Just One Stock To Trade | Podcast Episode #202

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. This comes from a guy that we’re gonna call Forrest. Now, of course, that’s not his real name. Real name is something else, but I use good Florida redneck names unless requested otherwise.

0:45
To conceal their identity in case they don’t want to be known. Anyways, forests, rights, what’s your thoughts on trading one stock for a short period of time just watching for patterns and maybe even doing some options on it? Look, the dude gets right to the point. I like that. He’s asking a question that’s never been asked on this show before, and I’m excited about answering it.

1:06
But first, let me remind you, check out swingtradingthestockmarket.com. That’s where you’re going to get all of my market research that I provide listeners with each and every day. swingtradingthestockmarket.com. You’re going to get all of my daily watch lists. You’re going to get the weekly master watchlist.

1:23
You’re going to get. The most intriguing charts of the day that I come across as well as updates on the regular with the Fang stocks plus Microsoft and Tesla and the market indices including S&P 500, Nasdaq 100, and the Russell 2000. And what am I drinking here? Well, before I get to answering Forrest’s email, I’m drinking a whiskey.

1:43
It’s not a bourbon, just a whiskey. It is Abaolo. It’s a Mexican whiskey. And it’s come straight from the farm to the bottle. And I’ll be honest, I don’t have high expectations for this one, and when I pour it out, It doesn’t even look like a whiskey.

1:59
It is very yellow. It’s got a little bit of the piss color to it, honestly. And I’m not a huge fan of whiskeys or bourbons looking like that. I like a little bit of a darker amber color. Alcohol content’s gonna be 43 proof 86. So decent strength to it, OK?

2:15
And to the nose, this thing smells like a tequila, like an anejo tequila, and that’s not a bad thing. It just throws me off because now I feel like my palate’s going to taste something that tastes like tequila. And on the first taste, it, it doesn’t taste that great. But then on the second one, it kind of grows on you a little bit here, like it’s not bad.

2:35
I really thought this was gonna be like a 3 or a 4 rated whiskey for me. And it’s not, it’s actually pretty good. The first sip wasn’t all that great. It was like, nah, after that, it actually grows on you, which is kind of interesting. It’s got a very strong corn flavor and maybe that explains the whole farm to bottle being done directly.

2:55
And it has a little bit of a heat to it, doesn’t have a long finish, and that’s a good thing because I don’t think the finish is all that great, but it doesn’t last long enough for me to really count it against it. So really the cons here is I think the color looks awful. I don’t think the smells bad. Tequila does smell good unless you have a bad experience with tequila and usually it’s repulsive, but in this case, I like tequila.

3:14
This is a good smell to it. It smells like tequila. And it grows on you. Smooth taste. I gotta say this is an everyday sipper, and I’m shocked that I was going to even go that direction. I give it a 63. And I think that’s a good placement for it. I don’t think it’s in a league of its own.

3:31
It’s very unique, especially with that smell flavor to it. And I think it’s a 6-3 whiskey. It’s a solid. I’ll probably end up buying a full bottle of this. I just got a sample of it because I’m so skeptical of it. But it’s actually pretty decent. In fact, if I had to choose this over like Corona while I’m eating some Mexican food, I’d probably choose this.

3:49
I mean, it’s a good sipper. It goes great with Mexican food. Now the Forrest’s question, he wants to know about just trading one stock. Is that something that we should really do as traders? Is this a good idea to just focus on one stock? On one hand you could say, OK, by focusing on just one stock you’re gonna become intimately familiar.

4:06
With everything this stock does, you’re gonna know the news, you’re going to know the charts by memory, you’re going to know the fluctuations. There’s not gonna be a lot that catches you by surprise. On the other hand. It could really get into some problems if you’re not trading that particular stock well.

4:22
There’s stocks out there that I do not trade very well. And there’s times too where I’ll trade one stock well and then start trading that same stock horrible. And it’s not because I’m necessarily. Engaged in bad trading behaviors, I’m not, but what it can often mean is that the stock is just not following many technical patterns and when there’s a breakout at head fakes, those are the worst, or if it tries to bounce and you’re trying to play off of a rising trend line, it just slices right through when you think it’s supposed to bounce.

4:48
So I’m not a huge proponent of it, but let’s dissect this a little bit further. I think one of the best ways to perhaps do a podcast episode on this particular question or subject matter is to go through some stocks and what the outcomes would be or or the challenges and or some perhaps even some of the successes that would come from just trading one stock.

5:10
And then I also wanna talk about just in general, some practices that take place when you’re trading just one stock that may not be good for your overall portfolio regardless of what you’re actually trading. So let’s look at the first one. Let’s say you were to just trade Apple, and believe it or not, there’s plenty of people that do it.

