Trimming The Watch List | Podcast Episode #255

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, you can succeed at the stock market and I’m ready to show you how, hey, everybody, this is Ryan Mallory with Swing Trading the Stock Market and Today’s episode we’re going to talk about it.

0:38
Go to stocks that we tend to trade more than others. For me there’s definitely some stocks that I trade more than others. Absolutely. And we’re going to talk about that and how that can be helpful and aiding a person with their full-time job requirements or if they have big family responsibilities how that can actually help them minimize their screening time and the necessary time, they have to spend going through charts.

1:01
Now remember, I’m a full-time Trader. I’ve been doing this for years and years and years, let’s see. Been a traitor since I was 11 years old, not necessarily full time but I’ve been doing it for 30 years and I’m able to consume a whole lot more information that probably most people especially those starting out just because I can go through 1,000 charts a day and not even blink an eye and probably spend like one or two seconds on them on average.

1:23
So this email comes from England on the other side of the pond and for a good English name, I’m going to call this guy Alfred Alfred Wright’s. Hey Ryan Alfred here from England just want to See how helpful the podcast is, what really is helpful about. It is how you keep on and on, and on about risk management, it’s really made a difference to my behavior.

1:43
My stop loss is have saved me a load of pain so thank you for that. I guess I have two questions if either makes it onto the podcast and be super happy. Well both we’re going to make it on there. He says the first one is can you tell me something about how you identify stocks to follow as targets?

1:59
I work full-time and have a load of family responsibilities so I don’t get a lot of time to follow the markets but I You have a list of about 10 targets that I follow and I update those depending on what’s in the news. I like a mean reversion strategy. If there’s been bad news that the market seems to have punished a stock too hard for, I like to go after those plays but also I’m looking at Mining and energy right now because it feels like those stocks have good prospects at the moment.

2:26
Anything you could say about how you identify stocks at follow and watch for setups be super helpful. Second question is, how do you decide which stop loss to put on? Tend to go with my gut feeling on this really, which I know is a terrible idea. Love the show, don’t drink alcohol anymore.

2:41
Sadly yes very sad but love the reviews, keep up the great work. Thanks now since he doesn’t drink alcohol anymore, I’m going to be evaluating a Shirley Temple. Nah I’m just kidding with you guys doing that.

2:58
This is Kings Creek that I’m evaluating here today. It is a Tennessee, sour mash. It’s a black label Tennessee. Sour mash. A ski, it’s aged for a minimum of four years. It’s got a proof of 80 and that means the alcohol percentage is 40%, which is not that great for a whiskey.

3:14
I like mine around 50 percent if not more. So the color on this one is a little bit on the light side. I mean it’s not horrible but to the knows that smells a little bit. Okey you can definitely pick up on a lot of alcohol smell to it to the taste. This taste is not that good actually feel like it kind of gets worse already had one sip of it in the Second Step was in any better has a little bit of a licorice taste, but it’s very like, a, it’s a flat, it’s like a flat soda.

3:40
I’ve mentioned that before some other whiskies that I’ve done, and I hate that flavor where it’s just, there’s no heat, there’s no finish to the Heat and it’s just comes in flat like so that you left out a couple of days ago and he take a sip of it just to see if it has any carbonation left and you kind of regret making that choice to even see if it had any taste or flavor to it, still at.

4:00
That’s what I kind of pick up when I drink this Kings Creek. Sour mash whiskey. Just really lacks the flavor. It’s very mundane. In fact, I would say that this is a drink that would taste like some kind of bad cocktail at Chili’s.

4:16
Chili’s is notorious for having bad cocktails, by the way, at least. In my opinion, I think they all stink. So scale of 0 to 10, I’m going to give this one a 4.7 and that may even be generous. There’s just no flavor to this thing now. Back to Alfred’s, questions here.

4:31
So he’s asking about the first thing he’s asking about, Buying stocks to follow as to potential trade targets, right second. And I’m not talking about like trade Target site, where you get out of a trade at or how high you think a stock can go if you’re long on a stock but he’s talking about targets as to what kind of stocks you may consider getting long on her short on second one is about, where do I put the stop loss?

