From Ranching to Trading | Podcast Episode #217

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 in the stock market. In today’s episode, we have a rancher that’s about to go into full-time trading. He’s of the age where he’s ready to retire and he’s wanting to take on trading from a full-time standpoint.

0:48
So we’re gonna get into that today. This guy, and he likes to be called the broke rancher, he writes, good afternoon. I just finished one of your recent podcasts with the trader who went full time. I am retiring from my day job next summer. It was going to go full time as well, but I had some questions.

1:03
As for financials, I am in a great spot with a passive income being generated from agricultural land leases as well as a wife who teaches school, so health care is covered and her income assists as well. We are mortgage and debt free, so I figured now was the time.

1:19
Anyways, I wondered if it is beneficial to set up a small business or LLC for trading full time. Are there tax advantages for, say, your home office, internet bill, etc. Without any employees, it would be a disregarded entity, but could it help offset taxes if you have a profitable year?

1:37
Are there any other suggestions you would give to someone who is going to go full time swing trading? Anyways. Love the podcast and listen to certain episodes over and over to absorb as much knowledge as I can. Kind regards, the Broke Rancher. Thank you, Broke rancher. We hope you’re not too broke before you go into full-time trading, and before I start to answer his questions, what am I drinking?

1:56
Well, I am drinking. The members mark bourbon whiskey. It’s Kentucky Straight small batch. Distilled in Bardstown, Kentucky. 45%. I only paid $18 for 750 mL. Pretty good deal.

2:12
Couldn’t pass it up. I was 1 for 3, I would say with the Costco brand, the best one being the bottled and bond, that was amazing. So I’m hoping members Mark, AKA Sam’s Club can pull through for me and give me a decent whiskey. You know, when I drink, I mean to the nose, it smells a little pine nutty.

2:30
I mean, you, it’s almost like you’re smelling the barrels that the whiskey was stored in. The first sip, it comes in a little bit hot, not too hot, but a little bit hot. Then the second sip, it’s like, there’s no heat at all. It’s like it just disappears. It’s weird. I don’t know if I’ve ever seen that from a bourbon before where it’s almost like two separate experiences from the first sip to the 2nd sip.

2:49
I wouldn’t say the second sip is better. I would actually compare it to like a, not a flat soda, but a like a flat bourbon. It just comes across flat. I definitely wouldn’t make this an everyday sipper. I haven’t tried it with old fashion. I do like to use a 100 proof for my old fashion. This one comes in at 90 proof, so it’s a little bit lacking in that area, but it could work.

3:09
I’m a little bit worried that there’s not enough heat on it to work with the simple syrup of an old fashioned, so I’m not gonna have high expectations that it’ll even function as the bourbon for an old fashioned. I think what I’m gonna have to do is probably just offload this on friends that I don’t want to waste good booze on.

3:27
I don’t do that to all my friends, just a few. In any case, for a score of 1 to 10, I’m gonna give this a 5.5. Now back to the broke rancher. He’s got a couple of really good things going for him, and I always recommend that when you go from part-time trading or, you know, from a career where you’re part-time trading into full-time trading, that you don’t just go into it to where you’re giving up everything else that you did in the past and you’re depending solely on trading income.

3:57
I think there’s this huge misconception that if you Do trading full time that you can’t make money doing anything else. And that’s simply not true. That’s not true for me. I mean, it was when I first started, but now, I mean, I have, even with this podcast, you guys hear ads. I mean, I’m making money off of that.

4:13
That’s what supports the podcast, right? But no, I mean, it’s good to have side gigs and you’re trading because What you want is the least amount of pressure as a trader. You don’t want the pressure of having to trade for your next meal or else.

4:28
That’s a lot of pressure for anybody to have to trade under, and I would say most people are not successful or going to be successful when they’re faced with that kind of pressure. So it’s good to have side gigs. It’s good to not feel a lot of financial pressure either. So he talks about the fact that he’s in a good spot with passive income.

4:47
That is excellent. That is. Ideal, in my opinion, for becoming a full-time trader. He’s got agricultural land leases and he’s generating income from that. That’s huge. That’s money that he doesn’t have to think about it just comes right in. The other thing that he has is he has a wife who teaches school, so health care is covered and her income assists as well.

