Buy The Dip | Podcast Episode #74

0:07
Learn a trade, stock successfully learn to profit consistently. I’m Ryan Mallory and on my weekly podcast, I’m going to teach you the in and out of a complex ever-changing stock market. If you will learn to trade better trades, smarter and profit figure.

0:26
Now let’s go trade everybody. Ryan Mallory here and podcast, 74. What are we going to talk about? Well, I think I want to talk about the most common expression. Found on the stock market today.

0:43
And that is by the dip, by the leap, and dip by the mother bleeping did that. That’s so you got an acronym, you got BT D BT, F DB T. MF D, depending on how derogatory you want to get about expressing yourself.

1:03
There’s a lot of ways to say buy the dip. I personally just choose to say, buy the dip. Let me tell you. It’s going to take I came to take it through this podcast because I absolutely abhor the expression by the dip.

1:19
I’ll say it, I’ll say it in jest, but really buy the dip. Has its roots and denying. The presence of risk in the stock market and this is an idiot stock market right now. Quite honestly, it is, it doesn’t reward.

1:36
People who manage risk, it really doesn’t. It’s going to manage people who turned a blind eye to it. Now, that’s great, right? Psycho? That’s a riskless market. No, not necessarily, it’s just rewarding people who don’t care about risk. For now, I’ve done these things for a long time.

1:52
I know how these things in, they always end bad. It ended last quarter for bed, people were blind to risk, then it Ended really bad, January of 2018. When we had a seven or eight percent, run in January, only to sell off, super hard and Superfast and February people say, well, you buy the dip.

2:13
Well, when do you buy the dip? Do you buy the dip? When it drops, Five Points, 10 points, 30 points. 100 points when you buy the dip. Well, I don’t know. You just buy the dip. That’s what they’ll tell you. If you ask them. When you buy dip, they just say.

2:28
Just buy the dip. there’s really no logic to it because what it does is it creates a scenario for you to for for you really to just blow up your Capital. What about XIV A couple years back? I believe it was or maybe it was just a year back.

2:44
I can’t remember exactly when but when the vix went up a hundred and something percent and one day and XIV had to shut down because in their perspectives, it said they had to shut down. People lost everything. Even the people who got in like a couple minutes before the clothes, I had somebody in the Splash Zone.

3:00
I didn’t I don’t trade Vic’s products, okay. If you’re Going for somebody. Who’s an expert in that? I understand the volatility index, quite well, I don’t trade the volatility index. It is nuts. Now, in the same, same note, where people buy the dip, all the time on equities.

3:18
People, also just short the rip on the vics all the time and even if you look back on it, like the last, you know, couple weeks or so, it looks like it’s a great way to make money. Just short every stinkin rip on the vix. If it goes up, you short it every time. That also is very bad because you want to talk about getting a margin call in a hurry be wrong on that one day where the vix does not sell off.

3:41
And then all of a sudden you’re going to realize how bad. And here’s the other thing too, is that kind of simplistic simple minded approach to trading and I’m all for simple approaches to trading, but that one is not a simple approach to trading that you want to do. It’s kind of like Buy Low sell High. Well, of course everybody wants to do that.

3:58
You know, by the dip the market has always been on a bull run forever. So you always Buy every dip, that’s true too, but the entry is the problem with the buy the dip. You maybe get get rewarded for the two-point drops and you buy the dip that today.

4:13
We had a 30-point drop, almost a 30 point drop. People bought the dip. It went back up and closed about what 10 points down on the day, 11 points down on the S&P 500. So people have a look at that, man, free money. It’s free money. You know, we got quantitative easing for and markets, cutting interest rates, all that definitely goes into the market.

4:33
Being able to sustain itself right now but Eventually the buy the dip Theory does not work because you in the end. Yes, at some point you were going to buy the into the stock market after a sell-off. The problem becomes is when you start doing it way too early, you start buying stocks way too early on the sell-off and so nobody ever knows how long a sell-off is going to last.

