Lessons Learned from Blowing Up | Podcast Episode #288

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.

0:33
In today’s episode is going to be a pretty darn good one. We’ve got a fellow here from back in July. This was episode number 265 that was entitled. Just start over he wrote Brian, loved the show. I’ll keep it simple new Trader here as a February. This year, I started out with $300, my brokerage account, simply to learn the ropes, after 82 trades, I am now down to just over $200 at what point should I consider it blown and start over much gratitude GW bun?

0:59
That was the Florida redneck name that he chose for himself. And we had the pleasure of hearing back from GW bun on how How he is handling, starting over and Bun rights? Howdy Ryan, this here is GW bun. Checking in with an update on my swing trading Education.

1:14
First off, I’m drinking a frosty can of bush. Secondly, I continue to enjoy every episode of Swing trading the stock market, your YouTube channel, your post on stock roads and your patreon feed as well. Thank you and keep up the great work. This is a follow-up to the email that you read on July 22nd and titled just start over.

1:31
Well basically that is what I’ve done, I’ve closed my account with E-Trade at it. Be percent total loss. Open an account with Fidelity and started transferring funds. This new Fidelity account will be funded at an initial $300 and with it. I will continue my trading education. I chose Fidelity to allow for fractional share trading.

1:48
Plus I like the way I can use and said bracket traits and the episode, just start over you posed. The question, what have you learned? Well, I’ve learned quite a bit, I’ll keep it simple. Number one, do not trade against the market, the sector, or the Trent. I did this for my first 50 trades out of any Experience.

2:05
And it was Bloody do not engage in fomo trading or chasing a price and retrospect quite a number of my trades were fomo and I didn’t even realize it. Do not buy the dip or average down. My worse all-time trade was because of this horrible practice, do not trade mean stocks, nor penny stocks Lessons Learned here.

2:24
Do not take comments on stocked Woods for anything more than a muse, ment value exceptions to this rule or posts by share pointer. And another guy, it is okay to make partial trade exits prior Did this. I was all or none. This second time around my intent is to conduct surveys of the various indicators available on you.

2:42
Yahoo finance, the first indicator will be the ichimoku. I don’t even know how you say that. So I don’t know if I’ve ever actually heard somebody say it out loud. But I mean, I’m familiar with it, but I just don’t use it on my own trading buddy, right? The first one will be the ichimoku. I think I might have said that.

2:58
Right, I’m not sure. And I intend to follow it signals to the letter using one day, in one week time frames I will do so for 25. Trades. And then evaluate I’m still laughing about whether or not I’m actually saying that right? Ichimoku, I think that’s right, but maybe it’s icky muku, not sure he wraps It Up by saying now I can trade fractional shares.

3:17
I am also going to explore the indices both long and short, IE spy and Sh QQQ and PS Q. IW M and R, WM etc. Etc, my question to you, is this, what is the best way to determine that? A trade, is a loser early on and just get out of the trade.

3:34
Well before it hits. Stop loss. Lost management has not been my strong point but we got to make that a strong point GW again, thanks for all you do. Keep listening and watching sincerely GW bun, okay?

3:50
There’s a lot to unpack here and I really like that he’s giving me his lessons. I love that he followed up with me. That is something that you guys, if I’ve done a podcast episode on one of your emails and you want to follow up with me, let’s do it. I love to hear from you guys. It doesn’t have to be just one email that you guys send me. I’ve done podcast episodes on people who have sent in multiple emails. So feel free to follow up with me if you would like to.

4:07
Now as for what I am drinking, we have got some private Barrel selection here from Russell’s Reserve, this is from Total Wine, it’s Kentucky Straight Bourbon, it is 55% alcohol, making it 110 proof. I love the ones that are, you know, 52, 55 those are like the sweet spot of my opinion. Huge fan of Russell Reserve, it wasn’t always a huge fan. Basically, out of ignorance, just never tried it, but man, every one of these bottles that I tried they’re really good. So this I’m excited about. My guy at Total Wine, he’s like Ryan, you come in here, you never take this private Barrel selection series that I always point out to you, you need to try it.

4:42
So that’s what I’m doing. I’m trying out Russell’s Reserve private Barrel selection now. I mean eyeballing this thing’s got a really, really thick looking color like very dark brown, very rich looking. On the smell, to the nose, whatever you want to call it, definitely can pick up a lot of like the berries.

