Blowing Up Your Trading Account | Podcast Episode #248

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 I’ve got a good episode for you guys today. It’s kind of a sad episode because we’re gonna talk about a certain individual who I won’t name by name that blew up his trading account.

0:44
And to conceal his identity, we’re gonna give him the name of Bodine. You gotta remember, there’s a lot of carnage in the stock market right now. So the story that I’m about to tell you from Bodine is not just unique to Bodine, but it’s happening to so many people out there, and it is so important to read you this story, and he’s given me the permission to do so, to.

1:05
Share it with you guys because a lot of you might be on the cusp of blowing up an account or maybe engaged in practices that will eventually lead to you blowing up your account. So listening to this podcast episode today could very much save your trading career.

1:21
So Bodine writes, Hi, Ryan. I was actually going to email you over the weekend explain why I had to leave the trading block. So a little bit of backstory. This guy was a consistent member of the trading block. He was in it, he was enjoying it. And then after a couple of days, I realized that he hadn’t been in there, so I reached out to him and he sent me back this email.

1:42
He says, the simple answer why I have not been in the trading block is that I blew up my account and I have only myself to blame. The longer answer, and maybe this is something you could put into one of your podcasts to warn others of doing stuff like this in the future, is that I couldn’t keep my emotions in check. I was trading with roughly 1500 pounds, which comes out to about $1700.

2:01
On all the trade setups you provided, I had really good wins and only a few minor losses, but I found that when I traded off of my own decisions, I either didn’t have the resolve to hold it or I just made really poor trades. When I saw a trade go negative, my emotions would take over, and I would close out a loss, telling myself that I would make it back on the next trade, which of course led to a downward spiral of bad trading decisions.

2:24
I purposely hid the money column on E Toro and only focused on the percentages. But then over the last few trading days, all the learning went out the window. I did a SQQQ scalp at 5x leverage, breaking one of my own rules, and had a big win. And the high of that made me think I could do it again, so I did and lost half of that big win.

2:45
Then another win. Then it just took over and I really made irrational decisions at the 5x leverage chasing that big win that would get the money all back. And 11 trades between the 10th and 12th of May, I lost $1,162 and I ended up with just over 400 pounds left or about $700 US dollars, so I had to pull the plug.

3:06
I knew that after losing that much money I wouldn’t be able to make sound trading decisions as I would be subconsciously trying to get that money back. I think another big factor in that is that I always felt my money had to be doing something. I always wanted it to be in a trade, even though I knew sitting on cash would always be better than losing it.

3:26
All the logical thinking just went out the window, and emotions made the decisions for me. The annoying thing is that on most of my big losses, if I had just held my nerve and not attached emotion to it, I would have probably doubled my account by now, and that also played on my mind when trading. I’ve taken the decision for the next 6 months that I really need to take a step back from the stock market and focus on one, saving for a wedding, meaning no spare money to really invest with. 2, saving in general to have a rainy day fun and make life easier. 3, let the emotions, embarrassment, shame, and anger of losing what to me is a large sum of money.

4:00
Subside so that I can come back with a clear head and make better decisions. And 4, save up enough capital to come back with a fresh mindset and having learned from this experience. I want to say that joining SharePlanner was the best decision I made when it came to trading.

4:16
I had watched countless videos and followed loads of people on Facebook and Twitter, and you were the only one that didn’t try to sell what you were doing. You let the results speak for themselves and your approach suited the way I wanted to invest. And whilst you are a mentor, the way you interact with everyone and help made you feel more like a friend.

4:32
I have learned an awful lot about trading from you, Ryan. I just wish I could have let what I learned lead me in the stock market rather than my emotions. I will 100% be back, so for the love of God, don’t stop what you are doing. Regards and best wishes, Bodine.

4:49
That last paragraph really got me, man. I tell you what, that was some of the kindest words somebody could possibly say to me, and I feel horrible that he’s no longer in the trading block, but we’re gonna tackle his whole email here and I want to really talk about what led to it, what maybe he could have done differently, what he could try to improve on in the future to become a better trader, and what we can all learn.

5:07
From Bodine’s mistakes. But first, what am I drinking? Well, I just recently picked up a bottle of Knob Creek 15 years. It’s 100 proof, meaning it is 50% alcohol. And when I smell this one, it really does impress. I mean, you pick up definitely some like caramel notes, like really sweet flavored notes there, and then the sip, nice vanilla flavor, almost like vanilla ice cream smooth.

