Surviving the Stock Market Crash | Podcast Episode #254

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 today’s episode is going to be a good one and a very important one. We’re gonna talk about surviving the stock market crash of 2022 or really any stock market crash for that matter.

0:44
I think it’s really important right now too. I mean, usually I do emails on most of my episodes where I’m answering your questions and your concerns, but I do think because we’re in such a historic moment right now with the stock market. I mean, think about it. The last time we had a major, major sell-off, especially one that lasted this long, was 2008.

1:05
So this is a huge event that we’re going through as a traders, as investors. And so I think it’s important, especially You know, assuming I do this podcast for another 10 to 20 years, which is something that I would love to be able to do, it would be really nice to have a log of these kinds of events that we’re going through so that 10 years from now when we go through another recession for whatever reason that it is, maybe it’s because AI has revolted and won’t do any of our jobs that we handed over to them and now all of a sudden the economy’s crashing because of that.

1:38
Who knows? I don’t know. But what I’m trying to say is is that. It’d be nice to be able to look back on 2022 and say, hey, this is how one guy got through the whole stock market crash. This is how he profited from it. And to use that as a precedent for going forward and just something to be able to reflect on.

1:57
So I’ve done a few of these so far here in 2022 and I felt like it was appropriate again to do that with this podcast. So, before I get into this, what am I drinking? So I was going to the liquor store to pick up some tequila and lo and behold, I see some bookers staring right at me.

2:13
It’s in a nice wooden case and. I was like, man, I’ve never seen that here before, and I asked the manager because he was standing right next to me. I said, there’s like some cash? Is this legit Booker’s cause for those who don’t know what Booker’s is, and I’m gonna be doing a review on it here pretty soon, it is a really good bourbon and it’s usually a very expensive and hard to find bourbon as well.

2:31
So he’s like, yeah, yeah, it’s the last one, so I grabbed it. And then he made fun of like the stock boy, made some joke about him or whatever, and so my attention directed over to the stock boy who was loading up the shells, one of the bourbon shells. He was opening up these boxes and I see this little tube in one of the boxes and I said, is that EH Taylor?

2:49
Is that the colonel? And he says, well, yes it is. So I said, hey, Can I get one of those? And he said, Sure, I got it for retail at $47. I mean, some of these stores that are out there will sell it for like $300 on the secondary market. I mean, it’s crazy how high this thing goes.

3:06
So that is what I’m drinking today. EH Taylor in honor of National Bourbon Day. Doesn’t necessarily mean it’s National Bourbon Day when you’re listening to this podcast, but as I’m recording it, it is. Beautiful color, I mean, very nice caramel color and to the nose man, you really smell a lot of butterscotch.

3:23
I mean, it smells good. I mean, it is delightful. You also pick up some like smells of like pine. I mean, it’s really delightful. But then when I’m drinking it, what really takes me back and I know that we all say. About Berns, oh man, that’s smooth, right?

3:40
But this thing really is, I mean, it’s really incredibly smooth. It’s 100 proof, so that makes it 50% alcohol, it’s bottled and bond, and you would think that there would be a strong kick to it, like one of those that would just like set your mouth on fire like most of your bottled and bonds, but not this one. This one has this unbelievable like vanilla ice cream flavor to it.

3:59
I mean, it is that kind of smooth, like soft serve vanilla ice cream. I kid you not, it’s really good. I mean, I’m just absolutely amazed by this bourbon and the linger and the way that it lingers when you swallow the bourbon, it doesn’t like burn your esophagus or anything when it’s going down.

4:16
It has no impact in that regard at all. In fact, it just stays in the mouth. I mean, it’s just incredible flavor. I don’t take scoring these bourbons lightly and very rarely do I give a score over 9.0, but guys, I gotta give this like a 9.6. This is in the same realm as Blanton’s.

4:32
It is just really, really good. In fact, it almost makes me wonder if I was too high on Blanton’s before. I mean, it’s that incredible. This is one of my favorite bourbons that I’ve tasted. So EH Taylor, the colonel, 9.6.

4:50
All right, so surviving the stock market crash of 2022 or any stock market crash for that matter, we’re gonna go through a bunch of different points that I’ve written down and I want to expand on each one of them. The first one is don’t try to hit every move in a bear market. Sometimes you’ll hit multiple moves, you know, you’ll hit the downside and then it’ll bounce and you’ll happen to catch that right at the right time, and sometimes it’s because the price just set up the way it did.

