Pressure of Needing to Win | Podcast Episode #201

0:07
Hey, I’m Ryan Mallory, and this is my swing trading, the stock market podcast. I’m here to teach you how to trade in a complex, ever changing world of finance. Learn what it means to trade profitably and consistently, managing risk, avoiding the pitfalls of trading, and most importantly, to let those winners run wild.

0:25
You can succeed at the stock market, and I’m ready to show you how. Hey everybody, this is Ryan Mallory with Swing Trade in the stock market, and I have a good episode for you guys today. We just finished our 200th episode and now we are on to 300. And for today’s episode, I’m going to call this guy Garth.

0:45
And Garth was in the chat room today on the SharePlanner trading block, and he was really riddled with some problems. He’s been going through a tough spell in his trading. Now I’m gonna piecemeal some of the comments that he made in the chat room and put it together. As almost like a letter in itself, Garth writes for the size of my account, trading in cash only yields me $10 to $30 on most trades, which just isn’t enough for me.

1:10
I turned to the options because the profits are in the hundreds when I’m right, but I can’t trade options the way you trade with stocks. I’m definitely stuck in the money situation right now. Around July, I started a losing streak that I’ve not been able to break even in some of the names that I have bought in the trading block, like Caterpillar being my latest loser.

1:27
I really do need to take a step back and readjust the way that I’m trading. I also put way too much pressure on myself going full time as a trader. I got to do some soul searching. I think I have just had my hand in too many pots, and when they fall apart, I kinda get a Max Payne situation. I used to only trade a few names.

1:44
I listened to one of Ryan’s podcasts again. And realized that I had been trading like a dang serial killer and never thought I would get caught. Yes, I did a podcast probably 5 or 6 months ago. I’m not exactly sure on the date, but go back and check it out. It’s don’t trade like a serial killer.

2:00
It’s one of the best ones that I ever did, honestly, and it really gets into the mindset of a lot of traders that that they will keep swinging for the fences until it burns them really bad. And that’s kind of what’s happened to Garth here. He says, I used to never go deep in the money calls just because it costs so much.

2:16
But it does get you a better break even price. That strategy is really what started hurting my swing trading account. From January to April, I was making between $300 to $5000 a month and life was good. Now, everything I touch loses. I have only ever really done options and I raised my account to over $25,000 from last September and decided to go full time, but now I’m down almost $7000.

2:38
Big ouch. This summer after July is when I really started getting burned. The real reason too many puts, I was starting to try to time a market collapse, ended up missing the actual 6% pullback we did eventually have. I need to stop shorting the market. So a lot going on here with Garth.

2:55
Again, I’m piecemealing a number of his messages in the trading block at SharePlanner because I felt like. I could respond to him in there and maybe a few people would benefit or I could respond in a podcast and a lot of people could benefit from the problems that he’s experiencing from a trader.

3:11
Now, what am I drinking before we get into the main subject at hand. Well, I picked up a bottle at Sam’s Club and I swear I don’t get compensated for them, but I do go to Sam’s Club a lot to see what kind of interesting bourbons and whiskeys that they have because they have a lot of them that I can’t always get anywhere else.

3:29
And today it’s Brothers Bond straight bourbon whiskey. It’s 40% alcohol, 80 proof. I couldn’t really find anything good or bad about this one, but now when I try it, it’s like really light and it’s airy. But I’m put off a little bit by the smell to the nose, to the nose, it smells like a church’s children nursery.

3:46
I know that’s not a good description for what you want a bourbon to smell like, but let me tell you, it’s growing up and even as an adult when I would drop my son off at the children’s nursery while I went into the main service, I would, I would get this smell when I walked in there, and I can’t even really describe it, but I smell it when I smell this particular bourbon.

4:06
I don’t know what it is, but it smells like a children’s nursery at a church. All those like baby wipes and all that stuff where they’re trying to keep everything sanitary. That’s what it smells like. Now, the taste though isn’t really all that bad. It’s light and airy and it doesn’t have a high proof, so that doesn’t really give you that little kick that you’re wanting.

