Desperately Seeking Profitability | Podcast Episode #222

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. We’re talking about a trader who has been going at it for 5 years now and is struggling to find his profits in the stock market, trying to figure out what works for him still.

0:45
He writes, Ryan, and we’re gonna call him Aggie, by the way, because that’s what he asks to be called. He says, Ryan, I just started listening to the podcast, really enjoying the content. I’d like to get your thoughts on my personal situation in regards to trading. And let me tell you, folks, he spills out his heart here in this one.

1:01
He says, I’ve been trading for about 5 years now. I have taken the journey very seriously throughout this time. In the 1st 2 years, I would typically spend 12 to 16 hours a day studying charts, reading loads of books, trading, and just absorbing information. I mean, I would pass out at my desk, wake up the next morning and keep studying whatever I could get my hands on.

1:21
I have filing cabinets full of handwritten notes, hundreds of trading reviews, market observations, and fundamental insights. So obviously, Knowledge of the stock market, using candlesticks, technical analysis, all that stuff. He has that knowledge.

1:37
So there’s something else here that’s given him problems. He says during that time I was focused on day trading. I never made anything during this time, and in total, I probably lost about $30,000. I did, however, gain a lot of experience with markets, indicators, fundamentals, orders, shorts, long, scanners, and who knows what else.

1:57
I’ve traded hundreds of different stocks, short and long, I’ve moved away from day trading in the last two years and into swing trading. Undoubtedly, swing trading fits my personality and routine much better, and there’s a reason for that, and I’ll get to that probably in a second why I think that is. The problem is, After all this time, I’m still not a profitable trader.

2:16
I am 5 years in, and I would say I’m break even at best. I have no problem putting in and honoring stops. I have no problem executing my plan once in a trade. I do struggle some with figuring out profit targets. I do struggle knowing when to get out of a trade early. After using a metric load of different indicators, and that’s my way of leaping out the curse words.

2:39
I’ve finally drawn out the conclusion that none of them really helped. Thus, I might draw a few trend lines and look at volume, but that’s about it. I don’t hold over 6 months and I aim to hold about 2. I’ve never really traded with serious size in relation to my net worth because I didn’t want to risk it unless I knew I was profitable.

2:56
After 5 years, my endurance is being tested, to say the least, I have no plans to give up trading. I will do this till I die, but my endurance is being tested. What would you have to say about my situation? Any advice or input would be greatly appreciated. Thank you, Auggie.

3:12
See what I’m telling you? The guy poured out his heart here. But before I get to answering these questions, what am I drinking? Drinking Knob Creek 9-year, this is the stuff that I have for a long time used in my old fashions, but I don’t ever drink it by itself because, well, having drank it in the past, it stinks, but I’ve never done a review on it and I thought it would probably be a good time to do it.

3:30
I think this is the last of my Knob Creek 9 year bourbon because you can’t one, find the handles anymore in the stores. Everybody keeps buying it and two, when I used to buy it, it was like $48 to $49 for a handle. Now it’s like $68 for a handle and it’s just getting ridiculous.

3:47
So many people are buying this stuff. I don’t know why. But anyways, to the nose, I mean, you pick up a little bit of like dark cherries. Not bad, nothing wrong, got nice color, a dark brown color to it. The taste, man, it just comes across as like pine nutty, man. I don’t like pine nuts to begin with, but I just don’t think it tastes good either when it shows up in your bourbon.

4:06
And the finish comes on you fast. I mean, it’s a fast finish and it comes in hot and it doesn’t come in with much flavor. It’s just scale of 1 to 10, I mean, it is 50% alcohol, 100 proof, so I mean, it’s, it’s got that going for it. Definitely not something I would do as an everyday sipper, and the Evan Williams is way better.

4:24
The bottled and bond, Evan Williams is way better than this from just uh drinking it neat. I give it a 5.1. I think the only way to even remotely enjoy this one is by diluting it. If anything, I hope some of you all will hear this review and stop buying this stuff because it does taste good in my old fashioned, but it is absolutely atrocious to drink by itself.