5:14
Other times you’ll miss out on it and you’ll just have to wait for that move to the downside to play out or to the upside depending on if it’s a dead cat bounce. But you can’t expect yourself to be able to hit every single move. And when you don’t hit the moves, you can’t chase after them because the ability for the market to reverse course and burn you if you’re trying to get short or the gap down and let the bottom fall out of this market is unbelievable, because remember, When you’re in a bear market, the volatility is elevated, much more than what anybody is used to trading.

5:47
In a bull market, the volatility will be lower, but in a bear market, it’s very much elevated. So in a bull market you’re not likely to get massive gap downs. You’re not likely to see as many big moves to the upside or to the downside. Yes, you’ll have 1% moves here and there, but you don’t see like 3 and 4% moves like what we’re seeing on a regular basis.

6:07
So if you don’t get in initially on a move, don’t try to chase after it. For instance, I just got into QID a week ago. I had to wait about a week for it to happen. And then once my trigger price of $23 hit, I got long and I took some profits along the way, but right now in my final third of a position, I’m up about 20% on that trade.

6:25
But I got in on that initial move. Now, if I would have waited till Friday or till Monday, it would have been much harder to get into QID. In fact, I wanted to add more bearish exposure to my portfolio, and I wanted to do it through like a 2 or a 3 to 1 ETF on the Russell 2000, but I couldn’t do it because the move was already underway, and so I had to settle for like a 1 to 1 ETF which was RWM.

6:49
Just because I needed to keep the risk tight, and that’s one of the big things you have to do on trying to get into these moves. You still want to keep the risk tight and you want to put your stop bosses below key levels that if it’s violated, you don’t want to be in it anymore. You also want to be aware of revenge trading. So this is one of the things that hits pretty close to home for me because I know that I was susceptible to it in the past and I had to be aware of it still today that I don’t get into the revenge trading mindset.

7:15
And that is where you get knocked out of a stock. And then you get right back in it because you’re afraid that it’s gonna bounce right back up. I had a almost a revenge trade by, well, I think some people might say it was a revenge trade. It really wasn’t. But QLD back in the middle of May, I think it was like May 14th, May 15th or so, the market was starting to bottom, but before that actually happened, I was already long QLD because there was a couple of attempts there thinking that the market was bottoming, and then it would keep pushing lower and everything and it would frustrate me as a trader.

7:46
My first four trades in May were actually losing trades, but they were small losing trades. And then finally, that 4th trade QLD I get stopped out and I said to myself, like, I know I could just tell by the breath in the market, I can tell by the way it’s behaving with the VIX and everything else.

8:03
I was quite confident that even though I had been stopped out that it was going to reverse course. So what I did instead of just jumping right back in and hoping that would reverse course, I waited for it to reverse course. And as it started to reverse course, I got back long on it again. Now, QLD still remained the best trade option for me.

8:18
Now, if there was a better trade, I would have taken it, but that’s the one thing that best signals a revenge trade is when there’s better trades out there and you don’t take it. That’s why it wasn’t a revenge trade for me because there was no other better trade for me at the moment that I was willing to take. So I jumped back into QLD and I think I made about 15% on that trade.

8:36
But revenge trading is when you have the mindset that you have to make that money back with the stock that you just got knocked out of, you have to make it back with that particular stock. It’s not good enough to make it back with another stock. Even if there’s 20 different trade setups out there that are 10 times better than the trade that you just got knocked out of, you feel this need, this desire to have to make it back with that particular stock.

8:58
And that’s revenge trading. So you don’t want to get caught up in that. And in the past, I used to do that all the time. I was so paranoid of a stock taking off without me after I got stopped out, and I’ve broken that habit, but it took a long time for me to realize I was doing that and for me to understand that it was a huge detriment to my trading.

9:17
The other point that I would tell you is that especially with a bear market like what we’re experiencing right now in the S&P 500s in bear market territory, and so is the NASDAQ. But with the bear market, these things take a while to play out. Yes, we had to sell off from March of 2020 when we saw the NASDAQ drop like what, 30% within a matter of 5 weeks.

9:40
But then it immediately V-shaped bounced, the Fed bailed out the market, probably would have kept going lower, but the market got bailed out by the Fed, the market bounced and it was off to the races thereafter. Same thing with 2018, market got bailed out by the Fed. But this time we’re not getting bailed out by the Fed.