4:59
I’ll be honest though. I mean smells important, but it’s kind of one of those things where you take a whiff at it and then you really just get down to the sipping. So on the sipping side of things, you taste the mint, pick up a lot of toffee flavors. It’s got some good honey flavors and then on the finish, it’s got a really, really nice balance to it.

5:17
You definitely taste the spice that lingers for a little bit, but it doesn’t come on right out of the gate. It lets you enjoy the taste first and then you get hit with the finish. So it’s a really nice like flavorful bourbon to put you in a nice, chill mode. I think a lot of these Total Wines have it. So I know they’ve been sitting on this one for a long time. It’s not selling fast, so check out your Total Wine to see if they have it. This isn’t like a paid sponsor or anything. I’m just telling you. It’s a good one. Scale of 1 to 10, I give it an eight point seven. Like I said, all the Russell Reserve Bourbons really a huge fan of. I need to start trying out some of these trashy Bourbons out there.

5:51
Maybe I’m getting a little spoiled, maybe I’ll get a little bougie and I keep getting the good stuff, but I need to go back to my roots, man. Trying some of these trashy Bourbons because they really do suck. And the worst thing about it is, is that you end up getting a collection of sucky bourbons. And I have nowhere to go with them. I usually just give them away to somebody that actually likes them, but I need to get back to that. My apologies. I feel like a lot of the ones that I’ve done lately have been really good, but I’m going to find you some trashy ones here. Don’t lose faith in me just yet. A lot of you guys say that you like to hear about the trashy ones as much as the good ones.

6:29
Alright, let’s get to G.W. Bun here. So first off, he talks about, he’s drinking a frosty can of Bush. One thing that saves him here is that it’s a frosty can. I mean, when you give it that kind of an adjective, okay, that helps. Man, it’s Bush. I’m not totally against it, but, you know, hey, to each his own, right? But he dropped 30% in his account and he closed it out. What makes that hard is when you get down 30% in that account, he was in a 300 dollar account, goes down to 200. So, yeah, about 33 percent. But let’s just say for rounded numbers, say it was a 30% drop. What makes that hard is that it takes a 42% jump to make that money back. So even like with the market right now with the NASDAQ down, it’s down over 30%. It’s going to take over a 40% move to be able to make that money back.

7:08
Let’s say the NASDAQ goes down 50%. And that’s where you really start to see the compounding. Where after you lose like 25%, the numbers just get explosive in terms of how much of a move you need higher in order to make back your money. So if you lose 50% in your account, God forbid, you’re talking about a significant drawdown and a huge move to the upside that you got to make in order to get that money back. A 50% drawdown requires a 100% rise. So if the NASDAQ does end up dropping 50 percent, a lot of people are going to take huge losses but it’s going to take a 100% move out of the market in order to make that money back.

7:45
And so that’s why you see me talking about tight stop losses all the time. I got taken out of a trade yesterday, I wasn’t stopped out, I actually got out a little bit early just because I could tell by just looking at the chart that this thing was not going to work out. Well there is the ticks on the charts were way too negative, the breadth was getting really ugly. I was in an SSO which is a two-to-one leveraged ETF of the S&P 500 to the long side. So I knew that this thing was not going to work out in my favor. I ended up getting out of it. I saved about an extra 2% by not waiting for my stop-loss to get knocked out. Stop loss would have been taken out this morning had I stayed in it for the extra day or overnight, so it was good that I got out.

8:20
But if I had like a 10% or 15% stop loss on it, I would have definitely still been in it for the rally that happened today. But just because you get stopped out doesn’t mean that if the opportunity doesn’t arise that you can’t get back into a stock or to an ETF or into an index ETF. Not at all. And I think that’s what a lot of times people get upset about. One of the things that I always try to do is I try not to think about, okay, I got stopped out at this price, now I’m getting back in at even a higher price than where I got taken out of the trade. I don’t want that, I should have just stayed in it. Like that kind of where you’re grappling with yourself. Market doesn’t care about that stuff. Doesn’t care about where you got in and out, it’s just moving. It’s always in action, right?

9:06
So it’s always in action, we got to have short memories. We can’t worry about where we got in or out because if you get back in and you make money to the upside, it was worth it, was it not? So that’s what happened to me with SSO. I think I got in around like the 42.80 mark, somewhere around that point. Then it comes back down, I get knocked out at like 41.50. But the next day, today, I get back in at 41.70 which is 20 cents higher from where I sold out yesterday. Now, I could’ve been like, hey I’m not going to get in a half percent higher than where I just got out at. But if I had, maybe I never would have gotten into that trade.

