Evolving As A Trader | Podcast Episode #279

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 in today’s episode.

0:35
We’re gonna have a good one here. We’re going to take an email from a listener who has actually gone back in time and listen to about 278 podcast episodes. He goes back to, when I was calling the trading block, the Splash Zone and he also noticed that over time, my approach to trading and some of my strategies have gradually changed.

0:55
So this is a great opportunity to talk about the evolution of a traitor evolving as a traitor. So for a good floor redneck name today we’re going to To call this guy Houston. I’ve come across, many Houston’s and my adventures in the Deep South, so, Houston rights.

1:13
I was listening back through all of your podcast episodes. I’m all the way back to the Splash Zone days. It seems back. Then your strategies were slightly different than they are now. For instance, in one episode, you mentioned that you will never take partial profits. You are either 100% in or 100% out of a position.

1:30
In another episode, you mentioned that you like to hedge your positions. If you thought the market might turn four. Ample you could be holding s QQ Q + TQ q q. At the same time, making a net zero while waiting for the market to pick a direction. Could you explain possibly what you learned that made?

1:46
You retire these old strategies and what makes the new strategies better? Thanks Houston. Alright, Houston. I appreciate the email. What am I drinking? This is going to be a little bit depressing. I’m drinking water, but I’m going to put a little twist on this. Okay. Now there’s nothing special about the water.

2:03
Waters Kirkland Signature. Purified water. Get this stuff at Costco’s Dirt Cheap I think for like 24 of them are something you pay like or five bucks. We go through them fast in this house. But I’m getting some blood work done and the wee hours of the morning and I’m not allowed to do anything but drink water can’t have any bourbon because that might throw the tests off and it goes back to when I was doing the health wellness check.

2:28
And I ate three cookies a couple hours beforehand that my daughter had made. Yes, three of them. And as sent my I glycerides to like levels of over 400. So got the wife, a little bit nervous, got to worry, sister Ryan. You got to go do a real blood test.

2:43
You got to get this done right? So I agreed. I’m going to go do the blood test but I can’t eat can’t make any eggs or eating any cheese and crackers. For I go to bed at night, man, and definitely can’t drink any bourbon. So, so my drink of choice. Tonight’s going to be Kirkland water.

3:00
Now, I’m not going to get into the description of what it tastes like or notes or anything like that for obvious reasons. But what it made me think about is that what rating do I give water in a way that anything below the score that I give water is stuff that I would rather drink water than drink Bourbon, and anything above the score.

3:18
I’m going to give water would be things that would prefer bourbon over water. So, you follow me below a certain score. I would rather have water. Then a Bad Bourbon above a certain score. I would always rather prefer bourbon over water. Now, I’ve had some pretty bad Bourbons in the past that I’ve done on this podcast and Went back and looked at my scores and look back at some of the really bad bourbons and even some that were like, not horrible, but not great either.

3:44
And what would I make? The cut off at? And I came up with four point three by giving this water that I’m drinking tonight, a 4.3, essentially, any bourbon that I give a score to and it’s not above 4.3, I would rather drink water. I’d rather be hydrated.

3:59
And so there’s a number of Bourbons over the years that I’ve given a score of 4.3 or less to breath Essence a sparker bourbon. Don’t like it. I gave it a four point one, that was podcast, 250. Now you got agitator bourbon. I gave it a four point six.

4:15
If I had to choose between the two I would choose agitator bourbon Basil. Hayden. I gave a 5.0, I’d rather have Basil, Hayden the water. So now we have a new category. Well, I’d rather have water or bourbon. There’s also the everyday sipper, the weekday, sipper, and the weekend separate. We don’t have to get into all those definitions today, but for the purposes of going forward prating some of these Bourbons, if it’s Over a 4.3.

4:36
I don’t want to drink it. All right, so we have that out of the way, let’s get back to Houston and his email. So he’s correct. I have changed some of my strategies over the years and there’s even strategies that I’m looking at implementing and to my trading strategy going forward.

4:53
But I’m still working on, still playing with getting more comfortable with. It’s kind of like crypto. Right? Crypto comes along. You’d be foolish not to try it out and at least see, if this is something that might work for you, I’ve treated Crypto, I’ve dabbled in it. I don’t think it’s really necessary at a place that I want to be trading it right now.