4:54
How do I decide upon that? I’ve done a lot of podcasts on that, but I don’t mind reiterating it and future podcasts just because I think that repetition is very important as a traitor to hear some of the same things twice. If you listen to every one of my podcast, I talked about managing the risk, and I’ll be talking about managing the risk in this one too, but I think that is so incredibly important to hear that in every podcast that I talked about it and every podcast.

5:17
So, I think, for a person who is working full-time as a load of family responsibilities, you don’t have to follow every single stock in the stock market for one, you can have each of the sector’s identified, right, you can trade ETFs. So when you have a bull market there’s usually stocks that are Doing better than others.

5:36
There’s also sectors that are doing better than others, so you can have those identified. So for instance, you have the energy sector, That’s The XLE ETF. You have the utilities, that’s the xlu. You have technology? That’s xlk. You have health care.

5:52
That’s XLV. Discretionary, that’s xly Industrials. That’s Excel. I you have materials. That’s xlb, financials. That’s XLF, real estate, which is Excel. Ar e Communications which is xlc and I’m not sure Healthcare.

6:11
Do I say yeah, I already did health care but then you got staples xlp. So there’s 11 sectors out there. So you can really make a career off, a just trading the sector, but I’d also throw semiconductors and their to that’s a subset of Technology but it’s still worth considering because it is a huge part of the market.

6:27
So you would have 11 sectors in one ETF from an industry that you can follow. So there’s those. So if the Mark is bullish, you try to And the most bullish, sectors and trade, those. Assuming that there is a good traits that have to be had. If it’s bearish, you try to find the weakest sectors and try to find those with the best trade setups.

6:47
So, the downside. So that’s one option that you have. The second one would be, is if you’re still wanting to trade individual stocks, is to consider identifying 5 to 10 stocks in each sector. So, for technology, for instance, that would be metagame.

7:04
ETA It would be Google GOOG L, Microsoft msft. But, of course, you may also want to be like, hey, I don’t want to trade the mega cap, so I don’t want to trade these. You know, trillion dollar stocks maybe I want to just trade, AMD or Nvidia, or lrc ex knows, be semiconductor.

7:24
And then you have like cou P which is a software player, Unity software, which is you, you can look at any e for utilities and S 0. Or if its energy, you could be looking at At eighty S and S lb H. Eh L for Halliburton and Chevron CVX we’re talking about Staples.

7:43
Will then you go WMT for Walmart and DLT are for Dollar Tree and Costco cos T we’re talking about health care. You got PFG. You’re looking to add some stocks for discretionary, then you got Amazon, obviously amzn, you got Restoration, Hardware RH, Wayfarer W, Shake Shack sh8.

8:05
Or McDonald’s MCD. So there’s a lot that you can just follow in terms of like 5 to 10 stocks. I also have a must watch, watch list, must watch watch list. And what is on there about 100 stocks that I always want to be looking at each and every day. And I do, I look at the leaders in those stock.

8:22
These are ones that are most interesting to me. Some of them may not be interesting to others, but of course, you have all the main stocks plus Tesla. Plus Microsoft, you have Nvidia and AMD is your real big tech stocks like Adobe you also have good representation across all the other sectors as well.

8:39
So I always am wanting to look at those. Those are mainly your Market leaders, and some really intriguing ones. Like I have Rivia non there, right? I’ve never even traded rivi on but our IV in is one that I might trade in the future or just interested in following it. I got Robin Hood never been bullish on that stock, h0 0 D, but yeah, it’s on the list.

8:59
There’s about 100 of them on there. So I look at those probably on a daily basis. It also helps me to get a good You’ll for the overall Market. But I mean there’s thousands of stocks out there to screen for and to look at and everybody’s watch list in the stocks that they like enjoying trading the most.