5:06
I’m pretty much in the same boat in that regard. I mean, my wife teaches in the school system, public school system, so there’s that, that’s always very nice as well. And she provides the healthcare. Actually, before I was married, I paid for my own insurance and I was kind of excited about not having to pay for my own insurance anymore.

5:21
I was just. Put right onto that insurance plan, which does make it nice. And of course, like teachers too, and I, I would assume in in most cases with all the public schools, most teachers, they get pensions at the end of their career. That’s another thing that’s really nice. So, you know, if his wife is close to retiring as well, there will be a pension there that will help too.

5:40
I guess the pensions aren’t as good as the actual salary, but nonetheless, I mean, that’s passive income. And I guess for the spouse that’s not teaching. It’s passive income irregardless because they’re not the ones that are actually doing the work, they’re just benefiting from the income. So he’s got some land leases that it’s providing additional passive income.

5:58
That’s the kind of stuff that you want, whether it’s a retirement plan, a spouse that works, rentals, interest bearing assets, like for instance, right now, you can put $10,000 a year in an ICE savings bond. And you can make 7.12%.

6:14
That’s only guaranteed through April of 2022, but they change it like every so often and they will update it come April with the new interest rate’s going to be, but if inflation continues to take off, it’ll actually go higher. But there’s a lot of things that you just kind of got to search out. I also I’m a huge believer in dividend portfolios.

6:31
And I’m always trying to build up my dividend account with different opportunities, especially after big sell-offs. I love stocks that don’t change their dividend at all. They’re trading at a huge discount and to get into some of those, like just recently, I bought some Verizon because it’s trading like almost at a 6% dividend, and it’s taking a quite a beating of late.

6:51
So I jumped into Verizon and that’s not really a stock. I mean, if it grows and goes up higher and higher and higher, that’s great, but it’s really just, I’m in it for the dividend. Other ones too that are pretty good like Dow Chemical, you have some like Chevron. I got that one there you also have ExxonMobil, and they’ve actually had some incredible runs over the last 6 months.

7:10
So you get the dividend plus the growth. But those aren’t necessarily the stocks that you’re trying to trade. I mean, you could trade them, but what I’m getting at with those is that it’s good to have a dividend account too, where you’re actually generating money from a dividend standpoint. So, Becoming a full-time trader just doesn’t happen when you realize that you’re good at trading.

7:28
There’s also some financial planning that has to go into it too. It’s good to have like dividend accounts that are creating additional income for you. In the case of the hopefully not broke rancher, you know, having a wife that works or a spouse that works, that’s good too. I mean, we’re not trying to put the pressure on the spouse to provide all the income, but it takes the pressure off to where you’re like, OK, if I have a bad month or a bad week or something, I’m not going to the soup kitchen to feed my family.

7:54
So being creative like that goes a long way, you know, with, like, in his case, the agricultural land leases, they’re generating money, that’s extremely, extremely important. I would I’ll say too that trading requires that you’re going to have to work harder. I think that I worked in corporate America for like 78 years before I quit.

8:12
And if I knew how hard it was going to be as a full-time trader, there’s a good chance I wouldn’t have quit. And look, I didn’t have a podcast talking to me about these things. I didn’t have a mentor. I didn’t have anybody teaching me these things at all. I told a whole bunch of people I was ready to quit my job and become a trader and everybody’s like looking at me like, Are you crazy?

8:31
And at that time, I had just started SharePlanner so I wasn’t really expecting much out of SharePlanner. I was blogging on it, but that was about it. And I remember people saying, oh, it’s a bear market. This is worst time. I mean, do you not remember the dotcom bubble? I mean, people lost a lot of money. I quit my job during the dot-com bubble, and here I am back at work, working with you.

8:49
I mean, this is just a bad, bad idea. But I did it anyways and uh maybe because I was young and didn’t know any better, I went with it and, and somehow I managed to make it work. It blows my mind to this day that I’ve gotten to where I’ve gotten. I, I didn’t see.

