Being a Bagholder | Podcast Episode #203

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 got a good episode for you guys today. Kind of makes my blood boil because it’s some amateur trading here and Though I’m here to help out the people who are amateur and they’re trading, man, I hate to see the same mistake made over and over and over again.

0:47
And in this case, that is exactly what we have got going on here for this episode. I’m gonna call this guy Percy. It’s my Florida redneck name. He writes, Ryan, thank you for the information you provided in your podcast. My question is, how do I know when to cut my losses?

1:03
If I get left holding the bag. I’m paying my dues, learning to trade, and in doing so, I’ve made some poor purchases and did not set my stop limits. Once a stock has dropped and stays flat, what indicators tell me that there is a chance of a rebound versus no chance at all and I need to just sell and move on?

1:23
Sincerely, Percy. And he tells me the stocks that he’s holding all 20 shares or less. The first one’s UNE. The second is P H UN, the third, L I D R, the fourth, B E N E. Now, with every podcast, I don’t get into the nitty gritties of the charts to where you need to pull up a chart because I want to be able to make sure you can listen to this podcast on your ride home or at the gym or wherever you consume.

1:47
My content at. So, the common thread with all of these, they’re all pump and dumps. These are all stocks that went up 100, 200, 300% in a single day. They were trending on stock woods, they were meme stocks, they were stocks that everybody was talking about that everybody had to get into.

2:04
And they all collapsed under their own weight. Why? Because they’ve been doing that since I’ve been trading and I’ve been trading for over 30 years. These stocks always do that, whether it’s penny stocks or stocks that you can get on the New York Stock Exchange. There’s stocks that will get pumped up to oblivion.

2:19
We’ve seen it this past week with CA. We’ve seen it with Bed Bath and Beyond. What happens? Everybody rushes in at the open. Everybody thinks that they’re gonna make their money and they all get left holding the bag, and they don’t understand why they think, well, the market’s rigged. No, you’re rigging yourself, man. You’re making it to where you can’t succeed in the market because of the poor decisions you’re making.

2:38
It’s not rigged at all. Definitely not in the way that you think. When you take a loss does not mean it’s rigged. I’ve taken losses. I’ve taken losses plenty of times and I never feel like that the stock market’s rigged because of my losses that I take. It’s a horrible excuse to cover up some major flaws in a person’s trading.

2:58
So before I start to answer his questions, what am I drinking? I am drinking Clyde Mays straight whiskey rye. Now, I’ve done the Clyde Mays Alabama bourbon whiskey, and let me tell you, I did not like it. I gave it a 3.9, wasn’t impressed at all by it.

3:16
Don’t have a huge level of confidence in this one. I usually like bourbons better than rice. This one’s a wry, I’m expecting it to be worse. Now when I look at it, it’s got a nice color to it. It’s a little bit on the light side, but overall, pleasant color.

3:31
The nose, it’s like walking through a field of wild flowers up in Tennessee, and you can smell that nice aroma of honeysicle in the air. It’s kind of what it reminds me of. I don’t know why I come up with that, but that’s what it reminds me of. Pleasant smell, it’s not strong.

3:50
The taste comes in a little bit hot at first, not overwhelming. Nice hotness, settles down pretty quickly. I wouldn’t ever say there’s like a real strong smoothness to the flavor, but it’s not bad, and you don’t think that there’s much of a finish there. And then like a couple of seconds later you’re like, huh, it’s almost like a poor man’s jalapeno kind of like lingering on the tongue.

4:12
So I’ll be honest, I’m gonna give this one a 7.8, which is double the score that I gave for its bourbon. I did not think that that was gonna happen. I thought this one was gonna be a 4. a 5 at best. But it doubled at 7.8, really good, good score for Clyde Mays, usually not a fan of their products, but I’ll go to Total Wine and probably pick up one of these suckers.

4:32
I mean, it’s like a $45 bottle. I think it’s worth it. It’s an everyday sipper. Which I don’t give those out a lot either, but I would say this is a, a decent everyday sipper. The one that reminds me of this being a similar circumstance to is Angel’s envy. The rye was really good and then I tried the bourbon.

4:50
Bourbon was horrible. It’s the same case here. The rye is good, the bourbon’s horrible for Clyde Mays. I mean, this is a good whiskey, especially if you’re in the rye. I would get this. It’s $45 which today’s pricing with as much inflation that’s going on, it’s kind of becoming the norm for a bourbon or for a whiskey rye.

5:06
But overall, good, solid one. Now back to Percy. 4 stocks bag holding big time. I mean, even just today, he’s down another 31% on UONE, a gap down and he’s like, hey, look, I didn’t use stop losses on these things and I, as a result, managed to trade poorly.