4:59
Nobody knew that today that the market was going to sell off 30 points when it started to sell off and was only down five points. Did you know it was going to be the right time to buy the Dip at Five Points or 10 points, 15 points or wait till it was down almost 30 points. You don’t know that. But people will blindly by it, hoping that the market is going to bail them out.

5:17
That’s why I say that this is a market for idiots who have no grasp of what risk is. And if you don’t have a grasp of risk, long-term your ability to survive in the stock market goes to zero. That’s right, you will not succeed in the stock market. If you do not respect risk.

5:35
So you saw this podcast title today and you’re thinking, oh man, this is going to be great. He’s going to talk about buy the dip, he’s going to validate all of the things that I have been saying about just buy the dip. Just buy the dip blindly by the dip. No, I’m not.

5:50
I’m telling you you’re a fool for. Just buying the dip all the time. Buying. The dip. It will destroy. And kill your portfolio, and the long term and this is something That got its roots back all the way going back to 2009 when we had that massive market. So offer in 2008 bottom dat 666 on the S&P 500 funny I know.

6:11
And then it just started, rip. It’s been ripping higher ever since right? And so you in the meantime we definitely have had sell-offs and everything like that but what do you do? Do you. You just come on by the dip every time we have a dip. No because then sometimes you have some really, really big dips, 2018 quarter for.

6:29
We had a massive sell-off 20% over over twenty percent and three months. so if you bought the dip, when it was down 1% Was that the should you have bought the dip back in October when it was only down one percent know, but people did people did it when it was down 5%, people didn’t want to 10%, come December.

6:51
People are still buying it, they’re leveraging their position. Some stocks didn’t even recover from that big sell-off, okay, so if you’re still buying the dip in stocks that have yet to recover, that’s bad too. But then you say, well, Ryan look where the stock markets that. Now, we are way beyond that. We’re at new all-time highs.

7:08
I would have made my money back up by now. Yeah. If you bought spy, yeah, you would be up on that trade right now. Is, does that make it a smart trade? No, it doesn’t. Because you just wasted all that time. Trying to make back money, you didn’t have to lose and in some cases you’re going to be buying this dip on the wrong stocks and then you’ll never make that money back.

7:29
I mean you look at the stocks that were trading in 2000 during the.com. If you bought the dip when the.com bubble blew up thinking that. Okay, I know I’m buying the dip at 4,500 and the NASDAQ is going to go. Like I can’t remember how lonely. I think it went like below 2000 on the NASDAQ and let’s say you’re just wrong, but you loaded up your portfolio when it went from like, 5,000 down to 4000 and you’re like, I’m going to make my money back one day.

7:56
It’s going to go straight back up and you buy all these companies. There’s a lot of those companies that do not exist today. They never made it back and there’s a lot of companies out there right now, that will not make it back when we do get another big sell-off. So when you buy in the dip, you’re buying these stocks, and you’re done, you’re holding on for the long term, and they don’t come back that happens.

8:18
The markets been going up ever since GE, has been a stock right over the when GE first came out, I don’t know how long it’s been in business, but I think it’s been like, over 100 years. I’m sorry. I don’t really know that. I feel like, I should know that. I know it’s been around like, extremely long time.

8:35
Like at least 100 years and then you look at where the markets at. Now, it’s way. Higher way, way higher, but look at where G. He’s at right now. Gee, he’s trading at $11. You want to know where it was? Treating a Back in December of 1999, December 31st it was trading at $49 and 55 cents.

9:01
A 75% decline. So how did that by the dip mentality work for you? They’re one of the most reputable companies in United States history has declined 75%, and it’s accurate was even worse than that.

9:16
It was like over 80 percent earlier this year. But people who say just buy the dip, don’t take those things into account, not all stocks. Come back when the market rallies back. I think I think it’s a good idea when you have substantial new lows on spy on QQQ if you’re looking at like a retirement 30 years into the future to go buy those ETFs to buy.