9:05
Or foresee all the changes that would happen from a technological standpoint. I never saw myself sitting here at a desk doing a podcast with you fine people. Uh, just, uh, you never know where the life is going to take you, and that goes back to the point, OK, when you quit your job, you’re going to probably have to work harder than you ever worked on a regular job.

9:23
Because you’re having to provide for yourself, you’re having to be able to extract money out of the stock market from a place that doesn’t want to give you money at all, and you’re having to extract that money. You just never know where life is going to take you. I mean, you might be quitting your job to become an equities trader and you might find yourself 10 years down the road trading crypto or. futures.

9:44
I mean, look, we’re on the cusp of a lot of crazy things going on now from the cryptos to the NFTs. So when you quit your job, it doesn’t hurt to start looking at those things. I’m gradually learning about the NFTs. I haven’t done jack squat with it yet, but I’m learning about it because I don’t know if this is gonna be something that sticks long term where people are actually buying and selling these things, or If this is gonna go the way of the tulips, and we’re gonna laugh at this stuff a 100 years from now.

10:07
Like, can you believe people were buying JPEGs for thousands of dollars? I mean, they were doing that with the tulips in the 1600s for like 4 or $500 a tulips. So, history suggests people can buy some pretty stupid crap. But yes, trading will. that you work harder. That means there’s gonna be less days off. I don’t get a lot of days off unless the stock market is giving me the days off.

10:25
And this past year, I kind of get screwed. Usually you get a day off for New Year’s Day, no, because I guess for whatever reason, I don’t recall this happening in the past, but because it was on a Saturday, they didn’t give us a day off this year, kind of stunk. Christmas, you get the Christmas Eve off, that was it.

10:41
Thanksgiving, you get Thanksgiving off and you get Friday until 1 p.m. trading. I always like that little stretch. So there’s not a lot of holidays. I mean, there’s others besides the ones I just told you, but I’m not gonna spend the whole podcast going over market holidays, but I think it’s usually like 9 or 10 holidays that you get off a year.

10:58
A President Days, they usually shut down the market for that or a case of Hurricane Sandy, I think they shut it down for a day or two. So you can kind of get some weird things that happens like that. But overall, you’re not gonna really get more than 3 days off at a time. So if you take a step away from trading.

11:14
You got to remember too that every day you’re not trading, it’s money that you’re not making in the stock market. Some cases you might be avoiding some losses, but you don’t know that unless you’re actually trading. And if you’re full-time trading and you’re trying to avoid trading at all cause you don’t want to take losses, well, there’s probably a sign that you shouldn’t be trading at all.

11:32
When it comes to trading, you’re going to eat what you kill. Nobody’s going to hand you a profit. Nobody’s going to give you anything. The exact amount of money that you get out of the market is the exact amount that you earned. The exact amount that you traded. There’s no guarantees.

11:49
That’s why the days off aren’t going to be a lot, because even on the days off, you’re probably going to be catching up or trying to do some studying, maybe exploring new trading strategies, trying to figure out why you might be struggling on a certain period of time. And then you also have drawdowns in the stock market when you’re trading full time.

12:05
You have it as a part-time trader or any kind of trader for that matter, but drawdowns hit differently as a full-time trader. So if you’re gonna go 10, 15% drawdowns, or let’s say. Like 20% drawdowns. Let’s say if you take a 20% drawdown, you got to make 25% just to get that money back.

12:23
And that can create a lot of concern, pressure, and panic because If you go from your current position in the market to a 20% drawdown and then you make like 5% the following week, you’re not necessarily taking that 5% and, and feeding the family with it, you’re trying to get back to where you were before because you don’t want to start eating away at your capital or at your base because then you’ll never get back to where you were before.

12:47
So, drawdowns, you’ve gotta keep them small. I mean, avoiding large drawdowns is absolutely key. I’m talking about like, don’t be getting more than like 2 or 3% drawdowns. That’s dangerous. Because what can happen is you can start to panic, you start to double down, you start to ignore risk because you start to take it personal because you’re not eating.

13:06
And when I say you’re not eating, I’m not saying that literally. I’m just saying that you’re not killing anything, right? Your hunts are coming up empty-handed. So you start to panic a little bit and you might start making even worse trading decisions. And the last thing you want to do is have to go from corporate America or In the broke ranchers’ case, maybe he was a rancher, I’m guessing, go to full-time trading and then have to go back to ranching again.