9:36
So it’s really about me looking at the charts and what the charts are saying, and making a decision based on what I’m seeing right now, not the fact that I was stopped out of it the other day. As of today, finished up 3% higher. Maybe it goes up higher on the days that follow but took a little bit off the table. But think about how many times though that like, there’s traders out there right now that are probably still in like a UPRO or a TNA or a QLD or a TQQQ when the market was back in like at its highs and in January of this year, or even maybe they held from like March or June, or even, I mean, there’s deterioration in these products, you know, on a day-to-day basis because they reset each night. So can you imagine what kind of losses some of these people might be sitting on and what kind of rally that they need just to get back to break even?

10:18
That’s why stop losses are so important. They’ve guided me my entire career. They’ve always kept me in the game. But if you’re not going to manage losses and you’re going to even take wide stop losses, like the people who have like stop losses at maybe 20%, this can be some pretty, pretty hefty losses. And if you take multiple 20 percent losses, which is very easy in the kind of market that we’ve had this year, you may have like a 40 or 50% drawdown and all of a sudden, you need that 100% rally in order to get back to break even.

10:54
And so the whole point of this is, is that I keep stop losses tight because I don’t like big drawdowns. I don’t like big drawdowns because they require big moves in just to get back to break even. And this market this year, I’ve done really well, but let’s say I made nothing this year. I’d still be in a much better position than the person that tried to trade without any discipline and just got hammered as a result of always buying the dip.

11:17
They’re now having to make up losses when the market finally does bottom, whereas a person who’s just sitting in cash, is ready to pounce on the market. When it finally does bottom, they can start adding to their totals rather than trying to make back the totals that they once had. For me as a trader, whether I’m profiting, whether I’m on the sideline, there’s reason behind it.

11:36
I don’t want to take unnecessary losses. I don’t want to be stuck in an unnecessary drawdown. I don’t want to be hurting myself when it could have easily been prevented. So he closes ETrade account. He gets a fresh start, going with Fidelity, doing the fractional shares. The dude is great. Tell you the truth, I buy fractional shares all the time.

11:54
I mean, I don’t buy just a fraction of a share, I’ll buy shares. But what I end up doing is I just put in the dollar amount that I want to buy of a particular stock and I just go from there. For my long-term portfolio, because that’s what I use for Fidelity, I use that for my long-term portfolio, dividend stocks and stuff like that. But when I’m adding to it I just put a dollar amount on there. So I’m always going with fractional shares, I don’t care. It’s a little bit easier to do it that way. There’s really, in my opinion, there’s no right or wrong way to do it. I mean, some people say I should just say the exact number of shares. I don’t think it makes a difference. If you want a thousand dollars of something or ten thousand dollars or twenty five thousand dollars, you can actually just put that in there on Fidelity, say hey I want to buy twenty five thousand dollars of this stock. You can do that. Or a thousand dollars. Or a hundred dollars. But Fidelity, I’ve actually enjoyed using their platform. I mean it’s not bad. I get pretty good fills with them.

12:49
And he’s starting again with $300. It’s not too small. I mean with fractional shares you can still get the experience of trading, risk management and all that stuff. You just got to be willing to be disciplined. And I think what a lot of people do when they’re trading with an account that’s like in the hundreds or even, you know, like the low thousands, they are still consumed with the dollar amount. Look, if you’re trading with a $300 account, don’t expect that you’re going to make, you know, a hundred dollars a week on that account or $50 for that matter.

13:07
That’s hard to do with a $300 account. You have to have realistic expectations. But if you’re like coming away with and say, hey in an environment where the market was falling apart and it wasn’t good conditions at all for trading, I increased over the course of the year my account from $300 to $350. Man, I’ll high-five you all day long over that. And if you can look me in the eye and say, man, I managed the risk, I used stop losses, I was disciplined, I stuck to my plan. That is so awesome. I look at you and would say you were way more successful than a guy who had a million dollar portfolio and added a thousand dollars to his account that year. Way more.

13:43
But a lot of times when you have these small accounts, you just think about the fact it’s like oh this isn’t worth my time, I’ve made fifty dollars this year, who cares? But that’s not what you’re trying to do. You’re trying to become a good trader. If you become a good trader, the dollars will follow. But you got to become a good trader first. You got to learn the basics and it’s better to lose with a little bit of money than to not know what you’re doing with a lot of money and lose it all.