4:44
So with Aggie, I feel for him because he’s put in a lot of time and he hasn’t had the success that he would hope to find. I would tell him not to give up. I mean, I’ve been doing it for 30 years and there’s plenty of times when I look at this market and I think to myself, man, what in the world is going on here?

5:00
Like I can’t make head or tail. I felt like that a lot later in the year because I, there were so many bearish divergences in the market and I’m looking at it and I’m thinking to myself. How is this market still holding up? Why are people still wanting to buy Apple at $180 plus per share with a market cap at $3 trillion?

5:18
Like, what are you really hoping that Apple provides you at this point with that kind of a market cap? or seeing people buying Tesla at $1200 and I was just shaking my head the whole time. It’s like, it doesn’t even make sense because the rest of the market’s going down, it’s just being held up by a few things, stocks. And so, no matter how long you’ve been trading for, you’re still going to be learning, you’re going to still be experiencing things for the first time.

5:40
I mean, I’ve been through a lot of sell-offs and I’m not really brag when I say this, but before this month here, I had been through more corrections and more sell-offs, major market sell-offs than every trader in the world that had just started in the last 20 months.

5:57
Think about it. All these new traders and a lot of you guys listening have never been through a major market correction. I’ve been through tons of them. I mean, I saw what capital can look like after you trade heavily in the dot-com bubble or in the 2008 recession, or during the COVID sell-off or 2018 when you had the big sell off there.

6:16
I’ve been through a whole bunch of them and none of them are the same. They’re all different. They seem to be getting quicker and quicker, like they just can’t even last that long, but you’re always learning. So, Just say, oh, hey, I’ve been doing this for 5 years now. I haven’t learned it much, OK? I would say this though, I mean, think about the painter Michelangelo.

6:34
I had to look this up to make sure I have my numbers right. But Michelangelo, how many years did it probably take for him to become excellent at his craft of painting? And then when he became really good at it, he painted the Sistine Chapels. I mean, not just good, like, obviously legendary, but he was commissioned to paint the Sistine Chapel, right?

6:53
It took him 4 years to paint the Sistine Chapel and then legend has it, I’ve never actually seen it, but if you go really up close to the painting, you can see a lot of mistakes that he made. But from a distance, it’s an absolute masterpiece and as traders, we’re going to go through some difficult times, difficult months, difficult years even, times where we mess up.

7:13
But in the end, when we step back. We’re going to see a masterpiece if we stick to it and we stick to our disciplines and we don’t blow up our account. So, while Aggie’s been doing this for 5 years, I don’t think that’s necessarily, OK, you’ve given it enough time, move on to something else. No, you keep working at it.

7:28
You keep trying to get better. I mean, there’s parts of my game that I’m not that great at, and I’ve talked about those over the years. But one of the things that’s helped me with this sell-off is the The fact that I learned a lot of lessons from previous sell-offs. I learned to not just buy every time the market starts to bounce because most of the time those bounces aren’t going to turn into anything.

7:46
It takes multiple failed attempts during a market sell-off before we eventually get to a bottom. And let’s be honest here too. He says that I moved away from day trading in the last 2 years and in the swing trading. So he day traded for 3 years. Day trading is very difficult, especially to start out in day trading, very difficult.

8:03
I mean, I’ve tried day trading. I don’t have any desire for it. And here’s the reason why you’re handicapped by the opening and closing bell. So whatever a stock gaps up or gaps down on, you don’t get to participate in that. So if a stock closed at $100.01 day, gaps up to $110 and then.

8:19
You get in at 110 and it goes up to 11,050. Well, OK, you made like 50 cents per share, but there was also a lot of downside risk if it ended up fading that move. And while you made your 50 cents per share or 0.5%, the stock rallied 10.5%. So you missed out on a huge move there.

