Abandon Your Strategy | Podcast Episode #207

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 trading the stock market, and today’s episode, it’s gonna be a good one here. We have a guy that asks about when should he abandon his strategy? When does the strategy no longer work, and when you realize it, what do you do?

0:44
Can you have too many strategies that you’re working at once? We’re gonna talk about that and more. Let’s get to this email right away. And for this guy’s redneck name, I’m gonna give him Tommy Lee, good old Florida redneck name, he writes. Hey Ryan, when should I abandon a strategy and try a new one?

1:03
I feel like I am trying all sorts of different strategies to make money, but I don’t know which ones are working and which ones aren’t. Well, that’s gonna be a problem for you, buddy, he says. I just had a bummer of a trade. I caught a breakout and wrote it for almost 2 weeks. Earnings hit, and I know you never hold through earnings, but my sell price hadn’t been hit yet, so I held through the earnings report.

1:23
The earnings had a great quarter and popped. Again, it didn’t get to my sale price, but I was up 12% off of my entry. Then it proceeded to sell off over the next two days and I got stopped out at a 1% gain. What’s the thought on trying to exit there? My exit was 20% using Fibonacci retracements.

1:41
Was I aiming too high? Stock was FTT.O. Thanks and keep up the podcast. For those who don’t know, FTT.TO is a Canadian stock. It’s traded off of the Toronto Exchange. And before I answer Tommy Lee’s question, I’m going to tell you what I’m drinking.

1:58
It’s Bibb and Tucker. I want to try this one for a while. If nothing else, I thought the bottle looked really cool. Nice dark bottle with some engravings on it, really, really awesome. It’s aged 6 years. It’s got 40% alcohol, 92% proof, and this is a Bibb and Tucker small batch.

2:18
And do I get excited about small batch? Not really. I feel like small batch is a gimmick. Yes, I know that it’s with less barrels than like a normal batch, but nonetheless, I don’t think it changes the flavor all that much. Really, what I get more interested in is things that really differentiate a whiskey, like, is it cask strength?

2:37
Is it single barrel? Those are the kind of things that matter to me the most. To the nose, decent smell, smooth, sweet, nothing out of the ordinary. When you taste it. It’s smooth to the tongue, spicy to the mouth. Would I consider it a sipper?

2:53
No. Reason why? Probably a little bit too expensive to be a sipper considering you can get buffalo Trace at a cheaper price, and it tastes even better. So, while I think it’s not bad at all, I don’t necessarily think the price point reflects what I would consider to be an everyday sipper, come home from work, pour me a little bit of bourbon, whiskey.

3:13
No, I just don’t see it that way. Overall, I think it’s a good bourbon. I just don’t necessarily think it stands out from the crowd. I’m gonna give it a 7.7. I think it’s up there with like Russell’s single barrel, redwood, those two, I think it’s decent.

3:29
I don’t think it’s life changing. I don’t think it’s anything that’s an anomaly from a whole bunch of other bourbons. It’s just right there in the middle of the pack. 7.7. And before we get back to Tommy Lee here, I want to remind you to check out swingtradingthestockmarket.com, where you’ll get all my market research each and every day, including my daily watchlists, weekly master watchlist updates, and all the most intriguing stocks that I come across each and every day, including Fang updates and market updates too.

3:56
Check that out. swingtradingthestockmarket.com. Now, Tommy Lee is in a bind here. He’s going all over the place. It reminds me of a lot of new traders that they want to get their hand in everything. They’re putting their hands in places they shouldn’t be putting it. And really instead of becoming a master of one strategy, they’re trying to become OK or not so great at way too many.

4:18
And I see that all the time. I mean, you got people out there, they’re in crypto, they’re in options, they’re in equities, they’re in futures. Heck, they’re buying NFTs out there. And at the end of the day, they don’t even know what the heck they got. I mean, I just bought a $10,000 savings bond.

4:34
It’s given a 7.1% return. I bought it. Shoot, I feel like now I’m getting all strung out like I don’t know what the heck I got going on. I can’t imagine people who are trading with multiple trading strategies all over the place. But nonetheless, Tommy Lee is doing that here and you shouldn’t.

4:50
You should not trade, especially if you’re new to trading. Don’t be trading tons and tons of different strategies, and especially, don’t trade other people’s strategies. One of the things I try to do in the trading block is provide my ideas, but I try to make them. Ideas that are adaptable to other people.

5:06
I don’t get into the position sizes because that’s different for every single trader out there. I essentially want to tell you what am I doing with my trades and how am I doing it? So that you can learn, so that you can take what I’m doing and adapt it to your own style of learning. And that’s so important to adapt your trading.

5:24
To what you’re capable of handling. And what I mean by that is take everything that Tommy Lee has learned so far about trading the goods, the bads, the failures, what worked, what did not work. Just because he’s using multiple strategies and he doesn’t even know which ones are working and which ones aren’t, doesn’t mean that he hasn’t had some successes along the way.

