Too Much Profit | Podcast Episode #297

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.

0:31
Mallory with swing trading the stock market is today’s episode. We’re going back to the e. Emails on answering your questions. And today’s podcast, we are talking about too much profits. Can you make too much profit on a trade? When do you know when too much profit has been had and you just need to go ahead and exit out of that trade, for the purposes of this email, we’re going to call this guy Boomer and that’s actually a name.

0:55
He asked to be called, so typically I give a nickname out to anybody writing email. So I’m not using the real identities. Typically it’s a Florida redneck name, but I’m always open to other suggestions. Boomer rights. Hey Ryan, I love your podcast. It’s very informative to me as a new Trader. I recently moved from my paper account on toss that’s thinkorswim to actually trading real money.

1:17
One trade, in particular, was a trade on NEX. I found a good bullish engulfing candle pattern at the bottom of the downtrend. Once I got into the stock though, I found myself constantly watching the price action, I ended up selling way too early broke even and now the stock has made a rally.

1:34
How do you keep Up up when your money is on the line, how do you know when you’ve made enough profit? Thanks so much you can call me Boomer for the podcast, if it makes it on there. PS, I’m trading a very small account. Well Boomer, you’re on the podcast. So, what am I drinking today?

1:50
Well, I tell you what, I’ve been buying too many bottles of like trashy Bourbon and some probably too much money of good bourbon too. But I want to get one of these subscriptions to a company. I’m not going to use their name because they don’t sponsor me but they send like shots of different Bourbons.

2:05
So it makes it a little bit easier on me. Well, for this one I got a delivery of this whiskey Rye called few. Now it looks pretty good as nice dark color to it. But man, you take a whiff of this sucker. You do pick up some ethanol but the flavor is not bad.

2:21
Now, I don’t enjoy eating pears, but when you drink this stuff you definitely pick up on some pear notes, man. I’m telling you it’s very strong, it’s a very dry whiskey. Get a lot of like citrus a lot of spice and it’s not overpowering. At all, I would say that this is a better version of Basil Hayden.

2:39
Could I drink this every day? Yeah I probably could. I think it probably get old after a while. It’s not like a one that you can just always go to like Buffalo Trace or eh Taylor. This is one that probably would get tiresome after maybe a couple months of drinking it on the regular scale of 1 to 10.

2:57
I struggle whether or not to stay in the high 60s or creep into the loaf sevens. But I think I’m going to creep in a low 70, 7.1, So few whiskey Rye, that’s F ew, whiskey Rye 7.1. Now, first off, it’s good that he’s trading with a small account when you’re going from paper trading to trading with real money, it is a big deal.

3:18
I often equated to when I went from part-time trading to full-time trading and stresses and the challenges that that brought is very similar in the same way. When you go from paper trading to real trait now, to equate it to something that we can all relate to Monopoly, the game of Monopoly, right?

3:33
Yeah. You might get a little bit worse. Act up when you’re playing Monopoly basically because you know you’re getting taunted by your friends for landing on Boardwalk or whatever. But do you get really stressed playing Monopoly? Know why? Because it’s paper money, it’s not real. At the end you put the game away you don’t have to worry about it anymore but let’s say you were playing poker with just five dollars on the line.

3:54
You know what people will do? We need are just playing for five dollars. I’ve been there. I’ve gone to friends houses and they’re having like a poker night. I’m not even good at poker. I just probably use risk management. That keeps me around a little That longer than I should be. When I’m playing, like Texas, hold em or five card draw.

4:09
But people get worked up over five dollars, It’s amazing. And by the way, you’re gonna play poker for $5, consider the five dollars like entertainment for the evening, right? Nothing that you expect to get back. Yeah, if you win, it’s great, but whatever, but people’s demeanor in their attitudes change, all the more and it’s probably even more.

4:26
So, when you’re trading stocks, especially, when all of a sudden, you’re committing a couple thousand dollars to the trade, your emotions are really going to get ramped up. Imagine playing Monopoly with real money. Yeah. That board game get real serious really fast when you landed on Boardwalk.

4:43
So, when you’re making that transition, from personally, I don’t even care how much you’re worth. I think if you’re worth 10 million dollars, start off really small man. Just get your feet wet, start with a small account, it’s good to learn with a small account size because when you make those mistakes, you can recover from it. But if you start off in a lot of people did this in March 2020 when the covid lows took place and everybody started getting the stock market even more.