9:57
And so this very well could take a very long time. I mean, I think they said the average bear market lasts 289 days. That would take us until about October 22nd before we reached the bottom. And remember, the Great Recession lasted from late 2007 till March 9th of 2009.

10:16
You had the dot-com bubble that lasted from 2000 through, like, I think like the end of 2002 or early 2003 before it bottomed. So these things can last a very long time and I would suspect that it’ll probably at least last till October. And I don’t think that we’re close to putting in a bottom yet.

10:33
We’re just now starting to see the house of cards begin to crumble. And right now we’re already halfway through 2022, pretty much right there. So it’s already lasted a solid 6 months, and there’s no reason to not believe that it can’t last another 4 or 5 months before we eventually hit a bottom, if not longer.

10:53
And if you’re thinking to yourself, well, Ryan, you know, the Nasdaq is down 30% or whatever, there’s no way that it can just keep dropping forever. Oh no, it can keep dropping forever. You take the dot-com bubble. It dropped 87% off of its highs. It took 17 years for it to get back to those all-time highs again.

11:10
So yeah, it can last a long time. And so when you think that I’ll just hold a stock, even though I’m down on it a little bit, I’ll just hold it for it eventually come back. Sometimes they take 17 years to come back depending on what you’re trading. Sometimes it never comes back. Next point is to remember that what’s cheap can get cheaper.

11:28
We’re looking at PayPal, we’re looking at Square. We’re thinking there’s no way Square goes much lower from $90. Ah, but now it’s trading at $60. People will say, hey, there’s no way that Disney goes below 100, but now it’s trading at 93 or something close to that number, or Unity Software.

11:48
Back in October is trading at 210. What is it trading at in the 30s now? Shopify trading in the 300s after trading over 1700 late last year. So yes, the cheaper stuff can still get cheaper. Cheaper gets cheaper.

12:04
But you wanna know what’s really good and pretty cheap too? swingtradingthestockmarket.com. That’s gonna be the website that goes along with this podcast. swingtradingthestockmarket.com is going to give you all of my stock market research that I provide each and every single day.

12:21
That’s going to include technical analysis on the indices, all the main stocks, because I guess Facebook’s no longer a thing anymore. It’s meta and their symbol is META now, so main stocks plus Microsoft and Tesla. And on top of that, you’re going to get my weekly bullish and bearish watch lists, as well as the daily setups that I’m looking at each and every day, including the most intriguing charts that I come across.

12:49
So, check that out, swingtradingthestockmarket.com, you won’t be disappointed. Fight the temptation to do something. Fight the temptation to do something because we see the stock market dropping and we feel like, and I don’t have a real dog in this fight. I’m not really doing anything. I should be doing something.

13:04
I should be shorting it. I remember when we had the big fat finger flush in the market, the mistake where apparently a fat finger hit the wrong button and it flushed the market 10% lower. A whole bunch of market orders, right? Market was dropping like 10%.

13:21
Kid you not, I think this was like May of 2010, I want to say, but it was a crazy event and I remember just sitting there thinking. I should be doing something. I need to be doing something and I tried. I tried to short the market when I was doing it, then it came right back up. That’s why they call it the flash crash.

13:37
The fat finger flash crash. That’s what the name of it was, the fat finger flash crash. Look it up, pretty crazy. There’s even a YouTube video on there that was absolutely insane called Cancel All Orders. It’s not my video. It’s just the one that I sometimes listen to for inspiration, but it’s not inspirational either.

13:56
But during that time, I wanted to get short on the market because it was just moving so fast and there’s a lot of you guys out there too that will listen to this podcast and like, yeah man, I always feel like I need to be part of the action that I need to do something. But instead of what’s the best thing that you can do and still doing something is by not doing anything at all, by staying in cash, that’s doing something.

14:18
Because when you get into very volatile periods and huge uncertainty. You don’t know what’s gonna always come next. So during the flash crash, I got short and I remember as soon as I got short, the market started rebounding again and it kept going higher and higher. I actually lost money shorting the market during the flash crash.

14:33
But had I fought the temptation and not done something just because I felt the need to do something and there’s a lot of you guys out there that feel like you need to do something. There’s a lot of people cause I get emails and I get comments all the time about having a hard time sitting on their cash. Well, most of this year I’ve sat on my cash, about 80% of it for more times than not.