5:44
He’s had a probably a lot of learning experiences too, as evident by his email. But what I would say is. OK, take everything that you’ve done so far. Take all the trades that you’ve made, the good ones, the bad ones, and break it down to what has worked and what has not worked.

6:00
That means what time frames have worked for you. What risk settings have you applied to every single trade and which ones have worked for you? Why did you get in? Why did you get out? Ask all these questions for you. What kind of trade type was it that worked for you the most?

6:15
Which trades and which strategies did not work for you the most? What markets were you trading in that you found the most success in? And I would say this right out of the gate. If you’re trading options, just get out of them all together. I know a lot of people don’t agree with me on that. But there’s way too many people that are blowing up account because they’re over leveraging themselves using options because there’s this lure with options that you can control a whole lot more shares with a small amount of money instead of just trading with a smaller amount of money, they go crazy and they trade it like it’s an equity position and to where it’s either you get rich or you go broke.

6:51
And that’s how most people trade their options and you don’t want to be that person. So, in the case of Tommy Lee here, just go ahead and get out of the options, get that out of the equation. If you’re like Tommy Lee, get out of the options. But Tommy Lee’s got to figure out what is working for him. Is it swing trading?

7:08
Is it day trading? Where’s his success coming from? On the trades that he’s doing well in? What’s the risk tolerance that he’s taking on? If he’s finding himself making can excel decisions with wide stop losses, he probably needs to focus on trades that offer him a tighter stop loss.

7:25
He’s trading futures and he’s got nothing but losses or a great majority of losses, stop trading futures. There’s a good chance that the most success that he’s going to have. To date is gonna be found in trading equities because that’s where the best opportunities are, yet most people don’t like it because they can’t get rich overnight doing it.

7:46
And if they are determined to trade equities, they’ll oftentimes result to trading penny stocks because there’s more volatility there. But trading is not about getting rich overnight, and I hate to bust the bubble for a lot of you guys, but it’s not. Yes, we all get into the stock market with these grandiose ideas that we’re going to get rich quick, that we’re going to hit.

8:06
The next Tesla that we’re gonna get in at $1 a share on Tesla or a few dollars a share on the next Bitcoin, and we’re gonna write it up to billions of dollars. But the reality is, is that the people who do that are like those who win the lottery. It just really happens to anybody.

8:23
And you watch. I’ll get an email from somebody and Ryan, you got it all wrong. I got into Bitcoin when it was 10 cents a coin. And if that’s the case, why are you even talking to me? You got far more important things to do like managing your billions. So that’s the first thing that Tommy Lee needs to do.

8:39
Look at the strategies and not so much look at what strategy worked and what strategy did not work, but what elements from those strategies worked for him. He needs to look at his lifestyle too. If he’s working a 9 to 5 job as a crane operator, it may be hard to be a day trader.

8:56
He’s working from home and he has a screen that can be dedicated to The stock market, maybe he can be a day trader, but I would also say too, day trading is very, very difficult. And just because you’re not holding any positions overnight doesn’t mean that all the risk is out of the equation.

9:12
Oftentimes with day trading, you’re finding yourself trading some of the most volatile stocks that are out there because you got to get those gains in the same exact day. So you’re trading stocks with lots of volatility, lots of volume, and you’re going to see a lot more see salt day to day. So look at the lifestyle, look at the time frames that you’re capable of trading.

9:30
It may be that even swing trading is not going to be something that’s easy for you to do with your lifestyle and that you might have to do long-term investing, that your strategy and your approach would be finding more capital and allocating it to the stock market to particular trades over time and letting them grow over 10 to 20 years.

9:49
So it’s not all about abandoning a strategy. I’ve been trading the same strategies for about the last 15 years. I swing trade, I swing trade using technical analysis, using a lot of patterns like your very simple ones like bull flag patterns and inverse head and shoulders patterns or topping patterns or basing patterns and breakouts and all sorts of candle patterns.

10:10
But it’s not so much the technical analysis that has worked for me, but it’s the risk management because I know I’m gonna have bad traits. I know I’m not gonna have all winning traits. And when that happens, I need to make sure that I’m getting out for small losses. And I’ve prided myself in being able to do that because when you take small losses, it keeps you in the game.

10:29
Remember, there’s tons and tons of different ways to profit in the stock market and there’s plenty of people that will sell you their strategy, but you gotta remember too that just because it’s a good strategy doesn’t mean it’s going to work for you. It could be a good strategy, but for the wrong trader. Your lifestyles don’t match up, the time that you have to dedicate to being successful at that strategy will not line up.

10:48
Your emotional disposition will not line up with the strategy that he’s taking on. And that’s why I think that especially if you’re a new trader, being good at one strategy and maybe you don’t have a lot of trade opportunities that result from it, but at least when you’re starting off, get good at one or two patterns.

11:05
Get good at one time frame. Don’t overwhelm yourself with thinking that you gotta trade everything because that’s what you’re seeing on Stockwoods, and Twitter and everywhere else. People are telling you you gotta trade this and you gotta trade that. Don’t do that. Become good at one thing, one pattern, one time frame.

