Election Jitters and Over-Trading | Podcast Episode #126

0:00
Hey, everybody. This is Ryan Mallory with Swing Trading the Stock Market. And I got a good show for you guys today. It’s, it’s kind of a crazy time in the world right now. We have an election coming up as of the time of this recording, the next day, that means I’m doing this on a Monday, the election’s on a Tuesday.

0:15
That means sometime late Tuesday night, Wednesday morning, we might have an idea if this is going to be a Biden victory, a Trump victory, or a contested election. I personally don’t think it’s gonna be a contested election. I think it’s a lot of talk. I think it’s a lot of, uh, smoke and mirrors right now. I mean, we had one in 2000, but that was such a unique situation with those chads.

0:34
Remember those hanging chads? Those, that was some crazy stuff there, but it’s, it’s causing a lot of people jitters with their trading and everything else. But before I get started here, I’m going to start with a Bourbon. I kind of got off the track the previous weeks. I’ve been drinking some of those straight rye whiskey.

0:50
I like the straight rye whiskey. They’re they’re pretty good. My favorite’s always gonna be the bourbon. Before that, I did a really good Hibeki Japanese whiskey. That was, that was a solid one that a user had sent in, so that was pretty darn good. Now, this time around, I am going to be drinking.

1:07
What they call Winchester straight bourbon whiskey. I really hope this has some kind of connection with the Winchester guns, man. I, I grew up shooting some Winchester guns. I love those things. Uh, good stuff. This is a straight bourbon whiskey. It is 45% alcohol, and that makes it 90 proof, aged a minimum of 2 years in New oak, produced and bottled in North Charleston, South Carolina.

1:31
So I’m gonna get it. I don’t think I’ve ever tried this one. I need to create a spreadsheet of all these things that I’ve tried cause I’m, I’m kind of getting a little paranoid that I might actually have done some of these ones that I didn’t really stand out to me and then I’m like redoing them again, but I don’t think I’ve done it yet. I don’t think I’ve done Winchester yet, so. I feel like I would have remembered Winchester.

1:49
Let’s go ahead and get into this. Now, here’s the funny thing though, I actually have an ice cube sitting on my desk on a like a napkin, just because I’m a little paranoid that I might not like it. I want it a little bit deluded, but I’m, I’m trying to give this thing the benefit of the doubt. If it’s not that good, I’m gonna stick the ice cube in it, but right now I’m drinking it meat.

2:07
That’s good. That’s really good actually. I actually like this. This is pretty solid. I’m gonna have to put that ice cube back in the ice tray. It’s got this really strong harshness right when you taste it, but it’s not like just like a bland harshness. It’s like you can taste the flavor of the barrels almost, man.

2:23
It’s, it’s just a really good, good bourbon. I’m, I’m kind of shocked. And the price point’s pretty good. It’s $26 for a bottle. I’m gonna have to pick up an actual bottle of this because this here was just a sample bottle, but it’s pretty darn good. Really impressed by it. It’s one of the better mid-priced bourbons that I’ve tried.

2:41
I don’t even know if that’s really mid-price, really, $26. I mean, for me, that’s kind of like one of the better lower priced bourbons that I’ve tried. I mean, it’s really good. It’s, it’s definitely harsh, but it man, it finishes strong like it’s just, it’s solid. I, I like it. Now, if you’re not into a harsh drink, you’re probably not gonna like this one too much, but this one, it’s got a harshness, but it’s got like this subtle smoothness that you can like.

3:02
Taste that wood finish. It’s, it’s really nice. If you remember, I’ve changed the ratings for this from a scale of 0 to 5 to 0 to 10. On this, I’m gonna give it like a 7-1. I think it’s pretty good. Some of you guys aren’t probably gonna agree with that. I think it’s pretty darn good. I’m gonna give it a 7-1.

3:17
I’m very impressed by it. I think it exceeded my expectations. All right, so back to the elections here because I think a lot of people are really worked up about it. I, I’m seeing it in the emails, I’m seeing it in the chat room. I’m seeing it in messages on YouTube. I did a video on the election on the S&P 500, how it would react.