5:32
The only problem or criticism that I would have with this one is that the heat comes in really fast, so you definitely can taste that vanilla flavor, really nice, but man, you don’t get to experience it very long before that spice comes in and takes over. And Knob Creek, I feel like it’s notorious for some strong heat.

5:48
The 9 year, same proof, incredible amounts of heat. I won’t drink that stuff straight up, but I will put it in my old fashioned. I think it makes a marvelous old fashion. But the 15 year definitely more flavorful, definitely of better value. But the heat is just a little bit overwhelming.

6:04
So, for a score, I’m gonna give it a 7.9. I think it’s a good score. I think it’s pretty much as as high as I can go with that one, but 7.9 for the Knob Creek 15 year bucket. So, let’s go back to this email. Man, I tell you what, it really does sadden me a lot because I’ve been in his shoes before and I’ve blown up my accounts before too.

6:25
And it’s been a very long time, but it was those blowing up accounts that really, really taught you a lot of lessons and I learned it the most during a market recession, which is where he’s learning this from. So, for one, he says when I traded off of my own decisions, that’s where I ran into the most trouble. And he was using like the SQQQs, which by the way, guys, the leveraged ETFs, there’s a lot more risk in those than I think what a lot of people realize.

6:48
I do trade the leveraged ETFs at times. He mentions that they’re 5X. I don’t know what they are over in England or if he was just using some kind of like different formula for, you know, Position size plus the leverage that he was using inherent in the ETF itself. But SQQQ is a 3X ETF.

7:05
So this sounds like the primary reason behind why he blew up his account was the 3X. Now, I’ve used the, the 2X here recently, but I’ll say this, going from 2X to 3X, there is a noticeable difference in the volatility in your portfolio. And 2X is about all I can usually come up with from a reward or risk standpoint and a very volatile markets. 3X is really hard to find a good.

7:27
Trade set up, especially when there’s a lot of headwinds in the market or just a lot of overnight gap risk. But, you know, in the trading block, you know, he said he, he did good with my trades and everything. A lot of that comes down to the fact that I’m not pushing trades when I shouldn’t be pushing trades. So for instance, right now, I’m long on QQQ looking for a market bouncer.

7:45
I could be long TQQQ or long UPRO and the S&P 500 or long TNA, but the reason why I don’t is because of the risk, because if I’m wrong on this one and we get a gap down or we have some kind of crazy market event overnight, I don’t want to be down 20% on my position.

8:02
So QQQ is just a 1 to 1 ETF of the NASDAQ 100. Yes, it’s boring, but guys, managing the risk is more important to me than Pursuing the profits, and I know that sounds crazy because we’re in the stock market to make money, but when we solely focus on the profits on a trade or a potential profits on a trade, that’s where we get ourselves into the most trouble because we’re setting ourselves up for failure because we’re taking our eye off of the ball and what the ball is is the risk we should be keeping our eye on the risk that is in the trade.

8:34
If you take care of the risk, the profits will take care of themselves. So ultimately, I do want Bodine to succeed in the stock market, and the only way you can do it is by eventually becoming good at it yourself. I think it’s great to have people throwing ideas off of you left and right, and having Good people around you as a trader who are interested in seeing you succeed, but ultimately it’s important for you to be able to find that confidence in yourself.

8:58
He also mentioned that when I saw a trade go negative, my emotions would take over and I would close out the trade at a loss, telling myself that I would make it back on the next trade. And that’s just him justifying and when we talk about how people will make. Short term trades into long-term investments.

9:14
Why? Because they’re justifying, they’re justifying like, well, I believe in the stock. It’s like, let’s say for instance, Apple, and this would happen for sure with Apple. Somebody got in at $100 and the stock goes down. To $75. Well, when they got in at $100 they were probably like, OK, I’m gonna swing trade this to $110 and I’m gonna get out.

9:32
But then it goes down to $75 instead. They don’t have a stop loss, they don’t have a risk plan in place. And they said, well, you know, I believe in the stock. I think it’s gonna come back and I’ll get it and it may very well may, but he’s justifying the trade and that’s what happened here with Bodine. He justified. His trade to get out of it, so it goes a lot of different directions to justification.

