When Trading Conditions Change | Podcast Episode #260

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 I’ve got a good episode for you guys today. We’re gonna be continuing with Bryce Harper’s email from last week where he is just basically hitting me up with like 4 different emails just asking a bunch of questions.

0:46
It’s like basically a stream of thought that was coming to his mind. Every time he had a new question, he just sent me another email. So we got through the 1st 2 emails in the first episode and we’re going to get through the last 2 in this one, and I’m quite confident we’ll be able to do that. So what I’m gonna do here. I’m gonna read the emails and then we’re gonna talk about the Burma that I’m drinking for these episodes.

1:05
So, the name that I had given him in the last episode, I believe it was Bryce Harper, again, no relationship to anybody famous or anything like that. It’s just the name that I came up with. So, Bryce writes, my reasoning for asking you about being able to tell good setups from bad setups. Now, if you remember before I get any further in the email, he asked me about like what’s a good setup, what’s a bad setup, what’s a me set up.

1:28
He also asked me about the books that I like to read, just all sorts of stuff. But he wants to build on that first question where he was asking me about the different kinds of setups. He says, my reasoning for asking you about being able to tell a good setup from a bad setup is that I might be spending time drawing support and resistance lines all over a chart, looking at the moving averages and candlesticks, trying to see what is going on.

1:48
I might be spending an hour looking at that specific chart. You say you can scan hundreds of them a day and dismiss certain charts within seconds. I hate wasting my time. I don’t want to waste an hour looking at a chart you would have dismissed in seconds. I also don’t want to rely on someone pointing out charts for me.

2:05
I can speed up my decision to dismiss a chart as a bad chart like what you do. That’s what I would like to be able to do. I might not be able to tell in seconds like you do, whether it’s a good or bad, but if I can determine that within a few minutes instead of wasting half the day looking at a bad chart, that would be quite helpful.

2:22
That was the 3rd email. The 4th email says, let’s say market sectors and now, OK, first of all, completely different like subject matter here. He says, let’s say market and sector conditions were favorable when you enter a position. But while you are in the position, those conditions begin to deteriorate.

2:38
Your stock has yet to react to those conditions though. Do you ignore the rain clouds and hold the position, or do you exit? You want a good market and a good sector conditions when you enter the position, but when those conditions change, do you get out or do you keep watching the stock and wait for it to also change? Regards, Bryce Harper.

2:53
OK. So, a couple of good questions here. I think we can tackle them both in this podcast episode. But first, what am I drinking? I am drinking the Farland Reserve. I got this Joker at Total Wine, one of the dudes at Total Wine says it’s pretty good. I think I got it on sale for like $3 off at least. It came out to like 1899 plus tax, but McFarlane Reserve, it’s 45% alcohol, 90% proof. It’s a Kentucky straight bourbon whiskey aged 3 years.

3:10
Now to the nose, it’s got like a really good smell to it. It has like a cinnamon flavor, almost like a dark cherry smell to it. It’s really pleasant to the nose. And then to the taste, you get this like smoky cola flavor, a little bit of licorice, I’m not a huge fan of licorice, but it’s a very thin tasting drink, and I think that sometimes makes the tastes a lot stronger that you pick up on. It has a little bit of a kick there at the end.

3:43
It’s a decent kick, a little bit of spice. It’s not bad at all, not bad at all. I actually thought it was probably gonna be pretty crappy, but for the buck, it’s really a good, good bourbon. So, Scale of 0 to 10, what do I give it here? I give it a 6.9, 6.9. Is it an everyday sipper?

3:59
Yes, I think it’s definitely an everyday sipper. I think it’s a cheap 11 of my buddies drinks it. He loves the stuff. My daughter drinks it. She likes it too. She’s also of age to be able to drink, by the way, but McFarland’s reserve, 6.9 in everyday supper. Now.

4:16
Back to Bryce Harper. He doesn’t want to spend a lot of time looking at his charts, and I understand that. I mean, you want to look at a chart, you wanna spend a half a day looking at it or even an hour. You better hope that there’s a good trade setup coming out of it because let’s say you look at another 9 charts and spend an hour each on each one of those, all of a sudden you’re looking at 10 hours’ worth of chart studying and you’re only looked at 10 charts.