8:34
And when you get into a good trade, it doesn’t let you build upon those gains day after day after day. There’s something so powerful about a trade that runs over multiple days and you’re compounding that money. So, while I wouldn’t say like the 1st 3 years was a waste for Aggie, he learned a lot. For one, he learned what he didn’t want to do in the stock market and that was day trading, but he was also picking up skills too, like, and, and he even said it right there, you know, I’ve learned how to evaluate fundamentals, use indicators, experience a lot of different markets, order placements, scanners, all sorts of good stuff, right?

9:06
So it wasn’t a waste, but it was an experience that Tom had, this isn’t probably for me. A lot of people who are doing the day training, they’re having to jump after these like 1 and $2 stocks that are making massive runs in hopes that they’ll keep making a big massive run throughout the day. Really not a smart thing to do because it’s very difficult to manage the risk on those very high volatile trades that are running on the news or running off of earnings or whatever else they might be running off of.

9:32
Also too, I talk about the meat and potatoes a lot with trading. The meat and potatoes on a swing trade can be massive. You know, if you buy a stock at the beginning of one month and the stock goes up 30%, and let’s say it went from $100 to $130 but you got in at $105 and sold at $125 you didn’t get in at the bottom and you didn’t get out at the top, but you got a good chunk of the meat and potatoes.

9:54
Well, a day trade, you know, you may. Not be able to get into the bottom or get out of the top. But now when it comes to day trading, unless you’re getting not just the meat and potatoes, but getting in at the bottom and getting out at the top, it’s really hard to net much profit.

10:11
Out of consistently day trading. So I think he’s made the right move just from a general standpoint over the last couple of years, going to swing trading because there’s so many more opportunities there. I don’t think he has a lot of discipline problems either. He puts in a stop also, so that means he’s planning out his trade before he ever takes the trade.

10:30
He’s executing his plans once he’s in the trade. But then he talks about profit targets and so I sometimes wonder too is if he’s not seeing that clear resistance overhead or maybe he’s just ignoring it and maybe hoping that it will push through resistance. If there’s strong resistance overhead, I don’t trade it. Like if there’s a declining trend line that it’s yet to break, I’m not getting long on it.

10:47
I’m gonna wait for it to break that declining trend line first, but profit targets. Should be like the ease of the reward without serious resistance to have to deal with. You know, I could say I got into the stock at $10 and I think it’s gonna go to $20 but if there’s major layers of resistance every couple bucks, that might be hard to get to.

11:07
And also, we gotta look at it. What’s the time frame likelihood? Are we dealing with the time frame that I hope it can get to it in, or are we looking at it, what it’s the stock’s history is like if it’s Verizon, it doesn’t move much or if it’s AT&T, it doesn’t move as much as like a stock like Roblox or Rokku might move.

11:25
So you’ve got to make sure that one is the profit target at a place where the stock doesn’t have a lot of resistance. If the stock takes off, is there a clear path to that reward level without serious resistance? The second thing is, is, are you aiming for setups where there’s that ease of reward that’s at least 2 to 1 for what you’re risking because if you’re going 1 for 1 or even less than that, I mean, it’s gonna be hard.

11:48
It’s gonna be hard to profit off of the market in trading stocks or swing trading stocks. So he’s been doing swing training for 2 years and it’s such a different animal than day trading because you don’t take on the overnight risk, obviously, and then you’re in and out, you’re doing a lot of scalping when you’re day trading. Day traders don’t like to call themselves scalpers, but in a lot of ways they are scalpers.

12:07
But, you know, after 2 years, I wouldn’t say that you’re supposed to be perfect at this just yet. You know, you watch the Masters tournament and you look at these professionals and they go out onto the golf course and they hit the ball with so much ease and they make it look easy. You think to yourself, oh, I could do that. So you go out there and you start hitting some balls at the range and maybe you can hit it pretty far, you’re like, oh, I’m not too bad, but then all of a sudden you’re teeing off on 18 holes and you start realizing how horrible you are at golf.