5:04
So with the Wall Street bets crowd, they started pouring everything they had into it, they were taking cash withdrawals against their credit card. They were getting into Bitcoin Dogecoin and all the other cryptos and they are getting smashed. I’ve told you, I’ve seen so many testimonials and people telling me and you probably heard them on this podcast, plenty of times of how people have destroyed themselves with trading and if they would have started off small and just learn the ropes, man.

5:32
Going from paper to just a little bit. No, they don’t even In just start off with big account sizes. They go big account. Size has width options now, this is just me talking, but I think you have no business trading options until you become really good at trading stocks, you want to create more headache, more craziness in your life, more likely to fail than succeed start trading options in just bypass inequities all together.

5:56
And I know a lot of you guys aren’t going to agree with me, when I tell you that because some of you guys have went and bypassed options and you’re still trying to find your footing there. Is a person. And sometimes I lurk on the different Facebook groups that are out there. And there’s this one where people are like hyper trading s QQ + T.

6:13
QQ. And there was this one woman, man. And let me tell you every day, she was talking about how in this kind of goes back to the previous episode. When I talked about you know, not saying I think we will do this or I believe we will do that instead it talks about reacting to what the markets doing and seeing what the markets doing and playing your trades according to that mindset.

6:35
This one woman she used to always say and it will show up on my Facebook feed all the time. Oh, we’re going right down. I’ve spoke it into existence, I’ve put it out there in the universe, which I don’t even get. What any of that means, by the way, I mean, speaking something into existence, like what the heck are we talking about here?

6:53
But people actually do this with stock market. Like the markets actually listening to what you’re speaking into so-called existence or the universe or like in the great Cosmic galaxies. There’s this like universe. That’s Sing to you like what? Like space outer space is listening to you.

7:08
I don’t know. But these people they think that they can say it and it becomes a reality in the market could care less about what you think, or what you believe. And so I tried to tell this person. Hey, follow the price action. Just don’t try to predict what the markets going to do, React to what the market is doing.

7:24
And this person behaves like you don’t know what you’re talking about. I said, look, I’ve been doing this for 30 years. I kind of have a feeling for what I’m doing. It’s like it’s not the same Market that from 30 years ago. It’s different this time, which is We’ve you hear somebody say it’s different this time, run when they say it’s different this time they are about to blow up their account.

7:41
But anyways this person told me it’s different that I didn’t. What they’re doing. Yeah, they probably been trading for like three or four months. Well they post the other day that the market is rigged and they quit that. The numbers don’t make sense, they don’t make sense. People now I’ve never looked at a chart and said, the numbers don’t make sense.

7:56
The numbers are what they are. It’s what the market tells you it’s going to be. It’s what buyers and sellers coming together buying and selling a stock creating that? At final closing price on the day and there’s a lot of price action in between to get to that closing price. This person know, the numbers didn’t make sense, the millions of buyers and sellers that were out there that day, that created the closing price for the stock, they don’t make sense and so you have it.

8:21
So the point of all this is, is it keeps you in the game longer when you’re treating small, you’re less likely to use excuses that you’re more likely to respond and do better from a less emotional standpoint to what the market is doing. So, yes, it’s good. Starting with the small account size.

8:38
Now, the second thing that I picked up on got into this stock and X, it’s an oil company, you found a good bullish engulfing pattern at the bottom of a downtrend. Which when you’re seeing it emerge, you don’t necessarily know that it’s the end of a Down Trend, right? You suspect you’re saying okay, maybe if it can start to rebound here a little bit, develop a basic pattern or break a previous lower high.

8:57
Then. Okay, we have a new uptrend created off of that bullish engulfing pattern. Once he got into the stock he found himself constantly. Watch price actually there’s nothing Wrong with watching price action and then he ended up selling it way too early. Now my question would be are you watching for profits or you watching how the stock performs relative to your plan of action?

9:14
What do I mean by that? What do you mean by the fact that you, are you watching this? Yeah, of course. I want to see if my stocks going up or down in my losing money or making money, but that’s not really what I mean. If after you get into the trade, are you just throwing out your whole trading plan out the window, because what are we creating training plans for just to say we did it?