13:27
I mean, you want to stay in trading. If that’s what you’re wanting to do, that’s what you want to stay in. And when you get those drawdowns too, let’s say you’re successful getting back to break even, well, it takes time to get back to break even. If you lost 20%, it’s usually going to take a lot longer to make that 20% back than it did to lose it because the market usually takes the elevator down and, and the Stares back up, and that goes for bull and bear markets, but it also goes for drawdowns and increases to the portfolio.

13:55
If you’re seeing a lot of volatility in your portfolio where you’re down 20% 1 day and up 30% the next, you’re probably trading one way too big and two with far too much volatility, and you’re probably also trading in penny stocks and crap stocks that you should not be in. Part of the game of full-time trading is to definitely make profits, but it’s also to stay in the game.

14:15
And it’s never more important as a full-time trader, far more important than as a part-time trader because as a part time, you have an income that can get you back into the game. Full time trading is not the case. That’s why I’m also a big proponent of having passive incomes and everything so that if you do have a drawdown, you’re not panicking and having to make that money back right away because those who rely fully on the trading and the trading only are creating potential disasters for themselves if they ever go through a rough spot or a rough patch in the market.

14:44
My concern too with a lot of traders is that, and I’ve mentioned this in a number of podcasts and specifically ones that talk about going to full-time trading. Is that they haven’t really gone through a legit bear market. I can point to a handful of them that really shook investors quite a bit, but they haven’t gone through prolonged ones.

15:02
In fact, the last prolonged bear market was 2008. Since then, we’ve had, you know, 3 to 4 months selloffs here and there. I think the last one of those was January, February, and March of 2020. Where you started off the year both January and February with small sell-offs.

15:19
February started the whole COVID pandemic, and then you had a sell-off that ensued late that month and then you had March that really tanked. So you had a 3 month sell off and then the rest of the month, the market had one of the most forgiving rallies that I think I’ve ever witnessed before where it just went straight back up for months and months and months.

15:36
It’s continued on to, you know, 18 months later practically, up through the beginning of January 2022. So a lot of people, if they started trading during. Or after the big sell-off that happened in March of 2020, they’re not really experienced in large drawdowns yet, but if you have gone through some big ones, and the one that happened in March of 2020, it was pretty steep, but it wasn’t breathtaking.

16:02
It’s not something that we’re really talking all that much about. We’re talking more about the recovery that ensued thereafter than we are really about. The actual COVID sell-off. The one before that would have been quarter 4 of 2018. A lot of people got their heads handed to them on that.

16:18
I actually did pretty well on that. I think I made the bulk of my profits from the sell-off of 2018. In quarter 4. So that’s the big question mark that a lot of traders need to be asking is like, am I prepared to handle a big market sell off if we see one this year, if the Fed continues to taper and raise interest rates, there’s a very good chance we’ll see one.

16:40
Are you prepared for it? Do you think you can handle that? Are you going to keep trying to buy the dip all the way down? That can be a very dangerous game for a lot of traders. And if you’ve been making all your money by simply just buying the dip. It’s a good market to have done that in over the last 18 months, but when the time comes where that doesn’t work, you’re risking a lot of money and a lot of potential losses.

17:02
So a dip buying only works for as long as the market keeps V shape bouncing immediately thereafter. When that stops, there’s going to be quite the reckoning for a lot of traders. Remember too, when you are going into full-time trading, you’re gonna wanna make sure that your affairs are in order.

17:19
Broke Rancher here has no mortgage. That’s important, but also like if you live in Florida, like there’s property taxes. You wanna make sure that you’re putting aside money every month to be able to cover those property taxes because if you happen to get caught up in a market sell off, you don’t want to be trying to scrounge around to figure out how you’re going to keep your home by paying your taxes.

17:39
You wanna make sure that property taxes and other things like of that nature are covered and that you’re planning for it each and every month. From a taxes standpoint, you know, I’m not an accountant, so don’t take anything I have to say as. Be in the gospel or Being certain, but I’ll talk a little bit off the cuff about that.