3:35
First of all, I mean, it, it’s really hard to have a discussion about politics without people like losing their minds. I know, I know Trump is a polarizing. Figure that’s, that’s not new news. I know that people who like Trump don’t like Biden, but it’s not necessary for you to have to tell me that you don’t like Biden because you like Trump and you don’t like Trump because you like Biden.

3:54
It’s, that goes without saying. I, I, I get that that’s the situation in America. It’s not really like Nixon versus Kennedy or Bush versus Perot and Clinton. The polarization of politics is extreme right now. So, You know, I, I guess a lot of times people will give their opinions on, on candidates and they feel like they have to be insulting in the process.

4:16
They give these stupid nicknames. And yes, I know that there’s politicians that do that too, and I’m not even gonna name it. It’s obvious who it is. But I mean, why, why do that if, I mean, what does that proof that it doesn’t allow you to have a civil conversation, especially with somebody that doesn’t hold the same belief you. So anyways, the reason why I bring all that up is because the purpose of this podcast episode today isn’t to get into the merits of each candidate.

4:37
It’s really to get into the, what are we dealing with in the stock market here? What are we likely to see because we have seen where in 2016, the market sold off, the S&P 500 sold off like nine straight days prior to the week of the election. And on the Spy, it was like 4 out of 5 days, it sold off.

4:53
So a little bit different even though there’s a pretty much tracked the same. It was just basically because Spy had a slightly lower finish that put it in the red while S&P 500 had a s higher finish. It doesn’t really mean much. Nonetheless, it was a bearish week going into the election week.

5:09
Now, we’ve kind of started off the same way. We didn’t start off in 2016, we started off with just amazing bullishness. Today, we started off with amazing bullishness, but we quickly pulled back. We didn’t really finish the job. We didn’t see the market really take off there. And so you saw things like tech pull back, didn’t really participate in the rally.

5:28
And here’s the thing about tech. We saw tech not participate right at first either when the market bottomed in late March. And I was kind of dumbfounded by that too, and I’m kinda dumbfounded that we didn’t see tech rally again today as well. So it’s gonna be key for futures throughout this week to continue to rally.

5:46
Now, the, the outcomes of the election, you get a Biden victory. I don’t think the market’s gonna react all that much. I think where the market might get a little bit worrisome is if you have a divided government where you have a Democrat president, Democrat House and you have a Republican Senate.

6:02
That’s very possible there because you’re still gonna have struggles with coming to a deal on the stimulus, so then that’s gonna put the stimulus right back in the forefront of the picture. On the flip side, Trump wins, he’s more than likely going to hold the Senate in that case, and he’s gonna likely have a Democrat House.

6:19
And then if that’s the situation that we’re dealt with, it’s gonna probably be a similar reaction. I feel like the market’s been kind of paring for a potential craziness on election night. I think that’s why we’ve seen the pullback last week and we’ve seen it for the two weeks prior to that. The worst thing I think for the market is that we start seeing like a repeat of 2000 where you’re getting the lawyers involved, you’re getting the courts involved.

6:39
And all of a sudden everything’s unknown. We don’t know what the heck’s going on. You got rioting in the streets, you got all this other craziness. I mean, there’s, there’s crazy Twitter accounts out there already talking about what they’re going to do, if it’s a contested election or if their person doesn’t win, it’s absolutely freaking nuts.

6:55
So freaking nuts I need to take another drink of my Winchester straight bourbon whiskey. A lot of times as traders, we think that we gotta be doing something in order to be managing the risk. And when I say that, what I mean by that is that we, we have to be trading. We have to be getting more long or we have to be getting more short.

7:12
And sometimes that’s not the answer. The answer is really to do less when it becomes more uncertain in the stock market, when you have less of an idea of what’s going to happen, and let’s, let’s face it. There’s been a lot of times in 2020 we don’t have a clue with what’s going on here, and the, the solution to that is not to do more, it’s to do less, to do less until you, the market becomes a little bit more certain, so you can do more.