5:10
But the point is, is that it’s worth trying different things trying to see whether something can actually make you a better Trader. So, the first one is about not taking partial profit, I was either 100% in or 100% out. I was never taking partial profits. Now, I wasn’t scaling into a position either, that was very true. A lot of that changed with commissions. I don’t like to have commissions eating into my trades. Now, commissions don’t play a huge role in my trades, but still nonetheless, you take 250 trades, and let’s say out of those 250 trades, you make about 400 different trades and you’re paying, I don’t know what it was back in the day, but let’s say it’s $10 a trade, that’s four thousand dollars on commissions.

5:51
Now, you can save yourself an extra fifteen hundred dollars just by going all-in and all-out not all-in being like your entire account on one position, but 100% of your position size in, 100% of your position size out. Now some of you guys may disagree with my approach to trading in that manner back then and that’s okay. I’ve actually changed. So I do get all that. I don’t like to scale into a position. I’m either not in it or I’m completely in at a full position when I initially get in. If the stock goes against me I don’t have like additional capital that I’m going to throw at it. No.

6:24
Or if it goes up I’m not going to scale into it that way either. But what I will do is when I plan out my trade and when I’m up, let’s say seven or eight percent on the trade and I have a stop loss of like three and a half. Well, then I’ve already made two to one on that trade so I’ll go ahead and take maybe a third off of the table and then if the stock continues to go up let’s say it goes up to 10 or 11 percent then I got about a 3 to 1 return and I’ll take another third off and then I’ll let that last third or that last quarter depending on how aggressively I’m taking the profits, I will let that one run a little bit longer and further because it’s such a smaller position size. I’m at a place to where I can let that trade run for a while.

7:13
Now, when I was doing all in and then all out, it’s a lot more difficult to say, hey, I got a stock that’s up 11 percent. Becomes a lot more troublesome to continue to hold on to that stock. Especially if it goes from like 11 percent back down to 5 percent. But if you were taking some at 7 percent and another at 10 percent and you’re down to the last third, you can let that one run a little bit longer, a little bit further and if it comes back down and you take like a 3 percent profit on that final third, okay, so be it.

7:30
But all of that will be offset by the fact that you took some really good strong profit along the way and then you can oftentimes realize far bigger gains by taking partial profits along the way or at least that’s what I was able to find from my style of trading. Maybe I take a third off at 7 percent when I have about 7 percent of profits, another third when I’m up about 12 percent in profits and these percentages aren’t like etched in stone, these aren’t like the ones that I take at every single time a lot of it has to do with reward and risk and everything else.

7:50
But I take some at 7, I take some at 12 and so I’m left with the final third of a position. And maybe it’s one of those trades that’s just going to go really well for me, and all of a sudden I’m up about 80 or 90 percent. Well, why was I able to do that? Well, it was because I was able to reduce my position size so much along the way that it opened me up to being able to manage a trade with a far greater risk tolerance because there was a lot less capital on the table. And that’s something I would have never been able to do if we were talking about a full position size.

8:29
So a full position size, I might have been out completely at 9 or 10 percent. Would never have had that final third of a position I could’ve let run for 80 or 90 percent. I had that happen to me one time with SPCE, I’ve had it happen a number of times over the years where you get into that final leg of the trade and because you were able to reduce your position size and thereby decrease your risk exposure and thereby increase your risk tolerance, decreasing the emotions I’m not saying a lot here but because I was able to do all that, it opened me up to be able to let the winners run for a long time.

8:54
And so, that’s where I get to the past when I was all in, and then all out. I was losing quick, which is good, but I was also winning somewhat quick as well. What I like to do is lose quick but win slow. I want to be able to stay in that position as long as I can. And one of the best ways to do that is by reducing the position size along the way, as the trade continues to increase in value. That will help with the emotions, that will help increase risk tolerance, that will help reduce risk exposure.

9:30
All really good things. Okay. So that was his first question there, he also talked about hedging. I think there’s a lot of different ways you can hedge. Yeah, I mean you can hedge with calls, you can hedge with puts, you can hedge with ETFs, leveraged ETFs. And then he said that in one of the episodes and I faintly remember this talking about, you know, how there was a situation where I held SQQQ and TQQQ. I don’t know if it was those specifically but let’s just say it was. And so between the two, basically you’re not making much, right? And I was waiting for the market to pick a direction. Do I necessarily think that’s the best way to do it for me now? No.