4:23
It’s got a little bit of like a licorice flavor to it. And while I could say it could be used as an everyday sipper if you can get it for the right price, I think I paid about $30 for this particular one. The smell keeps it from really being an everyday sipper. I hate to say it. I can’t see myself going below 5 and I can’t see myself going above 5.

4:40
I’m gonna give it a 5.0. In the David Portnoy world, that’s a rookie score. I don’t care. 5.0 is the, the best score that I can think of giving this one. All right, so back to Garth here. The biggest thing here, and I think this is the result of most of his problems is that he went full-time trading.

4:56
He started off with like $4000 in his account. He was making between $300 to $5000 a month going back to September of 2020, and he felt untouchable. And, and that’s a very common thing to feel when you’re doing well in the market. Heck, even, even nowadays, when I go start going on a good winning streak, I have to catch myself all the time by saying to myself, look, you are very well capable of blowing up your account if you don’t keep managing the risk.

5:23
You’re not a perfect trader. And I think for Garth here, the market became too easy for him right out of the gate. I always am fascinated too by a lot of people who start off trading, they get caught up in this beginner’s luck. And I’m not saying that necessarily everything that Garth played as a trader early on was beginner’s luck, but there was a lot of forgiveness in the market after those COVID lows going back to March of last year.

5:47
After that, the market constantly rallied, I mean, in big, big ways and so trading out of the money calls or trading even deep in the money calls. You can make a whole lot of money, but the first thing you did was going full time because there’s a whole other set of pressures that you face as a full time trader versus when you have another job that will supplement your trading activities.

6:08
And it’s just the same way like when you go from paper trading to swing trading with real money that it’s a whole other set of emotions. When you’re trading full time, you’re having to pay for the mortgage, you’re having to pay for the bills, you’re having to pay for a lot of things. If you have credit card debt, you’re paying credit card debt off with your trading.

6:26
And not every month is going to be up. I’ve had plenty of months where I do not make money, but the one differentiator in my trading is is that I will manage the risk on those months to where the losses do not get out of hand. For Garth here, he started off with a $4000 trading account.

6:44
And he’s making these massive gains. And I can tell you another thing that he probably did was he was starting to think that OK, if I can turn $4000 into $25,000. What happens when I turn $25,000 into $150,000 and then I’m gonna turn $150,000 into a million dollars and you can project out into the future that the market keeps doing what it’s going to do.

7:08
This is how rich I’m going to be in the future, but that’s not how the market actually works. I did that very early on in my trading. I remember when I was in my early 20s, I had a few winning trades and I was already mapping out if I get 4 or 5% on every one of my trades going forward, this is how rich I’m going to be by the time I’m 30. And then let me tell you, I think I was getting into the billions of dollars here and that’s just simply not what ended up happening.

7:29
And so going from swing trading part time to swing trading or day trading or whatever it is that you want to do the full time trading status is going to introduce a lot of pressures that you have to consider into your trading. It creates a lot of havoc if you’re not ready for it and if you’re married and your wife or husband is being sold the story that you’re gonna be able to do this because.

7:52
This is what I was able to do as part-time trading that’s gonna create a lot of problems for you when those results don’t come about. And then when those results don’t come about, then you’re even pushing a little bit more harder because you’re trying to make up for that lost time or for those missed expectations that you had for your trading account.

8:07
You’re trading more aggressively now and maybe even doubling down or tripling down if you didn’t show in any management of the risk. That you’re dealing with, you may find yourself in a big massive hole. And remember, if you lose 50% in your account, you gotta make 100% just to get that money back.

8:23
The other thing, and this is another problem that I have seen more so over the last year than I ever have before, and that’s people not even getting into the stock market at first, but going straight to the options because they see the options as, oh, for a few $100 I can trade a 100 shares of Apple. Well, the problem with that is that it’s got a rally like 20 or 30% just for you to be able to get into the money.

8:43
And so a lot of times, traders are not calculating the risk even more so with options, even though they think that they stand to lose less because they’re trading a smaller amount, but their chances or the probability of being right within the time frame that they’re trading with their explorations.