7:36
You do more in markets where it’s more certain, where there’s more of a trend line that’s been established, there’s more momentum. Right now, it’s not there, we’re setting up for a bounce, but we’re not bouncing like you would think we would. So the result is, is that you just don’t do a lot.

7:52
You scale back, you go more cash. When I, when I don’t know what’s going on, I do less. Right now, ahead of the election, I have two positions in my portfolio, and I’m mainly cash. And I’m OK with that. I really am. I feel so much more comfortable not being heavily long or heavily short because when you’re either one and you don’t really know what the outcome is, and nobody does, you’re setting yourself up for a major problem.

8:15
And let’s say you know what the outcome’s gonna be, but do you necessarily know what the market reaction’s going to be? And no, you don’t. I did that back in 2016. I was looking at the polls and at the time you had the whole Brexit thing going on too that had just happened a few months before it, and I remembered looking at the Brexit polls and the demographics of who was going to vote and who was likely to vote for the Brexit and who was not likely to vote for it.

8:37
And it was very much aligning in a similar pattern to the people who were voting for Trump here in the United States. And I thought to myself, I think Trump’s gonna win this thing. And he did. So what did I do? I got short and this was a lesson learned for me because it’s not like you trade a ton of elections, but you darn well better be sure that I’m gonna learn the lesson from that election.

8:55
And that was, is don’t, don’t go heavily long or short into an unknown scenario because not only do you have to get the outcome right, but you also have to get the market’s reaction right. So I got the outcome right. I was short the market and, and, and you know what, when Trump started winning all these states, the market started selling off and I’m thinking, hey, this is great.

9:12
We limited down, the circuit breakers kicked in, and then all of a sudden, I wake up the next morning, which wasn’t on much sleep because election night, it’s, it’s far too enticing to just stay up the entire night. I don’t expect to get a lot of sleep Tuesday night because I actually, as a political science major, I love this stuff.

9:29
I really do. I really enjoy watching the electoral college get filled in. Who’s gonna take what state, which one’s a surprise, all that jazz. But the market kept rallying back up. And in the process, I, I ended up like either taking a small loss or a small gain. I, I don’t know. I could go back and look at my, my price, uh, history and everything on my trades, but yeah, it was, it was a shocker to me because I went to bed thinking I was gonna clean up and then I woke up and the market was rallying close to green and it finished green that day.

9:44
So, the point is, is that doing more doesn’t necessarily make you safer in the market. Usually it makes you less safe. So, when you have less exposure, less commitment to what the market’s doing currently, that’s OK. The market’s gonna trade the next day. It’s gonna trade the next day after that. You can always get back in.

10:03
But when it’s very much unknown, you don’t need to be in it at that point. You’re just trying to be a hero if you do it. And I was trying to be a hero in 2016 and, and, uh, while I made a pretty bold prediction and said, yeah, I think Trump’s gonna win it, I was wrong on the market reaction. And the saddest part about this podcast, I’ve got like one sip left of this Winchester.

10:19
I mean, this was good. This is a really good one. I don’t even think the store that I carry has a full bottle of it, so I’m gonna have to go find it somewhere else. I need to find a bottle of this. This is good, good stuff. $25 for a bottle, you can’t beat that. All right, so guess what? We also have an email here that I’m gonna get to.

10:38
I didn’t think there was a lot of content to work off of, but there’s a couple of lessons there that I wanted to address, so I’m gonna go ahead and do that. This is from a 19 year old. I, I kind of dig the fact that there’s so many young people these days that are interested in the stock market. And for the purpose of this podcast, I’m gonna give this person the name of Jesse James.

11:00
Yeah. Jesse James, American outlaw, if you guys remember, bank robber, train robber, all those good things. And I’m doing that in honor of America because we have an election tomorrow, even though Jesse James never ran for an election, he was American, so we’ll give him that strong, bold American name. And I drank Winchester tonight, and I bet you that Jesse James had a Winchester at some point in his life.