9:15
It’s going to be different for each person. Also think that there’s go to stocks for me right now trading in a very bearish Market, I have a go-to ETF. It’s qid of also traded rwm to the downside and SD S and P SQ. Those are my go-to ETFs.

9:30
Sometimes, if I’m wanting to get shortened to the markets, not as volatile. I can go all the way up to a 32. One ETF, I don’t mind doing that but right now I’m not doing that because it is very volatile when I don’t want to wake up to a massive Gap higher which takes me out at a 10 or 15 percent stop loss.

9:47
But just because I watch these stocks, doesn’t mean like I said, I watch Rivia and I have never traded it for it. It doesn’t mean that I have to trade the stocks but if the opportunity ever comes about, whether I’m looking for like a bull flag pattern or I’m looking for a bounce off of a rising trend line or a cup and handle pattern inverse ETF.

10:04
You know, if they show Up and it provides me with a good reward risk ratio, then I’ll take it. I also think having a must watch watch list is good too, especially if it includes some of the really big names on it because it gives you an idea of what the overall Market sentiment is. For instance, if you have apple on the list and you see it every day and you’re able to say, hey Apple, which is the biggest stock that’s essentially ever been created.

10:25
It’s down 5% today, that’s sir, probably be a good red flag. Not to be getting into any tech stocks on a day, where apple is down 5% because it has such a huge sway. Way on the tech sector and overall market. Now he didn’t ask me a question about it, but he did tell me that he likes to mean reversion strategy, and a lot of people do that.

10:43
I see that all the time with a lot of Traders. And I see it with a lot of new traders to, and it’s not that there isn’t a reversion to mean oftentimes, but in a strong trending Market, whether it’s 2022 or whether it’s 2020 through 2021, you don’t always have a reversion to the mean.

10:59
And so if you’re playing a reversion to the mean, you’re usually dealing with limited reward, Probably equal risk if not greater risk because you’re essentially fighting a trend. But if you look at the trends from 20 to 22 20 21, they want almost straight parabolic in, there is very few pullbacks in between very few reversions to the mean.

11:20
And what a lot of people will use, they’ll use like a 20-day moving average for a reversion to the mean, you’ll see the 20-day moving average incorporated into a lot of things like Bollinger Bands, Etc. And they’ll even use Bollinger Bands to fade moves that go outside the upper, or the lower band. Assuming that it’s going to come back to the 20-day moving average.

11:37
But a lot of people play those and I’m not a huge fan of them just because to get a good entry on it requires you stepping in front of a freight train. So the stock may be routing hard and fast and it goes beyond the upper Bollinger band, but a stock in trade, outside of a upper Bollinger band for a long time.

11:54
And in fact, it can come back inside the Bollinger band, but not necessarily revert back to the mean and I’m trying not to make this too complicated of an episode by talking about reversions and means and everything else. But Just to hit on that topic about we vergence to means I like let my winners run.

12:10
So reversion to mean, doesn’t always let you do that. You also talk about he’s looking at Mining and energy because these stocks have been doing pretty well lately, but you also have to remember to I’m doing this recording about a day before it comes out. And I could tell you that energy stocks have been getting hammered. So as Ben materials and when you’re in a bear market and you have a sector like energy, that is done incredibly well relatively speaking, even in green on the ear.

12:35
If the sell-off is going to continue eventually, it’s going to bring down energy with it. It’s just like what we saw with Apple for the most part of the year, at least, for the first three or four months. Apple did really good relative to the overall market and if the market could have been a whole lot worse, if the Apple follow the overall Market sentiment but it didn’t.

12:53
But eventually Apple fell to eventually Apple caved. And now it’s part of the whole group of stocks that are just falling apart. So be mindful in a bear Market when you have sectors that are running. Against it that if the bear markets going to continue more than likely, it’ll take even the strong sectors with it.

13:12
Oftentimes you see gold and silver rally really well in the beginning of a bear Market. But once you start getting those margin calls on other stocks. They got to start liquidating, their more profitable positions in. That could be gold and silver for instance, where even though that might have done good early on, they have to start selling it which creates selling pressure for the Commodities.