17:58
Some people will set up hedge funds for themselves. I think hedge funds, if I remember correctly, they are not taxed at a short term capital gains rate. I think the big hedge fund loophole is, is that they’re taxed at long term capital gains. So some people might actually create a hedge fund for themselves.

18:16
You gotta be careful with that because. There’s a lot of laws that go along with hedge funds and how all that works, but one of the tax benefits though, to being a full-time trader is that a lot of like your subscription services like the software that you use, that’s usually able to be written off. Like for instance, swingtradingthestockmarket.com, where you’re going to get all my market research each and every day to help you in your full-time trading or part-time trading too.

18:39
That’s gonna give you all of my research from the S&P 500, the Russell 2000. The NASDAQ. I’m gonna give you updates on those each week along with all the FA stocks plus you’re going to get my master watch list each week and list of stocks that I’m looking at each day for trading and the most intriguing charts of the day.

18:55
So check that out, swingtradingthestockmarket.com and in most cases, that can be a tax deduction whether you’re a part-time trader or Full-time trader and like internet connection, you need internet to trade, that’s usually a tax deduction as well. Again, I’m not an accountant. I usually just hand my receipts to my accountant. He knows what I do for a living, but the things that I’ve picked up over the years, I believe that is the case.

19:14
And finally, I would say this about full-time trading. We tend to sugarcoat the challenges that’s going to come from anything that we really want in life. It’s like a kid who wants a new dog, right? What does he tell his parents? I will walk it every single day. I will pick up its poop all the time and I’m gonna feed it, I’ll groom it.

19:32
I’ll give it a bath twice a week. Well, usually that lasts for like a couple of hours. And then what happens? Well, the parents are usually grooming and feeding and taking the dog for walks and the kids always have an excuse why they can’t do it. And the reason why is that the kid can want.

19:50
A dog so bad that they envisioned themselves doing all these things, but then when reality hits, they really don’t want to do that stuff and they don’t always do it unless you just really get onto them hard and sometimes it’s not even worth the energy. It’s just easier to sometimes do it yourself. It’s the same thing with trading, we can think about it as that like nice fluffy puppy, that being trading and thinking that, OK, it’s gonna go well.

20:10
I know what I’m doing. I’ve had some success, you know, over the last 18 months or 2 years or maybe in Broke Rancher’s case he’s been doing it for 1015 years. I don’t know. But. You want to make sure that you’re not glamorizing it so much because in the end it is going to be a lot harder work. In the end, there is going to be a lot more stress when you go through drawdowns.

20:29
And in the end, you’re not gonna get as many days off. Christmas, I had to force myself to take some days off, which I’ve hardly ever done, and I think that was like 3 trading days that I got off plus the day off for Christmas Eve that the market gave us off, but. It’s very difficult to take a lot of time off.

20:44
I work long hours, so a lot of times I’m up till 1 or 2 o’clock in the morning. So you’re gonna live on probably less sleep, and it’s definitely not like what you see a lot of people on Twitter and social media portraying it as where you’re on the beach trading stocks on your laptop surrounded by girls in bikinis, waving palm fronds to keep you cool in the shade, just doesn’t work out that way.

21:05
Usually it’s lonely nights at your desk with a desk lamp on, scratching your head trying to figure out how do you climb. yourself out of this hole in trading or what am I doing wrong? Why did I lose on that particular trade? That’s just the reality of it. If you enjoyed this episode and encourage you to leave a 5-star review that helps me out tremendously.

21:22
Plus, send me your questions, ryan@shareplanner.com. I live off of your questions just like with the broke rancher here. I need your questions to keep the podcast going, so keep sending them to me, ryan@shareplanner.com. Thank you guys, and God bless. Thanks for listening to my podcast Swing Trading the stock market.

21:40
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. With your membership, you will get a 7 day trial and access to my trading room, including alerts via text, email. And WhatsApp. So go ahead, sign up by going to shareplanner.com/tradingblock.

21:59
That’s www.shareplanner.com/trading-block, and follow me on SharePlanner’s Twitter, Instagram, and Facebook where I provide unique market and trading information every day. If you have any questions, please feel free to email me at ryan@shareplanner.com.

22:15
All the best to you and I look forward to trading with you soon.