9:00
Makes it a far more difficult proposition, even more riskier proposition. And the case in point here was, is that just recently here I took caterpillar as a trade and. I got into it. I think it was like at $201 something. I actually adjusted the entry price there a little bit because it had a $1.11 dividend, so that actually lowers the cost basis of the trade.

9:20
But I got into the Caterpillar and then I got out at like $200.20 after getting in at $2001. Essentially, I lost a 0.5%, but for him, he lost 21% on the trade and over 3. $40 on that options trade and that’s where it gets so much more difficult because even if a stock is just trading sideways when you’re trading equities and not options just trading sideways means you’re not making money and you’re not losing money you’re losing time but with options when it starts to trade sideways, you do start losing money because it’s decreasing the odds of that option actually being able to expire in the money.

9:55
Most traders are not equipped to trade options. I don’t even like options and I don’t like it because I don’t like the time variable. I can be right. On a trade’s ultimate direction but completely wrong in the time frame that it achieves it in, and that’s very difficult. It’s also very difficult from a risk standpoint that when you’re just basically buying calls and buying puts that if you’re wrong, you can lose everything you have in that position in an instant and a gap down if you’re long on calls, a gap down can wipe out your entire position overnight and it can be like a 1% down or a 2% down or a 3 or 4% move in a stock in that entire position that you had.

10:30
And that particular option is completely gone and back to the full time trading component of this segment, it’s a desire of almost every trader to want to go and become a full time trader. It’s a very difficult thing to actually do because not only do you have to have a strategy that works, but you also have to be mentally able to handle the rigors of trading for a living.

10:53
And you have to make sure too before you make that decision to become a full-time trader that you’re not using a small sample size to base that decision off of if you’ve only been trading for 6 months to a year, that’s not a big enough of a sample size to say I’m ready, I’m going to go ahead and quit my job and become a full-time trader.

11:10
That’s not going to be the necessary preparation for you to do that. If you’ve been trading for a few years and you’ve been successful, you could be the beneficiary of an incredible bull rally. I mean, if you think about it. We have not had a major, major pullback in about the last 18 months.

11:29
We just haven’t. And outside of COVID and the pullback that came from that, which lasted for about 3 weeks in total, we haven’t had a multi-month pullback going all the way back to 2018, the quarter 4 of 2018, where the market pulled back a significant amount.

11:47
So there’s so many traders that when they’re making decisions I’m gonna become a full time trader they’re not contemplating the reality of what a bear market is like and bear markets, even though it seems like well if it’s going up or going down, you should be able to make money all the same true in theory, but the bear markets can also be very, very difficult to time and to be able to get in on because when these bear markets hit.

12:11
They’re very fast and then there’s a lot of dead cat bounces on the way. So if you start the short after it looks very obvious that the market’s starting to tank, then you get caught up in this dead cat bounce and then how many dead cat bounces go right back up to the all-time highs and really don’t ever become a dead cat bounce because they just keep soaring and how many of those do you have to trade through before you actually do get that legitimate dead cat bounce that leads to the next leg lower?

12:36
So there’s a lot that you need to see, a lot that you need to experience before you can really make that transition from swing trading part time to swing trading full time or even if it’s day trading or whatever. And, and one of the things that I’m seeing a lot of I’ve been doing SharePlanner since 2007.

12:51
So I’ve been doing it a really long time. This isn’t like a fly by the night operation like what you’re seeing a lot of people popping up on TikTok trying to act like that they’re these stock market experts or gurus with a crystal ball. I see these things happen all the time at these major market tops. A lot of people becoming full-time day traders and swing traders from part time.

13:11
That happened. Back in 1999 too, everybody started quitting their job and becoming a day trader. I’ve never seen so many people quitting their job to become full-time traders since the dot-com bubble when everybody was doing that. And then in 2008, I remember there just being a plethora of people offering all of these different services and, and features on their websites and their blog pages.