5:28
I know some people, I have family members that have a huge position in Apple, and that’s what they kind of live and die by. Now, if you only trade Apple, oftentimes you’ll see with Apple too, and especially of late, it’ll stay dormant. Until it reports earnings and then after earnings it makes a big move.

5:46
But in between there’s like 3 months there where it doesn’t do a lot. Now that’s not going to happen every single time we’ve seen some good moves out of Apple of late, but you can oftentimes be waiting for big news catalysts to take place. In fact, right now with Apple, you’re at the same price that it was at back at the highs of January.

6:03
So while it’s gone up and down above those January highs, it hasn’t made big moves and look. I want to remind you too I’m not trying to get super detailed into the charts of these stocks. I wanna be able to keep it so easy that you can picture it in your mind exactly what I’m talking about to having to reference a chart, but Apple has been sideways for 3 months even.

6:24
So yes, there’s definitely some pitfalls that come with trading a stock because like Apple, which is one of the most beloved stocks of all time, hasn’t really seen big massive moves even though it’s a big massive company. Let’s take another one like Neera Energy.

6:40
This is a stock that in bull markets will often lag overall market price action. That’s not bad because it is a utility and utilities aren’t necessarily expected to beat the overall market or even trade in line with the market, but what it does do is when there’s significant pullbacks, it holds its own really well.

6:56
In fact, if there’s a major pullback. Most of the time, especially in the early going, a lot of traders will jump into the utility stocks as a safe haven to put their money at and so when the rest of the market sold off, you’ll see stocks that are in the utilities like Nexstera Energy or Staples companies.

7:13
Like Walmart or Costco or real estate stocks or even some telecom stocks, they will actually do very well or even trade in the positive relative to the rest of the market that is selling off during a big market sell off.

7:29
Now ultimately if you have a crash like what we saw in 2020 or if what we saw in 2008 or even 2000, eventually the utilities give way too and you’ll start seeing people bail on them as well but in the initial. Phase of the sell-off, utility stocks can do pretty well, but most of the time the market is in a bull market, right?

7:48
I mean, if so, the market wouldn’t historically be going up over time. That means over time next year Energy is probably going to be lag in the market where it makes up ground is when there’s a sell off on a day to day basis or a bigger correction. That’s where it holds its own very well and they also have big dividend stocks which is fine to get as a trader, but it’s better for like the long term investors than the short term traders.

8:12
Yeah, I mean Amazon. Amazon literally hasn’t done anything for about 1314 months now. You go back to September of 2020, the stock hasn’t moved. It’s been stuck in a sideways channel. You could say the same if you were trading an index like IWM that really hasn’t done anything since January.

8:27
Also trading in a sideways channel and when a stock is trading in a sideways channel, there’s very limited reward to the upside. And if you’re going to short the stock, there’s very limited reward to the downside because it’s always going to be bouncing off of support and resistance until eventually it doesn’t.

8:50
But in this case with Amazon, if that was your go to stock or if it was trading the Russell 2000 regardless if it was TZA, TNA or IWM or RWM. It’s not going to give you all that greater returns. It’s actually gonna be quite difficult to trade because it’s just gonna be vacillating and oftentimes doing nothing while the market might be actually doing something.

9:06
Take Tesla for instance. Tesla just made a big move in the month of October it was up over 41%. Now let’s say that was your stock and let’s say that you had just gotten stocked out. Of a trade. And I’m only using this for an example here because this actually happened to me. Stopped out of Tesla and then the stock just has skyrocketed ever since.

9:28
That’s part of the downfalls of having stock losses, but if that’s your only trade, and that was the stock that you were depending on to be able to make some profits off of the market. You just missed the biggest run of the year, whereas for me because I trade other stocks and because I trade other companies, you know, I might have gotten stopped out of Tesla, but I got into Unity software and I made a decent gain there and it just makes it to where there’s more of a balanced approach to trading to where I don’t have to be perfect on all of my trades and if I’m only trading one stock, you almost have to be perfect because you gotta make sure you catch the big moves.

9:49
How about GME? Kind of similar but more of an exaggerated version of Tesla. When that thing breaks out and it goes from being like $10 a stock to, I can’t remember how high it went. I think it was like 400+ dollars. Let’s say if you started getting in at $100 or $200 then yeah, you might have made some money on that run up, but did you manage to get out as well, or are you still trying to get the same kind of profits that the people that got in at $10 received?

10:14
So GME has made its big run and yes, it’s had some decent size moves. In between, but if you’re trading a stock like JME, you’re looking for massive moves. And since that initial move earlier this year, you haven’t really got much out of it since then. In fact, it continues to trade in a narrowing range.