14:01
And that’s what a lot of people do. Man, they just go in face-first and they just faceplant right onto the market, man, and they lose everything that they made. It’s way better to start off with a small amount. You’re going to be able to learn and you got to treat that capital as if it’s precious, you know, like Gollum from Lord of the Rings. When he’s like, Smeagol needs precious. You got to be like him. You got to guard that thing. Just, well, I mean, don’t lose your capital in a cave or anything like he did his ring, but be good managers of risk. Regardless if you’re trading with $300,000 or $300.

14:18
Now some of the lessons let’s go through these because he had some really good ones. Do not trade against the market. Top-down trading strategy is what I always use. And that’s what he’s basically referring to here. He doesn’t trade against the market, the sector, or the trend, and that’s important. It doesn’t mean that, you know, when the market’s been in a downtrend you start to see a basing pattern, it’s coming out of the basing pattern that you can’t try to play that breakout. But again, you know, it pays to have a tight stop loss because if you’re wrong, you don’t want to be wrong by a lot and you all of a sudden you’re bag holding a 15 or 20 percent loss.

15:01
But you want to see the market starting to develop that breakout of that base before you really start to take a sector serious, or you start taking an individual stock serious. He said he did this for 50 trades out of inexperience and it’s, yeah, it’s going to have bloody results like what he said. It’s like you’re a fish going upstream when you’re fighting the trend. Like how many people when we saw the huge meltdown in May and June? And then again here in August and September, they just kept buying the dip and buying the dip. And now they’re down 20 or 30%, especially if they were margining themselves or even people who were buying the dip in January and February thinking, oh, this market can’t keep going down forever.

15:34
The Fed’ll pivot, they keep buying into all the rumors that are flooding Wall Street, and all of a sudden, you know what? They’re fighting an uphill battle. And then they’ll go away saying oh, the market’s rigged, it’s manipulated, you know, I’m screwed. No, that’s not the case. Do not engage in FOMO trading or chasing a price.

15:50
This is a huge thing because a lot of times people will be watching like the one-minute chart and they get hyped up watching it. Oftentimes, if you have a huge case of FOMO, it’s better to zoom out on the chart. It’s better to trade off of the daily chart or the weekly chart because when you start getting down to the 5-minute chart, you will start buying at some of the worst possible times imaginable. It’s easy for me to do that, and I’ve done it before too. But when you feel that way, start zooming out to the daily chart, look at what it says on the daily or on the weekly, and make your decisions based off of that. Because when you start doing it on intraday, man there’s so much volatility. It’s easy to get sucked into a trade and lose money unnecessarily.

16:24
And we’ve already talked about this, but he said don’t buy the dip or average down. His worst trades came from this and it’s like growing up, I remember my dad always telling me, he says a lie will take you further than you ever want to go. It’s the same thing with a dip buy. If you start buying it’ll take you lower than you ever imagined because you have to keep buying the dip.

16:42
Just like when you’re telling a lie, in order to cover up for that lie you got to tell more lies. And then before you know it, you don’t even know what the truth is. And that can be a lot like trading. When you’re buying the dip, it’ll take you down a far darker road, road littered with more losses than you could have ever imagined. If you keep buying the dip. Yeah, you get caught up in it because you’re like, oh now I only need it to rise this much before I break even. And it never does. And then all of a sudden, you’ve blown up your account.

17:13
He doesn’t want to trade meme stocks or penny stocks anymore. I think that’s an amazing discovery for him to have made. That is not just for him in particular, but there’s still people out there still trying to trade the meme stocks. They still think that that’s where their success lies. Man, look, when you look at GameStop and AMC and all these other ones, what do they do? When they do pop, they keep popping a little bit less each time. They’re not things that you can rely on, at least at this point in time. They’re not. I mean maybe they’ll get their act together, turn things around. But at this point, I mean, how many people, how many losses have been taken from GameStop and AMC? I would surmise that more people have lost money in those stocks than made money.

17:30
And the reason why is that people who are getting out at the top, the people who really did make money off of it, they’re having to sell to so many people who are buying at that top. So many accounts being able to liquidate their positions is just creating all sorts of new bag holders. And while I think there’s a lot of good things that you can learn from social media, I think Twitter is like a really great place, so is StockTwits. If you follow the right people, yes, there’s some really good news feeds out there that you can find out things really fast versus, you know, waiting on the Wall Street Journal to post an article about it. You can get that instant news really, really fast and Twitter moves the markets. So don’t completely discount it, but be aware of who you’re following.