4:35
I can tell you, I go through a lot of charts and sometimes. It takes me 40 or 50 charts to find one good trade setup, and sometimes even 100. I kid you not. And maybe that’s a little bit to do with my pickiness when it comes to what I want out of a trade setup, particularly as it pertains to reward and risk.

4:52
But I would also say this to Bryce as well, and I don’t know if a lot of people want to hear this, but the difference between me and Bryce is that I’ve been doing it for 30 years, since I was 11 years old. I’m gonna be 42 here pretty soon. I’ve been doing it for 30 years.

5:09
And Bryce is yet to make his first trade. So, if I wanted to become a pharmacist, I don’t know what a lot of these medicines do. I mean, it would take a lot of studying and a lot of time to be able to understand the different medicines that are out there. If I want to become a brain surgeon, man, I’d have to go to school, a lot of school, and really have to hone in those skills.

5:29
If I want to become an engineer, I gotta become pretty good at math, and I can tell you, I’m pretty much a algebra one kind of a guy at this point in my life. Yeah, I took some harder courses when I was younger. When I was in high school and then probably not in college, but in high school at least, and I can tell you those skills that I have from a mathematical standpoint aren’t all that great.

5:49
And if I wanted to learn algebra 2 or calculus even, it would take a lot of time and a lot of studying hours upon hours. And if I really wanted to be just a solid mathematician, you may be looking at years of studying and devotion to the craft.

6:06
My point is, and I think a lot of people don’t realize this when it comes to trading and trading successfully, is that it’s not an overnight thing that you find success in. It’s not just something that, hey, I want to be a trader. I’m going to figure this out over the weekend, and then all of a sudden you’re a great trader and I think a lot of people get fooled at it because.

6:25
They might start off with a couple of really good trades and they’re thinking, oh man, I’m actually a good trader. I can do this stuff. And then when they have that string of bad trades or even just that one bad trade and it wipes them completely out, they don’t always want to admit that they’re a young and inexperienced trader. Instead, they want to say, hey, the market’s rigged, and we’ll be honest too.

6:43
I mean, it’s not like hospitals are trying to lure an inexperienced wanna be heart surgeons. No, they’re making sure that you have the credentials that you’ve gone through all the training and everything else. But if you look at like what the brokerages are doing out there, they’re trying to learn everybody.

6:58
They’re saying, oh yeah, you can do it too. I mean, look at what some of these newer app-driven. Brokers platforms have done. I mean, they’ve made it look like something sexy and fun and it’s no different than having a fantasy football team. But what was the end result for probably most of those traders? A lot of losses.

7:14
And so I think people are goaded into believing that you can be a successful trader overnight and really there’s so much more experience that you need to get under your belt. And so with Bryce here who wants to be able to look at a chart within seconds, the reason why I can look at charts in seconds is because I look at thousands of them probably every.

7:32
In a given week, I’m probably looking at, let’s take the chart Apple, for instance, OK, but probably the most popular stock out there, right? Biggest company that’s ever existed. I probably look at that chart no less than 25 to 30 times a day. I do. Look at it all the time and I could probably say that about a ton of other stocks.

7:50
I look at it all the time. I can draw the stocks chart by hand probably. I haven’t tried it, but spy, probably look at it 100 to 200 times a day. Different time frames, everything. I look at it all the time. And so for Bryce here who, yeah, he’s looked at probably a few 100 charts in his lifetime, or maybe he’s looked at more.

8:11
I mean, if he’s spending an hour on each one of them trying to figure out the technical analysis, and I’m not knocking him for it, it just comes with experience that I’m able to look at them so quickly. So I’m not saying that people can’t, I mean, people are, there’s plenty of people way smarter than me out there, OK? I’m not trying to act like I’m some boy.

8:27
Genius here or anything, but what I am trying to say is that there’s a lot to be said for experience and for spending time in the market. And so don’t be hard on yourself if you are spending 30 minutes or an hour on a particular chart. Now when I say spend that much on every chart? No. I mean, There’s plenty of charts out there.

8:44
If you can’t find something that pops out at you within the first, you know, 10 minutes or so of that chart, maybe there’s a better chart to move on to and maybe there’s something that’s more obvious that’s going to stand out. One thing I would say if you’re gonna do technical analysis is have a good grasp on the different technical analysis concept, you know, understand what a trend line is and what support and resistance means and declining resistance and rising.