10:30
What about Alibaba? Let’s say that was the only stock that you traded and you were bullish on it. Well, the stock has lost over 50% of its value because of some of the headline risks coming out of China. Again, maybe you shorted the stock and that would be your play. But if you didn’t get in on that initial move, then you missed out and it’s not that it’s impossible to get in on initial moves, but you have to get in on the initial move, whereas for me because I trade other stocks, if I don’t get in the initial move on a breakout play like what I was just telling you about on Tesla, I can get in on the breakout plan another stock.

11:00
I don’t have to wait for that stock to set up again. Sometimes it takes months and months to trade a stock. There was a time where I probably traded like Netflix 15 or 16 times in a given year. It just, it was constantly setting up for me.

11:21
Again, and so if Netflix was my only stock that I traded, it didn’t set up again for me until just recently. And so that’s an example of individual stocks that you can trade in kind of the situation that you might run into now it’s not just with those trades you have a whole host of things that you can run into with every trade or every stock out there and one of the things that I think it will cause you to do is it will it will force you to take trades that might not actually be there.

11:47
So you’ll be forcing trades you’ll be trying to project onto the market what you needed to give you and that will be a trade set up that might not really exist or one that you might be able to find a better trade set up. Somewhere else with a different stock, but when you’re limiting yourself and you’re really just doing it to yourself, you’re self imposing these limitations of only trading one stock because you think that’s the only one that’s gonna be able to provide you with a return you’re really not running away from the problems of trading multiple stocks you’re just inheriting a whole new set of problems.

12:15
I also say too that if you’re gonna trade one stock, what I mean, what are you gonna do? How are you gonna position size that? You pretty much have to trade your whole portfolio, right? I mean, what would you do otherwise? Trade like a 20% position? Well, then what are you gonna need the other 80% for ever if you’re only trading one stock at a time.

12:32
So it almost requires you to trade an entire portfolio. And then all of a sudden, let’s say that your portfolio is doing really good and this is actually a strategy that so far is working for you and you build a portfolio that goes from like $50,000 to $100,000 over the course of a couple of years and then there’s a crazy news event that happens and all of a sudden the stock drops by 50%.

12:54
And then all of a sudden, or let’s just say that you were undisciplined on that trade. You made one bad rule or you didn’t follow one of your rules one particular time. Then all of a sudden, you’re back to where you started. So we don’t want that either, right? So the position size becomes a problem because Unless you’re trading multiple positions, you kinda have to trade with 100 position size, otherwise, you’re just letting cash to sit in your account.

13:17
And if that’s the case, if you’re trading 100% position size, then you got emotions to deal with because your whole portfolio is riding on one stock. If there’s an upgrade, if there’s a downgrade, those emotions are going to be amplified because your entire portfolio is based off of that one stock.

13:33
You’re also missing out on the experience of trading other stocks of learning more. If I would have just traded Amazon over the past year, all I would have is the experience of just trading a sideway stock if all I had traded is just, you know, for the one year alone. For one year alone, I would have been trading a sideway stock that’s gone nowhere.

13:50
So those are the things that you wanna keep in mind when it comes. To trading just one stock. That’s why I do trade. I can trade anywhere depending on the market environment that I’m in, 5 to 15 stocks at a time. And I’m not beholden to a particular stock. This past week, I sold a stock because there was earnings coming up and somebody asked me in the trading block, Hey Ryan, are you going to, uh, get back in right after the earnings?

14:13
And I said, I could, I’m not sure if I will, but if it’s the best trade set up out there out of all the other stocks that are on my watch list, then yeah, I’ll get back into it. But I’m not gonna force that trade just because I was in it before. And if you’re only trading one stock at a time.

14:33
You kind of have to get back into the stock or you’re not making money anywhere else. And, and funny story, I didn’t actually even expect to get back into the, the stock that I sold right before earnings, but after earnings, that chart had the best setup out there of any of the stocks that I was following, so I jumped back into it. But I didn’t feel the pressure to have to get back into it. It just happened to be the best trade set up that there was out there, so.

14:49
If you enjoyed the show, make sure to leave a 5-star review on whatever platform that you’re listening to. Make sure to subscribe and just so you can get the notifications whenever there’s a new podcast that comes out. And keep sending me your questions, ryan@shareplanner.com. I do read your emails and I do put them out there.

15:06
I take long emails, I take short emails, just make sure that there is a strategic question that you have at hand that I can answer for the audience as a whole. And make sure to check out swingtradingthestockmarket.com, where you’ll get all my market research and in the process, you’ll support this podcast. Thank you guys.

15:21
God bless. Thanks for listening to my podcast, Swing Trading the stock market. I’d like to encourage you to join me in the SharePlanner trading block where I navigate the stock market each day with traders from around the world. With your membership, you will get a 7 day trial and access to my trading room, including alerts via text, email.

15:40
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15:56
If you have any questions, please feel free to email me at ryan@shareplanner.com. All the best to you and I look forward to trading with you soon.