14:52
I would say 90% of the time, the most cash I’ve put to work is about 20 or 30%. But I’m doing fine on the year. That 20 or 30% using the market volatility is doing incredible. So I don’t feel the need to have to do something with all that extra cash.

15:08
Now, the market can bottom, then there’s the good opportunity perhaps to be able to start adding some long exposure and over time, maybe I can get up to where I’m using 80 or 90% of my cash. Very possible, but you have to fight the temptation about doing something. And finally, one of the things that’s helped me out a lot in this market is not trying to predict, but to react.

15:28
We feel like as traders that the only way we can validate ourselves as being legitimate traders if we predict the correct direction of the market, and that’s just simply not the case. You don’t have to predict it. I don’t predict anything. You care less. I think there’s probabilities where, OK, if it breaks the support level, there’s a good chance it’s going to test this next support level down below.

15:47
People get offended when I say that. I’m like, guys, I’m just following the charts. I don’t really care if it goes up or down. I’m just telling you what I’m seeing on the charts, and oftentimes I’m right about it, but I’m not necessarily predicting. I’m just telling you, OK, these are the levels of support, this is the trend line, this is a head and shoulders pattern, this is a cup and handle pattern, this is what it dictates it might do next.

16:06
And if it doesn’t do it, then fine. If I’m long on it and it doesn’t do what I expect it to do, I get triggered on my stop loss and, and I get out of the trade. But if I’m right, I don’t know how right I’m gonna be. So what I do is I’ll take some profits along the way and when I get to that final quarter of a position or a third of a position, I’ll say, OK.

16:22
Let’s see how high it wants to go. I don’t know how high it wants to go, but let’s see how far it’ll take me. And that’s really where so much of your success as a trader can come is when you really take yourself out of the equation, your ego out of the equation and say, I don’t have to predict Jack diddly squat. There was an old commercial back in the, what was it, 80s or 90s with Bo Jackson.

16:40
I wanna say it was the 80s. But the whole marketing campaign, I think it was Nike, was Bo knows football, Bo knows baseball. And for those of you don’t know who Bo Jackson was, probably one of the greatest athletes of all time. He didn’t have a long illustrious football career due to injuries, but when he played, there is nothing else like him.

16:59
He was a running back for the Raiders. And he just trounced anybody that tried to get in his path, but the whole campaign was Bo knows football, Bo knows baseball because he was a multi-sport athlete and then Bo knows basketball. So they kept trying to say, you know, Bo knows underwater basket weaving or Bo knows lacrosse.

17:17
But if Bo knows stocks, he’d probably be losing money because then it would be his ego in check of having to predict stocks in the direction they have to go. And we don’t want to do that as a trader. We don’t want to put ourselves in a situation where we have this need to predict what the stock market’s going to do next.

17:36
Anytime I’m in a position, I’m always looking for when the end of that trade is going to be. If it doesn’t happen on that particular day, then I’ll see if it happens the next day or the next day after that. And sometimes I might stay in a trade for two months or sometimes it might just be a week. But I take the need to predict out of the equation.

17:51
And then even worse than that is the need to call a market top or a market bottom. Just let the market decide where the market bottom’s gonna be. You don’t have to figure it out for yourself, and it should be a relief. The onus is not on you to figure out where the bottom’s at. The onus is on you is just to react to when the market shows you where the bottom’s at.

18:07
So to wrap it up, don’t try to hit every move in the market. Number 2, be aware of revenge trading. Make sure you are not trying to seek revenge on a trade that you just lost money on. Number 3, realize that this stock market crash could take a while. The average bear market lasts 289 days, and we’re only halfway through this year.

18:28
Remember too that what is cheap now can still get cheaper. Some people don’t realize that a 50% drop in a stock doesn’t mean that it can’t drop another 50% thereafter. And then fight the temptation to do something. You don’t have to be doing something every time and don’t try to predict the market.

18:44
Learn to react. You enjoy this podcast episode, I encourage you to. Leave me a 5 star review. I really like those things. They really mean the world to me. Also, make sure to check out swingtradingthestockmarket.com and keep sending me your questions, ryan@shareplanner.com.

19:01
I will get to them and if it’s a decent enough question, I will make a podcast episode out of them. So send it to me, ryan@shareplanner.com. Most of your emails do become podcast episodes. Thank you guys, and God bless. Thanks for listening to my podcast Swing Trading the stock market.

19:19
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19:37
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19:54
All the best to you and I look forward to trading with you soon.