10:10
What I tend to do now is use how long from an exposure term do I want to be in the market? So do I want to be 80% long? Do I want to be 100% long? Do I want to be 10% long going into a CPI report? I’m 5% long right now and I’m 95% cash. Now if there comes a time where I’m a little bit more confident in the market’s direction, maybe I opt it to 10% and then 20% and then 30%. Maybe that’s short. Maybe the market turns back lower again. I can start increasing my short exposure. Or let’s say we hit a bottom and it’s a very definitive bottom, we get a nice breakout, there’s some good trade setups. I take them, I’ll cover my short positions and then all of a sudden I’ll be 30 or 40% long. As those positions increase in value,

10:45
I’m at a point where I’m ready to add another position to the portfolio. So now maybe I’m about 50% long and then 60 and then 70. This is an example. But what I’m trying to say is that my comfort level with the market largely depends on the balance between long and short versus how much cash I want to hold of my portfolio.

11:02
Now, I can also at times say, hey, the market’s starting to struggle a little bit, I want to have a little bit of short exposure to the downside. So I can protect myself. And so maybe I’ll buy Apple, Amazon, and Netflix those are the ones I’m long and I’m just throwing stocks out there. And let’s say between those three stocks, I’m 35% long. So I have 65% cash. Let’s say then I want to be short on Caterpillar and Royal Caribbean, so I have three long positions, two short positions. So I’m like 24% short, 35% long. The rest is in cash. That would be a form of hedging as well.

11:38
So I really think hedging oftentimes comes down to what are you comfortable doing? How do you want to protect yourself? Do you want to do it through ETFs? Do you want to do it through buying puts? Do you want to do it by shorting stocks? How do you want to do that? And it really just comes down I don’t necessarily think that one strategy is better than the other. I really think it just comes down to what are you comfortable with as a trader? What do you like to do that puts you in a position to best be able to manage risk, best be able to handle the risk exposure in your portfolio? And then you go with that.

12:19
There’s other things that I’m thinking about right now. I mean, one of the things that I mean, I’ve worked with them in the past and everything and I haven’t, I wouldn’t say I’ve been dismissive of them, but I haven’t been overly crazy about using them, and that’s volume by price level. So instead of the volume being on the bottom of your chart, like most charts are done, they actually put the volume at various price levels on your chart.

12:38
And so this is what I mean by you have to be willing to adapt. You have to be willing to implement new tools and strategies into your trading. And so volume by price is one that I’m looking to incorporate more and more into it. I haven’t really done it too much but I’m getting more familiar with it, I’m getting better at identifying certain support and resistance levels using price by volume and it’s really awesome. I think there’s a lot of potential there. And I know some of you guys are probably listening to this and saying, Ryan, I’ve been using that for like five or six years.

12:53
Well, I haven’t. It’s not that I haven’t known that it was out there, but I’ve just never found a reason to incorporate it into my trading. And I don’t have a specific reason for wanting to do it rather than I want to be a better trader each and every day, and if there’s a tool out there I think that might be able to help me, then I want to definitely incorporate that into my trading.

13:09
So one thing that I would also encourage you guys to do with your trading is to check out swingtradingthestockmarket.com. That needs to be incorporated into your everyday research. Man, guys, this is incredible stuff. You’re going to get members-only videos from me each and every day and these videos are content-rich, man.

13:26
You’re also getting watchlists from me. You’re going to be getting updates on the market as a whole, on the specific indices, also on all the big tech stocks. Lots and lots of content that I’m sending your way each and every day. So check that out swing trading the stock market. And if you have any questions, be sure to send them to me,

13:43
ryan@shareplanner.com. I love hearing from you guys. I want to hear what’s on your minds. And for the next podcast episode, I fully plan on getting back into the bourbon, but for this particular one wanted to get this done and recorded tonight and I could only drink water. So I try to make lemonade out of lemons here. So once again, ryan@shareplanner.com. Send me your emails. Thank you and God bless.

14:00
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. With your membership, you will get a 7-day trial and access to my trading room including alerts via text, email, and WhatsApp.

14:22
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 and trading information 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 chatting with you soon.