18:16
Make sure it’s somebody that, you know, they’re not just blowing smoke up your butt. Oftentimes, when we get a crazy spike in the market, I’m going straight to Twitter to figure out what was the news that just moved the market. Like this morning, there was a huge spike in the pre-market, sent the market rallying. And I think, where the heck did that come from?

18:32
I couldn’t find it on any of the websites. So I went to Twitter, found it on Zero Hedge, they were retweeting a guy from Wall Street Journal that was talking about the Fed maybe wanting to start decreasing the pace of their rate increases. That got the market rally on. Wouldn’t have found it for a while if I had relied on traditional news sources.

18:50
And he says it’s okay to make partial trade exits. Yes, this is one of the things that I learned probably a little bit later than I should have. I think with the commission-free trading, I hated the fact that I was always racking up a lot of unnecessary charges and commissions. And I mean thousands and thousands of dollars lost every year to just partial profit. So I never did it. And when they started going commissionless, that’s when I did. And I think it started off too when I first started off swing trading, you know, there was like $20 just to get into a trade, and that could really add up if you’re doing partial profits and I wasn’t trading with much at that time.

19:22
So yeah, I got into all or none. And tell you, I got all in, I got all out. I still get all in on my trades. I still believe that’s the right way to go for my trading style. As I get out, I start to take partial profits along the way because that’s going to reduce the risk. But it still gives you an opportunity to make plenty more profits on that overall trade. Because one of the things I noticed too with my trading, and this is one of the things that led me to start taking partial profits, is that my trades weren’t maximizing the profit opportunities as much as they should when I was just doing all in and all out.

19:55
So I would go all in and then I would start taking a third off or a quarter off here and then take another quarter off, another quarter, and then by the time I get to like the last third or the last quarter, I’m letting that position run wild. So his question on this podcast, and it’s actually one I haven’t really talked too much about, is this well I’ve talked a little bit about it, you know, from a stop-loss standpoint but he said what is the best way to determine when a trade is a loser early on and just get out of it well before it hits my stop-loss?

20:11
Well, if you’re having a problem with a stop-loss, where you’re placing it, you’re probably placing stop-losses that are too wide. So I don’t place stop-losses at 10% because I don’t want to take a 10% loss. It’s too wide for me. So I can find really good trade setups but if it’s a 10% stop-loss, I’ll pass on it. It can be very frustrating at times because I see a good chart there and then you eventually see that chart play out favorably. You’re like man I should have just taken the trade. But I would have had to take a 10% risk at that time and when you’re initially getting into a trade, you don’t know if it’s going to work out or not.

20:30
So my stop-losses are very tight. They’re usually like three or four percent, never to usually exceed four to six percent. And every time I get into a trade, I ask myself, am I comfortable with this stop-loss? Am I comfortable with this 4% stop-loss on this trade? If I’m not, then I’m not going to take the trade. I have to be comfortable with it. Of course, we’re always comfortable with profits, but are we comfortable with the loss that we’re willing to take on that trade in order to hopefully achieve that profit? And if you can’t, then that’s really not a trade that’s worth taking.

21:05
So really, it’s about trying to find trade setups that offer a stop-loss that you’re comfortable with. And one of the things I do on swingtradingthestockmarket.com is provide a lot of good charts showing you and videos too, showing you that some of these trades out there that can provide some good trading ideas. So that’s worth checking out. You’re also going to get my watch lists each week, different stocks on my daily setups, as well as updates on the big tech and the market as a whole. You’re going to get many videos sent to you each and every week, multiple ones each day. So check that out. You’re supporting the podcast swingtradingthestockmarket.com and I hope that you enjoyed this podcast episode here.

22:00
It was good to follow up with G.W. Bun. As always, send me your questions ryan@shareplanner.com. Believe it or not, I don’t get enough from you guys. You guys, keep sending them to me. There’s no dumb question asked. If I can’t do it, I’ll sometimes follow up with you and say hey, let’s try to get a different question here or something that might work a little bit better for the show, but I try to get back to every one of you guys. Have I been perfect? No. But I do try to get back to every one of you guys and do as many of them as humanly possibly can.

22:21
And make sure to leave a five-star review too. Those mean a lot to me. They help me continue to build the audience. Yeah, like anybody I want to continue to expand the audience, continue to expand the reach of this show. So that as a favor to me as well, if nothing else. Thank you guys. Thanks for listening to my podcast.

22:37
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22:53
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