11:31
So, Jesse James writes, Hey, Ryan, my name is Jesse. I’m 19 years old, and I want to start off by saying thank you. Your podcast is amazing, and I’m sure many people benefit from your work. You know what? That’s not true, because I had some douchebag decide to leave a review on Apple Podcasts tonight saying, painfully tedious.

11:48
I have no idea how this guy runs a podcast. I’m listening for 10 minutes while this guy’s a fumbling idiot. You know, there you go, buddy. Andy 9729. Appreciate the not so positive feedback. Any case, with that said, if you guys would like to, make sure to go to, uh, whatever platform that you’re listening to my review on and leave a five-star review.

12:08
You know why? Because it helps me to deal with these weirdos that come on there and they feel like that I’m supposed to be catering to their every personal need and probably because he was 200% in margin and he wants to take it out on somebody and I’m not his crystal ball to tell him what to do, when to do it, and how to do it.

12:29
Also, before we get into this email here, I’d encourage you to go and check out swingtradingthestockmarket.com. I provide all my market research each and every day. That includes S&P 500 analysis, NASDAQ analysis, and Russell 2000 analysis. On top of that, you’re gonna get my indicator once a week that I use for timing market reversals to the upside and to the downside, as well as updates on all the FANG stocks.

12:46
Facebook, Amazon, Apple, Netflix, Google, Microsoft, Tesla, and you’re gonna get my personal watch lists. And you’re gonna get the charts that I’m finding most interesting each day, and you’re gonna get my list of setups that you want to be watching each and every day. Make sure to check it out, swingtradingthestockmarket.com and in the process you’re supporting the podcast and allowing me to be able to continue to put out more and more content each and every week.

13:09
Jesse James says, I started learning a lot about the stock market back in February this year, and I literally started investing like the day before the crash. Yeesh. I used Robin Hood for months, currently use Think or Swim, and actually managed to make a few $1000 through the market.

13:25
I know I was lucky because I didn’t know what I know now about stocks. Well, let me tell you, you’re gonna know a lot more about stocks as you continue to do it because even though you’re 6 months into it and this year was crazy. In terms of lessons and experiences, I have experienced a lot this year myself with the stock market.

13:41
I think, I think if you can get through this, this market here, you can, you can probably pull it off in the stock market as a whole. You just got to realize the market’s crazy, it’s unpredictable, but this year in particular, it was the craziest thing I’ve ever seen. Hands down the craziest market I have ever dealt with.

13:57
And Jesse James says. I actually managed to make a few $1000 through the market. Good job, man. I’m glad for you. I’m proud for you and happy. I hope you’re managing the risk. Jesse then uses the following words, I know I was lucky. Well, you know what, I think I’m lucky on all my winning trades too.

14:14
Jesse James goes on to say, I’ve never bought into the hype and I don’t listen to what random people say about a stock market. I am just thankful for that. That’s good. A lot of people get worked up on CNBC. They get hyped up on what they’re talking about on CNBC. If they’re talking about DraftKings on CNBC, they’re buying DraftKings. If they’re talking about Apple, they’re buying Apple.

14:32
So yeah, it’s, it’s just good to weed out that noise. Eventually, I started learning about options, uh, that could be a little too early, and started selling them and doing spreads and all that stuff. It was OK. I didn’t really lose money, but I didn’t exactly make money. I did make about 100 trades in a two-month span.

14:47
Good lord. I mean, that’s, that’s not too outrageous, but I mean, I think in your first year of trading, I would probably try to keep the trades a little bit less. You can really churn your capital a lot by doing that many trades over a 60-day period. Jesse James goes on to say, though, quite a lot for a beginner, but I had a plan like you say, I knew where to get in and out and followed my own criteria.

15:09
OK, that’s good. I like that. I like that you have a plan of where to get in and where to get out. You got to do that. I ended up having an 80% win rate. Wow, that’s good, that’s good. Which sounds like I should have made money. Oh boy. Before I even read any further, it sounds like you did not cut these losers short, but my losses were just too big for my winners to outweigh them.