9:31
No, you got to follow your trading plan. Yes, there’s times where you move up the stop losses or you go ahead and say, hey Things not working right here on this trade. It’s breaking below some key support levels. I’m going to go ahead and raise my stop loss and then you end up getting stopped out a little bit higher than where you originally got out of.

9:49
That’s one thing, but when you’re just saying what’s going on it, I’m not making money here, I’m getting out. People can work themselves up into a tizzy by watching a stock, and here’s the other thing. What time frame are you watching it on? I have a my charts. I mainly look at the daily all day long, and I also have a five-minute in a 30-minute chart on there or a five minute and hourly, I usually switch between Tween the 30-minute and hourly chart, but a lot of people will look at the one minute and believe it or not, there’s a huge difference between the 5 Min in the 1 minute. 5 minute is not as volatile as the one minute, and it gives me a kind of a good idea of how the markets flowing throughout the day.

10:18
One minutes, absolutely Bonkers. It will put it on some of the biggest candles you’ve ever seen that on a five minute chart doesn’t really look that big. But on a one minute, you can look massive and it can spook you out of a trade. As swing Traders, we can do ourselves a huge favor by not engaging in the one-minute chart rarely if ever do I Look at a woman after I came.

10:36
Remember the last time I looked at a one minute chart there, really irrelevant. But when you start looking at those candlesticks and what they’re doing, you start equating that with profits and losses and then you start making decisions off of it rather than following the plan that you originally set out with your plan, as a Trader should be set up to be able to handle the swings of everything in between the entry price.

10:54
And that stop loss. If you can’t handle the entry price in the stop us. Then you’re trading with too big of a position relative to the amount that you’re risking between the entry price in that stop loss. Then that means you need to be taken smaller positions. Now, the guys already trading with a small account, but you might be trained with a small account, but putting everything on the line there and he’s not willing to handle that.

11:12
So I don’t really know exactly what kind of exposure he’s putting in on that stock. But if you find yourself with the stock Ryan, after you get out, ask yourself, did you follow the trading plan? If you didn’t follow the trading plan, then you have nothing to blame, but yourself but now, if you follow the trading plan, you get stopped out and it goes back up.

11:29
What you gonna do? You gonna get mad? Now, you followed your trading plan that’s going to happen in trading. I think a lot of people think that they shouldn’t be frustrated by trade. That they shouldn’t be disappointed in how a trade turns out, especially if they did, follow their trading plan but it’s our contraire, you’re going to get disappointed by the results, your trades.

11:44
I’m disappointed all the time because I hate how some of my trades turn out. I feel like sometimes I’m penalized by managing the risk. It sucks. Got stopped out of a stock today only to watch it. Go back up the rest of the day. Now, do I Harbor? That frustration. Now, I just move on to the next trade, my worries become, what happens on the next trade because I’m used to it.

12:03
Believe it or not. I’m used to that. Disappointment that comes with trading. It’s kind of like an expectation, you’re going to get disappointed. But I think if you’re jumping outside of your trading plan and making decisions that don’t line up with the trading plan, that you took, then there’s a good chance that you’re being emotional with the trades.

12:19
And that’s probably meaning that your overexposure, you’re trading with too much of your capital on the line. He asked me, how do I keep my cool when my money is on the line? I keep my cool that. Now look I can be kind of a high maintenance person. You talk to my wife. She says, I’m the crazy person in the relationship is probably true. Even though I always tell her, she’s the crazy one.

12:35
Which by the way is probably not the best thing to say to your wife but you know we we joke with each other quite a bit so we both know, that’s not true. So how do I then if I’m a person that has a little bit more of an emotional side that I can be boisterous in life and not always be Joe, cool. Well, I traded amount that I’m comfortable with the amount that I’m comfortable with.

12:54
I can handle three, four, five percent swings on my trade, the amount that I trade with. Can I handle a 10 or a 15 percent swing on it? No definitely not 20%. Absolutely not. But 34 percent. Yes. So not only am I comfortable with the position size, also come forward on placing that stop loss relative to the position size and the volatility that’s surrounds the trades that I make has to be something that I’m comfortable with to, I can get into a penny stocks, put a 4% stop loss on it, but that thing might swing 50 percent in a single day, so I can’t do that.

13:24
So I’m going to be trading stocks that are reflective of what I’m comfortable with from a reward risk ratio. You know, remember this too, if you get out of a stock and the stock goes back up without you and it no. Likes that. But guess what the market does? He even know that you were in it.