9:42
Like a spy to buy like a QQQ iwm, maybe not iwm. I wouldn’t buy that for the long-term small caps, they come and go, they become big companies. I don’t really like small gifts. I don’t like training to index. All that much, either. Not from a long-term standpoint, at least, but Dia.

10:01
Que que que spy. Yeah, if the market is going to sustain itself over time, that those things are going to go back up to. But again, it’s about where you get in, if you got into the NASDAQ back when it peaked and 2000, March of 2000. If you got em for the first time because you were had the fear of missing out and you got in at 112 dollars, let’s say around $112, right?

10:23
I think the highest it reached at that point was like 120. But let’s say you got in 112. That was in 2000. You did not make your money back until 2015. That was 15 years that it took for you to get your money back.

10:40
And you also had to watch a period of three years of just non-stop selling going from 2001 2000, 2001 and 2002 just awful. And then you had the big sell-off in 2008 that almost took it back down to the 2,000.

10:56
Loads So you say by the dip. Okay, even on these ETFs there by based off of the history of the stock market will go up over time but you have to be right about where you get in it. You have to wait for substantial new lows to to get in. There’s dollar cost averaging to but then still even when your dollar cost averaging I know a lot of people do that in their 401ks and IRAs and stuff like that but then you still have to hope that that money will eventually make you a lot more money one day whereas if More patient with with your entries, you can get in a extreme lows and then write it back up.

11:31
Here’s the thing. QQQ went from like a hundred and twenty dollars a share. And March of 2000 all the way down to twenty dollars a share. Let’s say you got in at 120, let’s say you were the backhoe loader at the very top I mean that’s over 80% guys over 80% that you lost.

11:51
So biting, the dip is not always the best approach. People will do it with a short sightedness thing called the markets going to go up tomorrow. But at some point, it’s going to Peak and you’re going to be left holding the the the keys to a stock that That’s just continuing to go down.

12:08
I know, I’m being a little bit of a Debbie Downer with this podcast here and I don’t mind that quite honestly because I feel like I’m really giving you some advice that’s going to help you out in the long term when it comes to trading and how to trade, well, to protect yourself and to protect yourself from unnecessary risk and unnecessary loss.

12:28
Because like I said right now, the vine seems really easy. We drop Five Points, you buy the dip, even if we just dropped 30 points, you buy the dip and it seems easy. Seems Like free money but eventually it comes with a cost just like shorting. The vix came with a cost for so many people.

12:45
You don’t want to be, you don’t want to be a bag order when that time comes. And here’s the other thing to a lot of the dip buying when people will say, I’m going to keep doing it until it doesn’t work anymore. Well, when it’s doesn’t work, once what do you do? You just stop right there.

13:01
You can say, oh, it failed to work this one time. I’m not going to ever do it again. No, because it’s worked so many times for, in the past, you’re going to keep doing it. But when it stops working altogether, you just keep buying the dip as the market keeps. Lower and lower, and you’re all of a sudden, leveraging yourself.

13:18
You find yourself going into margin. You find yourself getting way too involved. And to, in a market, putting way too much Capital to work, your emotions are running High, your mind isn’t working, because you’re losing so much money, and then you sell out at the bottom.

13:26
That’s a really good feeling, isn’t it? I’ve had that happen to me on trade, not not all the emotional craziness, but I’ve bought in at it on a stock it’s goes down like one or two percent and I get stopped out and it goes is right back up, but that’s different because I’m managing my trade on managing to do.

13:43
That was the stop loss that I had when I went into the trade. So I’m just following my training plan. I can’t do anything about that, but when you subscribe to a flawed theory of just buy the dip and when it stops working, you just keep buying and buying and buying it, which is what people will do, they’re going to lose a ton of money so I’m going to wrap this up and I’m just going to be completely honest with you.

14:05
If you buy the dip right now, if you keep buying stocks, it may wake work for you for A Time. And that’s great. I hope you make tons of money by doing that but eventually it’s going to stop working and you have to ask yourself, am I gonna have the wherewithal to know? It’s time to stop buying the dip.

14:21
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14:40
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15:00
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