9:53
You don’t want to be in a trade where all of a sudden you’re justifying. You want to be in a trade that’s following a plan that takes the justification out of the trade, deciding whether or not you were going to get into the trade was the justification. Once you’re in the trade, following the plan is what it comes down to.

10:10
You don’t have to justify things at that point. You just need to follow the plan. He actually thought one of the things that he did was a bad thing, and I guess in, in some ways it could be a bad thing, but he said he purposely hit the money column on eToro and only focused on the percentages. I actually do that on Thinkorswim. I start out the dollars, and it’s not for the same reason that he did it.

10:27
He was doing it to hide the reality of his bad trades and his bad trading decisions. I do it just because I want to focus on the percentages and I want to just focus on the trade setup. I think it is very easy when you’re in the trades to focus just on the money and what that money means to you, like, If you put $100,000 on a trade, and it goes up 1%, you’re up $1000 and it’s only a 1%.

10:50
And if you’re not following the reward or risk ratio on the plane, that kind of mentality where you’re thinking, well, even though I’m up 1%, I’m actually have $1000 that I’ve just made, I’m gonna go ahead and close it out. Eventually, that’s gonna mess you up to the downside when a trade doesn’t even go up 1%, it goes down 3% and then all of a sudden, you need 3 of those 1% m trades just to make up for that 13% loss.

11:10
And so for me, hiding the dollar amount, I mean, look, when I lose on a trade, I know usually in my mind how much money I lost, but I don’t want to be consumed by it. I want to just be following the charts. I wanna follow what are the charts telling me, where is their support, where is the resistance?

11:26
Am I following my trading plan? Am I doing what I set out to do? And really what the dollar loss or the profit is on a trade, I could care less about. I just want to follow the trading plan that I have in place. So where it all starts to break down at was when he started winning.

11:43
He had a big win in SQQQ and he thought that he could do it again. And it’s a serial killer mentality that I did on a previous podcast, one of the most popular ones that I ever did, trading like a serial killer. You want to go listen to that because so oftentimes we will keep trading in a horrible, undisciplined manner until we get caught.

12:01
It’s the same thing with the serial killer. The serial killer rarely say, hey, you know what, I’m ready to stop here and go back to private life and enjoy life as a just a regular Joe. No, they have to keep doing their thing until they get caught. And so as a trader, I know it’s probably a morbid explanation, but it’s one of the best ways that I can explain it, but as a trader, We want to keep trading bad until we get caught, and when we get caught, it’s the end of the road.

12:28
Usually you don’t recover from it. And so as traders, we have to avoid the desire to trade like a serial killer. So, when you’re winning in an undisciplined fashion, it’s usually creating some really bad trading habits that’s going to come back to bite you. A lot of people develop horrible trading habits after the 2020 sell-off in March.

12:49
They got into the market. They’ve never really experienced trading until then. They get into the market, they start winning, they start winning big, the market’s making massive moves. It continues in the 2021. They get into the GameStop hype, they get into some of the other plays like AMC or Be a Bear or whatever.

13:06
And then 2022 strikes, they don’t have the tools, they don’t have the skills, they don’t have the experience to be able to handle a bear market because in their mind, the market was always gonna go back up. That’s what it was to me when I was trading in the 90s, starting off as an 11 year old. I thought the market just went up every day for the rest of my life.

13:23
It just felt like that. That’s what it had to have been. Yeah, there’s a few days here and there where it goes down, but it always comes back. And then the 2000 bubble pops and all of a sudden I’m like seeing a $50,000 account when I’m 1920 years old, go down about 80%.

13:40
And so a lot of these traders right now, they’re experiencing the same things. And what’s even worse is that they are losing their gains in rapid fashion because they’re trading options and crypto and all this other stuff. And they gotta pay taxes on the 2021 gains, but they’ve squandered all those 2021 gains in 2022 and they don’t have the money to pay those taxes.

13:58
So, winning in an undisciplined fashion will come back to bite you and it’ll usually end up taking you to the end of the road in your trading career. Winning is great in the stock market. Being profitable is great, but you got to do it the right way. And I hate this part where he wants to get his money back.

14:15
See, traders think like this a lot of times. They say, OK, I was trading with $100,000. I went down to $50,000. I’ve lost 50% of my account. I just need to make that money back. I need to get from $50,000 back to $100,000 and I’ll be happy again.