12:32
And Think about how long people play to become just a decent golfer. Maybe he can hit for par and how hard that is for most people. And trading is no different. You’re not just gonna go out there, make a couple of trades and be really good at it, and it’s not gonna happen over necessarily over 5 years or 2 years.

12:50
You gotta keep going at it. You got to see that you’re improving. You’re improving in your profitability and your gains, that you’re psychologically becoming much stronger in your approach to the market. Also worth noting in his emails he says, I don’t hold any trade over 6 months and I aim to only hold for about 2 months.

13:06
That’s good. I mean, you can trade stocks for 2 months and never go through earnings, but if you’re going through earnings holding a trade for 6 months, you could be going through 3 earnings reports right there. That’s a lot. That’s a lot of risk to take on, and I would be curious to see is, where is his biggest losses coming from? Is it coming from the stocks that he’s holding through earnings or through major news events?

13:24
The other thing is, what kind of stocks is he trading? Is he trading like $2 stocks? Well, he may be having a difficult time there because the predictability in those can be very, very hard. And if you’re chasing after newsmakers or the high gainers of the day, those are such crowded trades, it’s difficult to extract profits out of them on a consistent basis.

13:45
And he doesn’t trade with serious size in relation to his net worth, because he doesn’t want to risk it until he knows he can be profitable. I mean, some of that comes down to. Like paper trading, right? When you’re paper trading, you don’t feel the risk that comes with paper trading because you’re not really trading with real money.

14:02
But as soon as you go with real money, you start to trade a little bit differently, act a little bit differently. It’s kind of like going back to the golfer illustration of when you’re going from the driving range to the actual teeing off for 18 holes. All of a sudden you’re not as accurate as you were on the driving range.

14:18
There’s a lot of people that probably go to Top Golf and other places and they feel like that they could slug it out with Tiger Woods at Augusta. If you put them on hole one, they’re not doing so hot. And so what I’m trying to get to here is, is that just like paper trading, you don’t feel a lot of it. You need to make trading where it’s worthwhile to you, but you also don’t want to trade position sizes that are going to lead you into making irrational decisions.

14:40
I know a lot of people that trade really big, and when the trade doesn’t go right for them, they’re usually. Very susceptible at making a very bad trading decision getting out at the worst possible time or not following their stock losses. And then when they are actually on the right side of the trade, you know, they’ll get like a 3 or 4% pop and they’ll immediately cash out because they’re trading with so much money that they’re looking at the dollar value of what they just made on the trade versus whether or not they’re really following the risk reward parameters that they set out for they’re not focusing on the charts and what the market’s telling them they’re following their emotions and what that money means to them.

15:14
I love how Aggie said that he’s used a bunch of different indicators and he’s drawn the conclusion that none of them really helped. He draws a few trend lines and looks at volume, but that’s about it. That’s really almost all you need. Almost all indicators come from or a derivative of price and volume.

15:30
I mean, there’s some fancy stuff out there and everything, but to be successful, you don’t need all those indicators. They’re good reference points like I have stochastics and MacD and RSA on mine. I don’t ever make any decisions off of MacD and RSI. Sometimes I’ll look at Stochastics just to see how oversold or overbought a stock might be.

15:46
But even then, that’ll give me a little bit of guidance for whether or not I really want to be initiating a trade at this stage in the game, but Overall, I’m just looking at price and volume, drawing the trend lines, trying to see where the path of least resistance is. What is this charts trying to tell me because often what the charts and what the volume is telling you is going to be reflected in what all the indicators are also telling you.

16:08
Uggie also struggles with knowing when to get out of a trade early and man, that sometimes comes with a lot of experience too. I’ve noticed that I’ve gotten a lot better at getting out of a trade early when I just know that it’s not going to work right for me. Um, sometimes that’s just because of how the overall markets behaving.