11:20
That’s the best way to start off. And Tommy Lee admits in his email, yes, you don’t hold through earnings. That was a bad decision right out of the gate. But here’s the other thing though, he says, well, I, I didn’t sell it because it didn’t hit my sell price. Well, it doesn’t have to hit your sell price. If you got earnings, you go ahead and just sell it.

11:37
If I have a loss, that’s clearly not at my sell price, but I’m still going to go ahead and take the loss and move on to the next trade if it’s got an earnings report coming up. And you got to do the same thing. You can’t hold through a freaking earnings report. That’s a surefire way to lose the profits that you have, or to experience some grave losses.

11:54
You’re lucky you got out with 1%. I don’t even know anything about FTT.O, but I can tell you, anytime you’re trading earnings, it’s highly unpredictable. And just because they report good earnings, and just because they report good numbers doesn’t mean. That the stock’s going to do well. I mean, look at Walmart did great and then it sold off 3%.

12:13
They upped their forecasts, sold off. I had a friend, he told me, he’s like, Ryan, I’m gonna hold the earnings no matter what with POWW. What do I do? He’s like, well, if you’re gonna do that, take something off the table, man. I didn’t agree with him. I told him I was like, hey, I wouldn’t do that. But, you know, he’s a close friend of mine.

12:31
I know he was gonna do it anyways. My brother does it too, man. My brother holds the earnings all the time. Look, just because I preach something doesn’t mean that everybody listens to me on it. And sometimes my brother wins, sometimes my brother loses. And in the case of my friend here, he went and sold 75% of his position, which I think was a good move.

12:47
At least he sold 75% of his position for about a 10% profit on POWW and then reported earnings. Afterwards, he’s like, oh man, why did I sell it because the after hours popped up. But guess what? It sold off 5% today. He gave up all those earnings from after hours and more, sold off 5%.

13:06
He’s kind of feeling pretty good. He actually took that money that he had sold from before the earnings report and bought back at a lower price. So at least he was able to actually capitalize off of the selling that took place and he’s still up on the trade overall because he got in at a very low price on that dip this morning.

13:24
So, Don’t hold through earnings. I don’t condone it at all, but If you’re going to definitely sell at least half the position, at least you can say, hey, I capture some gains. If the stock goes up after earnings, you’re walking away with, hey, I made some beforehand, I made some after.

13:40
If the stock sells off after earnings, you can say, hey, at least I had the wherewithal to get out of the trade, half of it at least before the earnings report. Again, I will never condone holding a stock through earnings as a swing trade. It just doesn’t make any sense to me because You can’t predict the price movements, but I know there’s a lot of people listening, they’re gonna be doing it and I’m just trying to find some kind of middle ground like, OK, if you’re gonna do that, just at least curb some of your exposure so that you’re at least walking away with profits.

14:08
And in this guy’s case, he was 12% up before earnings. He sold half of it before earnings. He would have captured 12% with half of his trade position, then he would have been taking a 1% profit on the other half of the position, but at least he’s walking away with 6.5% or so on the overall trade instead of 1%.

14:28
And then he also talks about too, he says, what’s the thought on trying to exit on a stock like FTT.O? He says, my exit was 20% using fibs. Man, let me tell you, if you’re using stock losses of 20%, you have to ask yourself, what is the reward that you’re trying to get out of the trade? If it’s just 20%, then you’re going into a trade with the reward to risk ratio of 1 to 1, which I feel like is completely unacceptable.

14:50
Instead, you need to focus on more like a 2 to 1 or a 3 to 1. So using a 20% stop loss, you’re needing 40 to 60% just to justify the trade. And let me tell you, I like it when I risk 4% or 5% on the trade and I can get 10% out of it and then it blows through my expectations and all of a sudden I’ve got 20 or 30% and now I’m sitting on 6 to 1 for what I risked based off of the reward to risk ratio.

15:17
That’s really what you want. So to recap, Tommy Lee. If you’re listening to me, and I know you are, try to simplify your trading approach. Find what’s working for you. Find out what’s working for your lifestyle. Break down what’s the time frames, the risk profile, the trade types, the markets that you’re trading, avoid the options.

15:35
Don’t try to adapt everybody’s trading strategy to your own. Try to simplify your trading to where you’re good at just one or two types of trades. And then you don’t have to stay that way, but once you get good at those, you can start branching out, but don’t do it in some kind of hectic way that makes you feel like you got to get rich overnight cause you don’t.

15:55
Don’t hold through earnings. And don’t expect to be able to predict earnings and take some profits along the way. If you enjoyed this podcast, I encourage you to subscribe. Leave me a 5 star review too. Check out swingtradingthestockmarket.com. You’re gonna support the podcast when you sign up for that.

16:11
And if you have any questions, keep sending them to me, man. I’m reading all of them. ryan@shareplanner.com. I appreciate every one of them that I get and I categorize them in a special folder on my Outlook, so make sure to keep sending them my way. ryan@shareplanner.com, swingtradingthestockmarket.com.

16:28
Thank you guys, and 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 seven-day trial and access to my trading room, including alerts via text, email.

16:48
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17:04
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.