13:35
And they all disappeared when the 2008 crash it and now all of a sudden we got them all back again. One of the good things about SharePlanner is I’ve actually been able to withstand all of those corrections, and I’ve stood the test for the long run. And also, speaking of SharePlanner and its services, make sure to check out swingtradingthestockmarket.com because there you’re gonna get all my market research.

13:54
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14:12
Now the difference and I some of the stuff that I offer and everything is that, and I’m not trying to make this about me because I don’t try to hold myself out there as being this guy with a crystal ball that knows every next move that the market’s going to make. What I’m trying to do is manage the risk on every trade that I do make make sure that I’m taking calculated risks where the reward is far bigger than the risk at hand, and I do think that as traders we tend to get ahead of ourselves.

14:39
We don’t look at that risk we look at the profits and even in Garth’s messages here in the trading block, he says that. Making $30 to $40 on a trade was not enough. Look, here’s the thing, you don’t have to pay commissions and by saying that $10 or $30 on a trade is not enough, a trader puts themselves in that position to have to need more, but the market doesn’t care that you need more.

15:01
It doesn’t have to fulfill those expectations and most of the time it won’t. That’s why it’s not good to have expectations with the market and when you do go full time with your trading, you’re putting that pressure on the market that it has no obligation to fulfill. Because when you’re trading stocks, $10 to $30 is enough if you’re managing the risk and you’re maximizing your profits, you’re making the money that’s available to you, the profits that are available to you for the circumstances that you are in for the capital that you’re trading.

15:29
Garth went to options trading because he needed more money, but when you’re trying to go for bigger profits, you’re also increasing the amount that you stand to lose on a trade. A lot of people don’t understand that particular aspect of trading. If you go for bigger profits you’re also increasing your risk as well and you gotta make sure you’re gonna be able to take it and in this situation he’s got his hands in a whole bunch of different buckets he’s trading options he’s trading stocks, he’s trading all sorts of things and he’s getting himself into trouble where he’s creating these max pain situations and then most people.

16:03
Because this is how we’re wired. When we hit that max pane, we sell it all. We just want out. We don’t want nothing to do from with it again. We envision a life where it never came into existence, we wanna start over and just build back what we have the old way. And that’s again why I’m such a stickler about managing the risk, about using stop losses and about using a strategy that.

16:26
The market doesn’t have to comply with, but it’s a strategy that you comply with what the market wants to do what the market decides it’s going to do if the market’s going to sell off, I’m not going to buy a long position even if I wanna buy a long position, even if there’s some really good trade setups out there, if the market’s selling off, I’m gonna step back and say, hey, you do your thing, man, and I’ll be ready to buy when the market settles down and that’s me not putting my expectations on the market, but basically me conforming to the will of the market.

16:52
And Garth also looks at dollars. He’s looking at the dollars more so than any reason why is because he’s a full-time trader and as a full-time trader, you have to still pay the bills, so you’re going to be looking at the dollar amount that you’re bringing in. But an important aspect of trading is to not look at the dollars because you start to personalize them and when you start to personalize them, those dollars mean something.

17:11
It means your next mortgage payment. It means your, your kids’ college tuition or your car payment or the food that you put on the table. That’s what those dollars represent, but when you just focus on the, the percentages and you focus on the charts and you don’t get caught up on your year to date, but you’re just focused on making good trades and managing the risk.

17:29
You don’t get ahead of yourself, you don’t get down on yourself, you’re just focusing on that next trade and making good decisions. If you enjoyed this podcast and encourage you to leave a 5 star review for. Those things mean the world. They really helped me to continue to grow this network. Also check out swingtradingthestockmarket.com.

17:45
You’re gonna get more than you could have ever bargained for if you go there, all sorts of good stuff there. swingtradingthestockmarket.com. And be sure to send me your questions, ryan@shareplanner.com. I do see them. I do answer them, and I’m here to help you guys. So thank you guys. God bless. Thanks for listening to my podcast, Swing Trading the stock market.

18:04
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18:22
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18:39
All the best to you and I look forward to trading with you soon.