9:06
Support, know about some channels, know about the different patterns like head and shoulders patterns and cup and handles and triple tops and double bottoms and. And there’s tons of them out there. Know about candlesticks. So you, you gotta immerse yourself in some of the terminology and get that terminology down just like if you were studying to become a pharmacist, you gotta study the medicines.

9:27
You gotta know what the medicines do, how do they interact with each other. You got to know that stuff just like with charting. You gotta know what’s bearish, what’s bullish. You have this chart forming in the short term, but you have this forming in the long term, what should you do? It’s important to dedicate yourself to the craft, and I was thinking about this over the last couple of weeks. I think so many people are out there to try to sell you on the belief that it’s something that can be attained very quickly and you can become a trader instantly.

9:51
And I don’t know, maybe I’m just trying to redouble my efforts and just say to myself, you know what, I’m going to make sure that when people want to get into trading, they. Understand that it is a difficult task, but it’s also a very rewarding, very rewarding career, or even if it’s something that you want to do on the site, it can be very, very rewarding.

10:09
I tell you one of the best things that I like about trading, it is taught me a lot about myself, how I view money, how I view risk, how greedy I am, how fearful that I can be when it comes to losing money. It’s taught me so much about myself. There’s been times where I’ve broken keyboards and thrown a mouse when a trade doesn’t go right.

10:28
And it’s taught me a lot about temperament. And it’s funny because you would think that as a trader, or at least like the image that a trader has, that I’m a person that’s always looking for action. Like if I go buy a poker table, I need to be part of it because I need that action. I really don’t even enjoy playing poker. I think there’s a lot of things that you can take from poker and apply it to trading and vice versa, but I don’t really enjoy gambling.

10:49
But I do enjoy stocks. I’m fascinated with the charts and everything. But as traders, especially new traders, we have to have realistic expectation. The more charts you look at, the faster you’re going to get. You know, after you’ve looked at 1000 charts, you’re going to be faster on that 1000 chart looking at it with the information that you’ve learned over the years than you were on that very first chart.

11:08
When you get to that 10,000th chart, you’re going to be much better than you were on chart 1,0001. And if you get to your millionth chart that you’ve looked at. You’re gonna be much better than when you were at 10,000 or 100,000. It just comes with time, it comes with repetition.

11:24
You take somebody like Roger Federer or back in the day, like Pete Sampras, or on the female side, Serena Williams or back in the day, Steffi Graf. What made them great tennis players, dedication to their sport. You take how many serves and forehands and backhands and drop shots and volleys.

11:45
That they had to do over and over and over again. They didn’t just pick up a tennis racket and start serving at 130 miles an hour. No, they had to keep doing it over and over and over again. If you wanna be good at trading, you’ve got to do it over and over and over again. And things like this podcast and some of the books that I’ve recommended, those are tools to help you get better.

12:05
Those are like tools to help coach you to have more knowledge and more understanding. But the only way that you get good at applying those things is through practice and through working hard at what you’re doing. You take some of the people like Michael Jordan, Kobe Bryant over the years, what set them apart besides their unbelievable talent.

12:22
It was their equally unbelievable work ethic. The guys outworked everybody. They had practices before practice. So, to summarize this particular email from Bryce, you get. Faster at it by working at it, but also, you know, applying knowledge and trying to get better at your craft. Now, he asks a good question here on the 4th and final email, and that’s about market conditions.

12:43
Let’s say, and I always talk about using a top down trading strategy, at least that’s what I use, and that’s where I want the market, the sector, the industry to all be lining up with the chart or the stock that I’m looking to get long or short on. So if I want to buy. X. I want the steel industry to be bullish.

13:00
I want materials to be bullish, and I want the overall market to be bullish. And only then would I get into a stock like X. Same thing with like a tech stock like Adobe. I’d want software to be bullish. I’d want the tech sector to be bullish, and I’d want the overall NASDAQ 100 to be bullish.

13:17
But what do you do when you get into the stock, and I’ve had this happen plenty of times, when you get into the stock and all of a sudden conditions change. Well, that’s what the stock loss is for first of all. But one of the things I don’t want to do is get into a trade when I already know that the conditions are bad and unfavorable, even though the chart might be looking good.

13:35
I want all those things to line up for me to get into a trade. So once I get into the trade and then things start to turn. Sometimes you can just have a pullback in a sector and it’s a one-off event and the market might be still bullish, but that sector took a breather that day, but then the next day it just resumes the climb higher. That can happen.

