’re making these trading plans for yourself and for me, I do a lot of my research at night. I like that because it’s the one time where I can evaluate the markets where there’s no pressure of the stock market being open.

10:03
There’s no pressure of me having to react to what the market’s doing. I can look at what the market’s done. I can decide what stocks are setting up as an opportunity in relation to what the market’s trying to tell me right now, which sectors are hot, which industries are hot, and make the right decisions for individual stocks.

10:20
Because when the stock market is open and you haven’t planned out how you’re going to get out of the trade, if you’re wrong, and let’s just do yourself a favor. I do this to myself all the time. I always assume that I’m going to be wrong on every trade. You’ve heard me say this in a number of previous episodes. I always assume that I’m going to be wrong on every one of my single trades.

10:37
Why? Because I’m human, and the stock market doesn’t care about what I want it to do. The stock market’s going to do what it wants to do. And when it does what it wants to do, sometimes that’s in conflict with what I want it to do and what I want my trades to do. So I plan out my stop losses before I ever get into the trade.

10:53
Now, where the problem becomes is if you start trying to plan your stop loss and you start getting all hysterical and you’re like, got to get into the stock now, I’ll figure out the stop loss later. I’ll figure out the stop loss later. So you get into the trade and you get more enthralled about what is the stock gonna do now that I’m in the trade so you’re watching. It’s like, yeah, it’s nowhere near where I’d want to sell it anyways.

11:09
I’m not gonna worry about the stop loss now. And then the next day the market starts to sell off hard and you’re like, oh crap, it’s down 4 or 5%. I need to figure out the stop loss. And so then you start basing a stop loss off of what it’s doing at that exact moment in time, which may not be where it’s at at the close of the day. And so you’re, you’re, you’re panicking, you’re thinking, I’m gonna lose everything I got.

11:26
I get, I gotta get out. I gotta get out. And so you start placing these stop losses in order to mitigate the pain that you’re feeling right now. Right now, I don’t feel any pain from today’s sell-off because the market session is closed. I can look at the charts, see what the charts are telling me, and make a decision based off of what the market may do going forward.

11:44
I’m not feeling the pain in the moment of that uncertainty of how far is this market going to drop. It’s only down 50 points right now, but what if it sells off 50 more points, or maybe if it sells off another 150 points? I don’t want to be the recipient of that. I don’t know where to put my stop loss at.

12:00
I’m just going to cut my losses now. I’m going to put a stop loss right below the current market price and get out. Man, that’s so bad because you’re, you’re trading solely off of emotions and the one thing you gotta do is eliminate as much of the emotions out of it. And the one way to do that is planning your trade before you ever get into the trade.

12:17
I think the more research, the more analysis that you can do when the stock market is not open, the better off you’re gonna be. But you got to remember too that when you have a big sell-off in the stock market, when you have that one day sell-off that’s just huge and it rocks you to your core, you know what? You’re gonna have a strong emotional reaction and your planning has to be done upfront.

12:35
But you need to remember too, when you’re trading off of the daily chart, even if it’s a big day sell-off, let’s say the stock market drops 100, 150 points. In the end, it’s one candle, OK? I know there’s an election coming up. I know there’s a lot of fear that this market’s going to sell off. I don’t know if it’s going to sell off into the election.

12:51
It may rally into the election. Nobody knows. Nobody knows. But what we do know is that if the trade setup’s there, the opportunity’s right, the market’s right, the sectors are right, then go into it. If it’s not, then pull back. Judge the market on face value.

13:06
We, we put all these biases in there. It’s like, oh, if Trump gets re-elected, the market’s gonna do this. If Biden gets re-elected, the market’s gonna do this. And you may be right, you may, you may nail it, right? But let me tell you, last election, I thought that the stock market was going to crash and I did think that Trump was going to win.

13:22
And so I got out of the stock market and I think it was, I, I, I’ll be the first to admit it. I was not right for doing that. I should have been judging the market based off of what the technicals are because I’m a technical analysis guy. I don’t do fundamentals. Trying to predict market reactions to election results, that’s kind of like a fundamental, a macro fundamental analysis kind of a thing.

13:40
And so I got out of it. I, I kind of went outside of my trade spectrum. I was right about Trump winning. The stock market sold off. In fact, the circuit breakers came on because we limited down in futures overnight, but by the time the market opened, the stock market was rallying back up. Man, that sucker had almost already broke even on the day when the market opened up.

13:59
So I was right on my fundamental analysis. I was saying, hey, I think the, you know, Trump’s going to win the election back in 2016. I was one of the few that was thinking that, but I, I actually got short on the market, and uh I was watching the Trump win, the stock market fell off. I was right about the stock market doing this.