15:28
See, you say that, but then you say that you planned your trades and you followed your own criteria, where to get in, where to get out, but, and you may have been actually doing that, but where were you getting in at versus where you were getting out? I mean, if you’re winning at 80%, that means you’re like, if you’re like losing with an 80% win rate, that means you’re making like 20 cents for every dollar that you lose.

15:46
I mean, that’s crazy, right? I mean, I don’t know if that’s the exact math, but, but no, I mean, an 80% win rate and you’re still losing, what it tells me is that you’re not letting your winners run and you’re letting your losers run instead. You got to reverse that. You gotta cut those losers short, even if that brings down your win rate.

16:04
That’s not the big deal. The big deal is, is not letting your winners run because if your winners run and your win rate comes down, but your losers also shrink in terms of size, that’s good. That’s a really good thing. So a high win rate isn’t really necessarily good. A lot of times that actually does mean exactly what she’s talking about here is that she’s letting her losers run, is that she’s holding on to these things until they become winners again, but the ones that don’t become winners again, they destroy them.

16:30
Jesse says when I heard you say manage the risk, it clicked for me. I realized that I have been doing this wrong the whole time. You have helped me out a lot, and I hope that maybe one day I can make this my career too, because I love it. Thank you again, Ryan. No, you can, and I think, I think there’s gonna be a lot of good traders that come out of this pandemic, out of this year of trading because it’s taught you a lot of lessons.

16:50
It’s taught you about how the market can go way up and how it can come way down. And that’s, that’s, that’s a good thing for a beginning trader to experience. It really is because when I started off, I was 11 years old, it was 1991. I had like a period of like 9 years before I really saw a substantial sell-off, a substantial sell off to where I was like, what is going on here?

17:09
If you’re getting it in your first year, you’re quickly coming to the reality that says, hey, the stock market can kick you in the rear end. And that’s, that’s a good thing because likely if you’re just starting off trading, you’re not, you know, mortgaging the farm, you’re probably young enough to be able to overcome any mistakes that you made, that’s a good thing.

17:25
I was 9 years into it before I saw a substantial pullback and that was following the dot-com bubble, which was like the craziest bull market rally that I can remember outside of this COVID rally off of the March lows. But even still, I would probably say the dot-com rally was, was just amazing in terms of duration and how high it went, especially on the NASDAQ.

17:46
But Jesse James here has done options. I didn’t really touch on that too much, but I think options is really something that you should really nail down trading equities first and then get into options. I did that. I got into options. I just realized it wasn’t for me, but nonetheless, regardless if it’s for you or not, you really need to nail down just the basics of buying and selling and being good at that, because when you start introducing options, you’re introducing a ton of other variables.

18:08
The time factor is a killer, expiration, killer, deltas, Greeks, all that stuff, it’ll throw you for a loop, OK? So get good at trading just equities, get good at buying and selling, buying low, selling higher. Don’t try to get into the options until you’re a master of that. That said, that’ll do it for today’s show.

18:26
I hope you guys enjoyed it. If you guys have any questions, always feel free to ask me. Uh, hit me up at ryan@shareplanner.com. I thrive off of your emails, off of your questions, so please keep sending those to me as well. I want to keep hearing from you guys. I think you guys are awesome and you guys give me so much good content to work with.

18:43
Hey, we got an election coming up here, regardless of who wins and who loses, life goes on. Life goes on. I was thinking about this on the drive home today. The presidents that have been elected in the past, whether it was Trump, Obama, Bush, Clinton, Reagan, what did they do to my life that that ruined me as a person?

19:03
I can’t really think of anything, and I think that’s what we need to remember as we go into this election is that the president and whoever is elected isn’t going to ruin us. The person who’s going to ruin us is ourselves if we let it happen. So stay strong, stay courageous, whether you’re on the winning side or the losing side on election night.

19:22
Stay level headed, stay cool, and remember, life goes on, there’ll be another election one day. Thank you guys and God bless.