14:31
They’re looking at going from point A to point B back to point A. But what they really have to look at it through the lens of is they went from point A to point B. Point B has now become your new point A. And if you want to get to $100,000 that’s gonna be your new point B.

14:49
That’s gonna be your new destination. But you can’t go from point A to point B to back to point A, because when you get down to a $50,000 draw down to where you’re sitting at a big loss, that point B now becomes your point A. That money is lost. It’s not yours anymore. It’s somebody else’s. And you want to make that money back, you gotta quit acting like you’re gonna get the money back.

15:08
You just gotta start trading good, you gotta start trading discipline and you gotta start trading profitably by being disciplined and by being a person who looks at risk is number one focus in trading. And you wanna know something? His whole blow up on his account happened within a three day period, May 10th through May 12th.

15:28
What does that tell you? You could blow up your account really fast by just making some really bad trading decisions. It doesn’t happen over a long period of time, oftentimes, it happens really fast. Yes, if you look at Cathy Woods and arc, A R K K, yeah, that one’s been one of the worst slow bleeds I’ve ever seen.

15:45
Things like down 75% or something crazy like that off of its highs. That’s a slow bleed. But for individual traders, it can happen within a couple of days, especially if you start trading the leveraged ETS like there are 3 to X or you’re doing options on those things. Or if you’re trying to hold them for a long term, you’re gonna trade the 3X ETS in my opinion, you gotta be quick with it.

16:09
And that’s why you always see me in my own trading when I am trading like a 2X. I’m taking profits relatively fast on those. I’m looking to take a third off as fast as I can, another 13 thereafter and a third after that. And he suffered some too there when he realized that had he just held his nerve and not attached emotion to his trade, that he would have actually doubled his account and not actually taken on the losses.

16:30
Here’s the thing, the stocks are gonna go up or down when you get out of a trade, right? You get into Apple at 160, it goes up to 175, you get out, it’s gonna still go either up or down. And there’s only two directions that can really go. So yes, there’s a good chance you’re gonna be left frustrated when you see it continuing to go higher if you just sold out.

16:51
But here’s the thing though, as traders, we’re just trying to extract profits out of the market. We’re not trying to get married to positions. That’s why having a trading plan going into the trade, where’s your stop loss going to be? Where’s the potential for a target price on this trade? Where are you gonna start looking to take profits along the way is so incredibly important.

17:09
So skipping down to the very end where he says he has different things that he needs to save up for and that’s important, you know, like saving up for a wedding, that could be a big bill and it can be a lot of stress just trying to get ready for that. So, focus on the things that require your attention the most right now and it doesn’t have to be trading. And then he says save up enough capital to come back with a fresh mindset and having learned from this experience.

17:29
The other thing I would say too is ask yourself, what are you gonna do differently this time? I would highly encourage Bodine to continue to reading and to trying to search for answers and to examine his own trades and figure out what did I do wrong here. Had I come into each of these trades with a better trading plan, and I’m assuming that he didn’t even have a trade in plan at all, how could he have benefited if he came in there with a trading plan for each of these trades that blew up in his face?

17:53
And why did he get into those? Was it really necessary to get the SQQQ or could he have just done a PSQ which would have been a 1 to 1? All good questions to ask. And so, another thing that’s really good is swingtradingthestockmarket.com, where you can get all of my stock market research each and every day.

18:10
That’s going to include updates on all of the indices, updates on all the FA stocks plus Microsoft and Tesla, and you’re going to get my weekly watch lists, my list of daily trade setups that I’m following, and the most intriguing charts that I come across each and every day. That’s at swingtradingthestockmarket.com. You guys are going to want to get in that action plus.

18:29
Make sure to leave me a 5-star review. Guys, I thrive off of those 5-star reviews. It helps me to continue to push this podcast out to a bigger audience, so it means the world to me when you can take just a couple of minutes out of your day to do that. Plus, shoot me your questions. If you have a question or a story.

18:46
That you have about blowing up an account, an experience that you had. Tell me that experience. Throw me the questions out there that you want answered. I would love to hear from them. Shoot me any kind of question, and if I can put it on the air, I will do that. So, thank you guys. Thank you for listening, and God bless.

19:03
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, And WhatsApp.

19:20
So go ahead, sign up by going to shareplanner.com/tradingblock. 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.

19:41
All the best to you and I look forward to trading with you soon.