13:51
But you take energy so far this year. That’s been the most bullish sector so far this year, went way up when the market was going way down. That’s basically the summary of energy went way up when the market went way down. A lot of people chased into it. There were some good trade setups along the way, but let’s say over the last month or so you got into a new long position in the energy.

14:11
The market was bearish, but energy was positive. Let’s say you ignored the fact that the market was falling apart or let’s say. You got in when the market was starting to rally a little bit off of a deca bounce. So you wanted to play that bounce. And then you notice that the energy sector was by far the strongest sector so far this year, and then you decide to get into an oil stock because that’s also a very strong industry.

14:33
And then you find an individual oil stock and it starts to work out good right out of the gate. You’re up 2 or 3%. But anybody that’s been paying attention to this market over the past month knows that energy has completely fallen apart. And so you might have been up like 3 or 4% on the trade and then it starts to fall apart.

14:49
Maybe that oil stock that you were in didn’t fall apart right away, but you start to see the market fall apart as a whole, you’re seeing strong volume in the oil stocks. Yeah, that. Should be a good sign for you to go ahead and at least start booking some profits, raising the stop offs to say, OK, it’s been holding this 5 day moving average the whole time and I’m just giving you different scenarios or something that you could, you know, use as rationale.

15:10
You see that it hasn’t closed below the 5 day moving average at all over the last two weeks, but if it closes below it right now as the oil, energy, and S&P 500 are all pulling back, then I want to go ahead and just close out that position. I had something like that with QLD. I was in QLD. I was up about 8% on the trade.

15:27
I’d already booked some profits at 6.4%, which I always think is a really good tactic for trading in the market because it helps lock in a chunk of profits that makes it much harder to lose on a trade when you already have taken some profits off the table. So I had already taken a third of my QLD profits off the table.

15:46
It goes up to 8.5%, still feeling pretty good about the trade, but the market starts to fall apart. And what I didn’t know at the time is that it was the start of about a 5 day pullback for the S&P 500, but on that particular day, I wasn’t expecting the market to change, but it did. I looked at the 5 day moving average and I said, that’s gonna be my barometer right there.

16:05
If it breaks below the 5 day moving average near the close, and it looks like it’s going to close below the 5 day moving average, I’m gonna go ahead and get out, and that’s what I did. So. So yes, you have to be cognizant of the changing conditions after you get into the trade. It’s just not an autopilot kind of thing.

16:21
But you also have to be aware, OK, yes, the market’s going to have sell-offs even when you’re in a stock. It’s just say it’s a bull market. The market goes up 1%, 1%, 1%, and then finally it has a day where, OK, it might pull back a 0.5%. Is that a reason to be weary?

16:37
No, not necessarily. If your stock loss didn’t get taken out. No, I don’t think that’s necessarily a bad thing. But if you start seeing VIC spiking like 15, 20% and you’re seeing your sector that you’re trading in dropping 3 or 4%, yeah, that might be a warning sign right there to go ahead and at least be very aggressive with the profit taking or just close out the trade altogether.

16:57
And one of the things that’s going to help you in a market like what we’re in right now is swingtradingthestockmarket.com. Guys, this is my stock market research that I provide people with each and every day. It supports the podcast, allows me to continue to provide you with these episodes each and every week, and you’re going to get all my excellent stock market research and return from watch lists to setups to updates on all the big tech stocks like Apple and Amazon and Tesla and all those.

17:20
Guys, plus you’re going to get updates on the end of season as well. So check that out, swingtradingthestockmarket.com. And let’s wrap up this podcast episode by reminding you to send me your emails, ryan@shareplanner.com. I do read them. I’ve got some from you guys and I plan on making an episode out of each and every one of them as long as it’s a relevant question to what I can do a podcast on.

17:41
But keep sending them to me. I do read them and make sure to leave a 5 star review on whatever platform you’re listening to this podcast on, whether it’s Spotify or Google or Apple or whatever it might be. Make sure to leave a 5 star review. It does help me out quite a bit and I’m very, very appreciative for you guys for doing that.

17:59
So thank you guys, and God bless. 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 seven-day trial and access to my trading room, including alerts via text, email.

18:19
And WhatsApp. 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.

18:35
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.