5:26
It wasn’t just the lack of stop losses. It was what you were going after and when you were going after it. These stocks here, when they’re going up 100, 150%. I can’t think of a single reason which would make a person get into it outside of FOMO and outside of thinking that oh this is a great way to get a huge return and make a lot of money off of these things and a lot of people who are just starting off, they’re buying into these stocks thinking that I need to buy these because I can expand my capital a great amount.

5:55
Now, let’s say for just an instant that he had gotten into UONE and he got into PHUN and and L I D R and B E N E. And they went to the moon. Let’s say he made 100% on each one of them. No, let’s say he made 500% on each one of them. Now one, he’s not right to me about this problem, right?

6:15
He’s feeling pretty good about himself as a trader. These four trades alone will say, hey, I know what I’m doing in the stock market. And you think that he’s all of a sudden now that he’s working with 5 times the amount of capital that all of a sudden that he’s gonna be prudent with his capital and how he trades?

6:30
No. If anything, he’s gonna be more emboldened. More aggressive, and he’s gonna make bigger trades on these stocks. And ultimately, he’s going to lose it. Now, I’m just giving you a hypothetical situation here, but ultimately had it played out where he made 500% on every one of these trades.

6:48
He would have still lost all his money in the future. Or at least the large majority of it like what he’s dealing with here because you can’t consistently win chasing these meme stocks. Here’s the thing the people who are winning on these are the ones that are in it before the big move ever happens.

7:03
The people who are chasing it after the fact, they’re the ones that are going to lose. Why? Because the ones that got in early all of a sudden have these huge positions that they’re offloading to the people who are chasing at the top when it’s up 50%, 100%, 200%.

7:20
And they’re liquidating their shares to those people. Now, if a person has 100 shares to sell and there’s 100 people willing to buy one share of that stock, as it’s going up, that one person made all of his profits, but he just sold it to 100 bag holders.

7:36
Bag holding is an industry on the rise right now. I mean, there are so many people out there that are bag holding stocks and it’s for this very reason that they can’t stop FOMOing, and it’s really a result of being a lazy trader. You’re waking up, you’re saying, OK, what’s the biggest gains this morning?

7:53
And you’re looking at what the message boards saying and person ABC is saying the stock’s going to the moon, it’s gonna colonize Mars, and you start to believe it because you want to believe it, not because the chart actually says it. And so you start to convince yourself that you need to buy this stock and as a result you do, and it might work for a little bit.

8:09
You might be up 25-30% on the trade. Do you think you’re selling on it? No. Instead, you’re thinking, well, no, it’s gonna go up another 100% and then all of a sudden it doesn’t, and all of a sudden you’re down 50%. Let’s say a stock goes from $100 to $200 and you buy in at $200 and it drops back down to $150.

8:27
Well, the stock’s still up 50% on the day, but you’re down 25%. And in order to make that 25% up, you need to make 33% on your next trade just to break even. Kind of sucks, doesn’t it? But it is, it’s a very lazy way to trade it, and I’m not trying to just beat the crap out of Percy here.

8:42
I’m really not, but it’s called tough love, and Percy needs some tough love here. He’s got to stop trading these things. You gotta stop trading the D wax. You gotta stop trading the UONEs. You gotta stop trading with the Baskin Robbins flavor of the day is. Because you’re looking at a stock after it’s already made its move and thinking that there’s another big move to be made.

9:01
No, you’re looking at the big move. And yes, there will be some stocks that go crazy like your GameStops and your AMC from time to time, but those are one out of many that do not make those kinds of moves. And so when you’re getting into PHUN or LIDR or BENE, you’re hoping, yes, it’s the next GameStop.

9:20
Most of the time it’s not the next GameStop and you’re just whittling away your capital. And notice I’m not really even talking about the fact that he’s not using a stop loss. Yes, I think you should use a stop loss on every trade, even if you’re crazy enough to get into one of these things, but I don’t think they’re that effective in these kinds of trades because of the fact that if a stock’s already up 200%, where are you putting a stop loss on a stock?

9:42
That’s up 200%. You can’t. I mean, you’re gonna put it on like a, a 20% stop offs. You know how fast it will shake that out probably and go right back up again? Or maybe it doesn’t. Maybe it goes back down and yes, you’re down 20%, but at least you’re not down 50% or 60%.

10:13
You just can’t do it. So the, the other interesting question here is that Percy asks me, yes, I’m paying my dues and. I’ve made some poor purchases and that did not include any kind of stop loss. And he says once the stock is dropped and it stays flat, one indicators tells me that there’s a chance of a rebound versus no chance.

10:32
And that I need to sell and move on. Here’s the other thing. Indicators are not going to make you rich and they’re not going to Save you when you make bad decisions. Indicators are derivative of price action. My question to him would be, why are you still holding on?