16:26
And not so much the individual stock, but if I’m seeing big broad market sell off, there’s a good chance that I’ll go ahead and cash out of a trade early or maybe just scale out of the trade and lessen my exposure on it simply because there’s some things that just pop out to me on market action when we start breaking to new lows of the day or when I start seeing where breath indicators are not very strong.

16:44
That it might not be a good reason to stay in a long position. And oftentimes too when we’re in uncertain markets and I happen to actually take a long position like this past week, I did this with HD Home Depot. I went into the trade knowing I was going to take profits aggressively, and I think it popped up to like 364 and I took profits immediately for like a third of my profits for like 1.1%.

17:04
Did I want to stay in it longer? Yes. But seeing how the market was reacting, I got 1.1% at the open. I’ve seen a sell off way too much in the afternoons. And then of course the market. Proceed to sell off in the afternoon and I closed out the other 2/3 of that position for a small loss, but overall, I think I made 0.03% on the trade.

17:22
Now, 0.03% isn’t something that I get all giddy and excited about, but it beats taking a 1 or 2% loss or a 3% loss on it or getting stopped out at where I was originally placing my stop loss at. And that just comes with like experience of seeing enough sell-offs and dealing with it enough over time to where you, it starts to stick out like a sore thumb to you when things are about to get ugly.

17:43
And just knowing the kind of market that we’re in right now here in January of 2022, you’ve seen enough whips all action and inability for the market to hold on to gains and to the close that, OK, I start seeing the market sell off, I’m gonna try to protect some of my gains on my long positions where I can.

18:01
So here’s the thing, Aggie. I feel you, man. There’s been times, like I said, where I’ve looked at the market and I’m like, what the heck is going on? Or sometimes where I’ll say, man, sometimes I just think I don’t know anything when I trade the stock market. It just makes me look like an utter fool. But all of those are still building blocks for me 30 years into this process, still learning.

18:19
Now I would encourage you 5 years into it. Keep on learning, man. You’re a lot further ahead than most people, having done this for 5 years. You’ve seen a sell-off in 2018. You saw the COVID sell-off in 2020, so you’ve seen some significant selling. And those are huge billing blocks in your growth as a trader because it teaches you why you need to manage the risk and the stock market and it looks like based off of your email that you are doing that.

18:40
And that’s a big part of the battle. Now, it seems like more of the problems for you and a lot of traders deal with this is that they don’t know where to get out of a trade with, probably because they’re going into trades that have a lot of resistance overhead, or they’re not taking the top down trading methods serious enough to realize, hey.

18:59
I’m not gonna go heavily long on stocks or I’m not gonna catch a falling knife when the market’s falling apart. And when the market’s good, I’m gonna try to let these things ride as much as I can. I’m gonna take some profits along the way, but I’m gonna let my winners run wild while I cut my losers short. If you enjoy this podcast episode, I’d encourage you to check out swingtradingthestockmarket.com.

19:19
That’s where you can get all of my stock market research each and every day that the markets open. I provide tons of research including watch lists, stocks that I’m looking at, my favorite charts that I come across each and every day, as well as updates on all the FAC stocks and the S&P 500, the NASDAQ, and Russell 2000.

19:36
So check that out, swingtradingthestockmarket.com, and you’re supporting this podcast when you do so. And finally, make sure to leave a 5-star review. I greatly appreciate those reviews and to send me those emails still ryan@shareplanner.com. I do read them all and I want to see what you guys have to say and I wanna answer your questions on the air.

19:54
You guys provide the content to this podcast. How cool is that? It’s not about me calling up guests. I get guests almost on a daily basis or people requesting to be a guest on a daily basis, and I turn them down. I’ve never accepted a single one of them. Because you guys are the guests, you guys are the ones that I want to hear from, and you guys are the ones that I want to try to help out the most.

20:13
So keep sending me those questions, leave those positive reviews, check out swingtradingthestockmarket.com, and God bless you all. 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.

20:31
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20:53
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.