13:29
And then all of a sudden, gold and silver is doing horrible with the market. You look at 2008. That was a really Really bad time for the overall Market gold, and silver didn’t do that much better. Now, I would say right now, gold and silver is not all that great. It’s not doing as bad as the overall Market, but it’s still not doing that.

13:44
Good, the second question. How do I decide? What stop-lossed put on? He says he uses his gut feeling, man. Don’t use a good feel good. Feel he is set up to make you lose money. It isn’t a lot of people go by it. A lot of people think this is where I think it should go, but the market doesn’t care about your gut feeling, it doesn’t even know your gut feeling.

14:02
But what the market does know, is support levels that are on the chart. So why not use the support levels that are on the charts that the market has respected in the past to wear. If it does break, you know, that there’s something to that break below. A key support level that says, hey, I don’t want to be in the stock anymore, and that’s where I put, I never use my gut.

14:20
I could care less about what my gut things am. I good? Often runs contrary to what the market actually does. Ultimately, it doesn’t mean that I have a bad gut. I mean, I could stand to lose a couple pounds, but nonetheless. Yes, I don’t let my gut dictate my trading and I really think that those who do usually find themselves in losing trades, that last far too long, because it losing trades.

14:43
Can be a slippery slope. You can be like, hey, I got in stock at $100, I’ll put my stop loss at $95 when it hits is like. Let’s just see what happens if it goes down. The 94 hits 90 floors. Like yeah, I’ll give it till ninety, three. And then before you know it you’re down to like 85 and you’re still making the same logic and then you’re thinking to yourself such an idiot.

14:59
Man. I should have just sold it at 95. Yeah. You should have That’s what a lot of Traders find themselves in the situation of doing. They put themselves into a slippery slope. Hard stops are really a good tool and I know that a lot of people want to blame market makers or the boogeyman for when they get stopped out.

15:15
But to be honest, you’re going to have losing trades at least 40 to 50 percent of your trades will be losers. What’s going to dictate your success? As a Trader is how tight you kept those losers because if you don’t keep it tight, it doesn’t matter what kind of profits you’re going to be making, you’re going to ultimately lose.

15:32
So, I put my stop loss is not what my gut tells me or what I think it should be at. But I’d look at what the charts, tell me. And I also have to pair that with what my risk tolerance is and the overall Market, if I have a low tolerance for risk and I have a somewhat of a low tolerance for risk. That means my average.

15:48
Stop loss is somewhere around three to five percent sometimes tighter if I can pull it off. So if I look at a trade setup, it has this beautiful bull flag pattern. It’s breaking out at 100, but the only way to place a You stop loss on the chartists.

16:04
Look more like 10 or 15 percent lower. I’m gonna pass on that all day long because it doesn’t fit my risk parameters. Yes, it may look like a good place on the charts but it’s not a good place for my risk preference. But what’s also really good for people is swingtradingthestockmarket.com.

16:20
You didn’t think you were gonna be able to get through this episode without hearing about that. Now did you swingtradingthestockmarket.com That’s the patron website to this podcast, it supports the podcast and it’s going to Give you my stock market research each and every day. So if you enjoyed this podcast, pretty sure you’re going to like this research as well.

16:38
Because with it, you’re going to get updates on the indices, you’re going to get updates on all the main stocks that includes Microsoft and Tesla as well along with my weekly bullish and bearish. Watch lists. You’re also getting my daily list of stocks that I’m looking at for possible setups plus the most intriguing charts of the day.

16:57
So check that out. swingtradingthestockmarket.com and I appreciate you. Is listening to this podcast episode. Remember, send me your questions. ryan@shareplanner.com, I do read them and I do put most of them on air, make sure to leave a five-star review as well because that does support the podcasting.

17:13
Can you allow it to grow? And I appreciate you guys, listening. Cheers and God bless. Thanks for listening to my podcast. Swing trading the stock market. I 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.

17:32
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17:52
Every day 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.