14:17
And so, but by the time I woke up the next morning and I’m watching the stock market rally against my existing position, yeah, I, I still got out for like a small profit, I believe. I maybe it was a small loss. I don’t know, but it was, it was not the kind of gains that I was expecting. The next morning when I saw like Florida go for Trump in 2016.

14:35
So what I’m trying to say here is is that we, we start to envision things that’s going to happen and how the stock market’s going to react to it. And oftentimes it does not, in fact, I wouldn’t say oftentimes, I would say most times it does not play out the way we see in our minds. So I think we’re better off as traders, if we’re gonna be technical analysts that we follow what the technicals are saying and and quit trying to like skirt outside of the technicals because we’re not going to trust them even though that’s what we are and we’re going to start putting some fundamental analysis into it.

15:04
And look, I don’t, I don’t know how the market’s gonna play out going forward. With the election, I guess, you know, if you’re listening to this about 8 days after I did this podcast, then you’re going to know the response. You’re going to know how the markets did. But at the moment of this podcast, I don’t know that yet.

15:20
And so I got to look at today’s sell-off. Maybe we continue selling off tomorrow and if so, I already have my stop losses in place. I’ll do more analysis to see if there’s room for tightening my stops in the key areas. But if it’s not, I’m gonna leave my stops where they are. I go into my trades knowing full well I may lose the exact amount that I put my stop loss at, that I may lose the amount that I’m willing to to get stopped out at, and I may never tie to my stop loss because the trade may never go in my favor at all for me to have the opportunity to raise my stop loss.

15:48
So let’s summarize this podcast, shall we? One, it’s obvious when you have big sell-offs, you’re gonna have big emotional reactions. That’s just part of trading, man. It is. You’re going to have these kinds of days where the market just rips you a new one. What you want to do is you want to be a little bit cautious leading up to it because usually there’s some signs heading into a big sell-off that says, you know what, maybe you don’t want to be 100% long on the stock market right now.

16:11
Maybe you want to take some profits along the way, and that’s what I’ve been doing. So I wasn’t fully loaded when the market started to sell off. And I don’t have strong emotional biases towards the market. The market wants to go up, I’ll, I’ll be fine with it going up, and I’ll add more long exposure. But you got to remember too that this is one day, this is one candle.

16:28
When you look back 300 trading sessions from now, it’s just going to be one candle that you experienced on that particular day. It’s gonna be a long candle. It’s gonna be a big candle, it’ll probably stand out, but in the end, it’s a candle. And it helps to review your stops on a nightly basis when the markets closed, where you don’t feel the emotions.

16:46
But the only way you can do that is by knowing before you ever get into the trade where you’re gonna put your stop loss at. You have to do that. You’ve got to plan your trade as if you’re always going to be wrong on every single trade. It’s called risk management. It’s what I preach in almost every one of my podcasts, and I’m gonna continue to preach that in every future podcast.

17:03
It’s always, it’s a core part of trading stocks, manage the risk, and there’s a lot of variations of it, and you can make it to where it works for you, but you got to do it. You’ve got to protect your capital. And try to, try to not decide where you’re going to put your stop loss in after you get into the trade or after something big happens, you’re like, where do I get out at?

17:20
But one of the main questions people are always asking is like, oh, I’m down 50% on the trade. You know, what do you do in those situations? I don’t know. I don’t know. Cause I didn’t, I, the only way I know what to do is if I plan ahead of time, and you gotta plan ahead of time. You always gotta plan ahead of time. So, remember that, and before I forget, make sure you check out my Patreon account.

17:39
Go to swingtradingthestockmarket.com. It’ll take you to my Patreon account. It gives you all the market research you could possibly ask for. That’s gonna include my S&P 500, NASDAQ, and Russell 2000 analysis multiple times a week. You’re also going to get my indicators.

17:55
You’re gonna get updates on all the FA stocks, Facebook, Amazon, Netflix, Google, Apple, Microsoft, Tesla, each week. So you’re gonna be able to stay up on all the most popular stocks out there. You’re also gonna get my watchlists, my bullish watch lists, my bearish watch lists, that’s gonna be updated multiple times a week.

18:12
And I’m also gonna send out charts throughout the week that I find very, very interesting or ones that I think you should keep an eye on. So, check that out, swingtradingthestockmarket.com and make sure if you’re listening on Apple or Spotify or whatever platform, leave me a review. That would be great. 5 stars are much appreciated.

18:27
I always like those. Make sure to, uh, uh, support the channel by doing that. Subscribe. Thank you guys, and God bless.