10:49
What’s your timeline for deciding whether or not this thing is going to bounce? And do you really think there’s gonna be another epic run? As far as an indicator telling you whether or not the stock is going to rebound. There is no indicator. There’s absolutely zero indicator that’s going to tell you whether or not the stock is going to rebound, and you’re going to make that 31% back on UONE that you lost today or, or some of these other stocks that have just really taken you to the cleaners.

11:16
There isn’t. These things are pumping up. They got pumped up. People who were in it before pumped it up so they could dump it to you and let the stock come back down. And that’s not rigged. That’s not a rigged game at all. What they’re doing is they’re riding the wave up and they’re selling it to everybody that’s getting in at the very end.

11:32
I mean, it just happens. Anytime you have a winning trade, you got to sell it to somebody who thinks it’s gonna go higher. And these kinds of trades that are going up 100% to 200% in a single trading session, there’s a lot of people that are going to be stuck with some massive losses. And the good thing is, he doesn’t have a ton of shares in these trades.

11:51
So while I’m kind of being rough on him a little bit, I want to set the stage for him and his trading going forward. Like, look, man, you got to get serious about what you’re doing. You gotta protect your capital. I don’t care if you’re trading with $100 or $100,000. You got to get serious about protecting your capital.

12:10
And if you don’t do it with a small amount, you’ll never do it with a large amount. And another point that I’d like to stress is that he’s wanting to make his money back. And you always hear it’s like, oh, it’s not a loss until you sell it. Well, no, that’s not true. A lot of these stocks will never recover.

12:26
Even in a great bull market like what we’re in, there’s plenty of stocks that do not ever come back once they start to decline. Now, which stocks are gonna bounce back or which ones will even come close to making any of his money back? I don’t know. I’m not sure if any of them will.

12:42
Or if all of them will, the thing is though is he still has capital in these trades and he’s putting that money at risk for further declines when he doesn’t even have an understanding whether or not the stock has a chance of going back up. Neither do I because these things are just pump and dump schemes are the flavor of the day, and they may never be the flavor again.

13:01
And so when you make some really bad trades, we still think that that money is out there for us to get back like, oh, we’ll get a pardon or we’ll get some forgiveness from Mr. Market himself. But the fact of the matter is is that money can and likely is gone forever and so well I can’t say specifically to these trades what they will ultimately do.

13:19
I know enough to stay away from them, but as traders when we make bad decisions, we can’t say, OK, we were at point A, now we’re at point B, how do I get back to point A? No, the point B that you’re now at needs to become your point A and you need to figure out how do you start making good trades going forward and forget about where you were at.

13:38
Because the market took that money and start thinking what is the best option for me to do going forward in order to have a history of making good trades. The other thing too is while you’re waiting for that stock to come back, there could be 50 or 60 other trades that you could have made that probably would have helped you recover some of that money that were better trade setups, better opportunities, and instead you’re just waiting for these things to come back because you think that your restoration will come from these 4 stocks that have already.

14:05
Destroyed you as a trader. Now to wrap it up, make sure one, to make better trade decisions that you go to swingtradingthestockmarket.com and get all of my market research there. That’s going to include the S&P 500 updates, the NASDAQ 100, the Russell 2000 plus all the FA stocks plus Microsoft and Tesla, plus my master weekly watchlists, my daily watchlists for the trades that I’m looking at.

14:29
Each and every day plus the most intriguing charts of the day all at swingtradingthestockmarket.com and in the process you support this podcast. Now, we have learned from this podcast episode is one, don’t go chasing after pump and dump schemes. I know I’ve said that in other episodes too, but it’s always worth repeating.

14:45
You can’t go after these things. Second thing is there’s no indicator that’s going to tell you if you’re going to make your money back, and let’s be honest. When you manage the stock poorly and when you’re seeing massive massive losses, it’s not always the best idea to keep your faith and hope in those same stocks that just burned you to make that money back.

15:04
You gotta start looking at getting out of the trade and moving on to the next trade because there are opportunities out there. Sometimes there’s more opportunities than others, but nonetheless, you have to move on to the next trade. And in the process, you’ve gotta manage the risk, use those stop losses, and don’t go after these crazy pump and dump schemes.

15:25
Remember, the money is made by anticipating the moves, not seeing the move that’s already unfolded and saying, you know what? I’m gonna get in now after it’s already made the move. If you like this episode, I encourage you to leave a 5-star review. Make sure to subscribe so you get alerted every time I post a new podcast.

15:42
I try to do about 2 of these a week and make sure to keep sending me your questions, ryan@shareplanner.com. Thank you guys. God bless. Thanks for listening to my podcast, Swing Trading the stock market. I’d like to encourage you to join me in the Share planner trading block where I navigate the stock market each day with traders from around the world.

16:02
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16:23
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.