13:43
The market doesn’t know that you broke even or that you took a loss on that trade just like with my trade today. I got knocked out for a loss. Stock goes back, I would have been profitable on the trade overall, had I not been knocked out at the trade at that stop loss is the market know that. No. Does it care? No careless. So you have to move on. You have to move on to the next tray because they are are going to be trades that work out quite well.

14:00
And if you sit on the bad traits, the ones that disappoint you that get you upset and you start modifying. Your trades of try to prevent that from happening from taking losses in the future. Guess what? You’re just going to take more losses. You can’t outsmart the market. You can only React to what the markets doing. You have to see what the markets doing, but when you start thinking that this time will be different or this time, it’ll do what I want it to do.

14:21
If I just tweaked this and week that the markets just going to rip you a new one man. Oh, and by the way, before I forget, make sure to check out swingtradingthestockmarket.com, that is my Patron website that goes along with this podcast, whether you’re going to get all my stock.

14:38
Research each day, that’s going to include multiple videos, that is sent your way. It’s also going to include my watch list, stocks that, I’m following each morning, check it out. swingtradingthestockmarket.com. You also get updates on the big tech stocks. You’re also getting updates on all of the indices really, really good stuff. I’m giving you all my information for a pretty cheap price to check it out.

14:54
swingtradingthestockmarket.com. Now, about making too much profit. Is there a such thing? How do I know when I’ve made too much profit? I don’t, I don’t think there is enough profit now. I always talk about manage the risk. The profits will take care of themselves. Yeah, I don’t know how much profits that is.

15:10
Sometimes it’s two percent sometimes it’s a 90, or 100% profit. I don’t set out to really know what profit I’m going to take you here. Who is it? Jim Cramer. He always says, holes, make money Bears, make money, pigs, get slaughtered. I don’t think so. I mean, I take profits along the way in order to manage risk, but if I get down to like my final third or a quarter position in the stock keeps running, and I’ll let it keep running, not going to stop it.

15:34
I don’t think there’s Point to where I can make too much profit on a trade. The market doesn’t know if I’m making too much. Profit doesn’t even know if I’m in the trade doesn’t even know where I got in at, doesn’t know my entry and it doesn’t care if I make too much profit. So you can’t worry about that. I think when we start worrying about how much profit that we’re making, we’re starting to personalize with that profit is to us if you’re managing the risk, in the stock keeps going up.

15:54
Doesn’t stop you out. That’s not a bad trade. I’d stick with the trade that continues to go up. I’m having that right now with this one stock D Nu T, he keeps going up every day. Maybe tomorrow, this will be like the thing that Sticks the knife in it but right now, it’s doing pretty good. Is there a tendency to want to just go ahead and close out the whole position?

16:10
Absolutely. But right now, it’s not giving me a reason to close out the stock, so I stay in it. I might take another third off here in the coming days, but for now, I’m going to continue to let it run higher. As long as it’s willing to once the stock is unwilling to run higher. I close it out. It’s pretty simple, make profits in a stock until it’s not willing to make profits anymore.

16:29
Keep raising that stop-loss keep taking profits along the way and just let it go as high as it once it’ll probably come back. A little bit and then you’ll either get stopped out or you’ll close out the position altogether. But that’s not a bad thing. Often times, you’ll get out higher than you would have expected. If I’m not taking profits along the way then I become more emotional about the trade and I’m more likely to close out the position altogether.

16:49
Far too early. But if I would take profits along the way, I am able to actually let that stock even though it’s a smaller position run for a much longer time because I’m becoming less emotional about that particular trade because I’ve taken profits along the way almost.

17:05
Nearly ensuring that. I make a profit on the overall trade, if something were to go bad on that, final third or final quarter of a trait. So if you enjoyed this podcast, I would encourage you to leave me a five star review. Keep sending me your questions, keep sending me your emails. I do enjoy getting them, reading them and responding to them.

17:21
Make sure to check out swingtradingthestockmarket.com. Thank you guys. And God bless. Thanks for listening to my podcast. Swing trading the stock market, I like to encourage you to join me in this SharePlanner trading block, where I navigate the stock market each. Today 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.

17:44
So go ahead, sign up by going to shareplanner.com trading block, 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. You have any questions, please feel free to email me at ryan@shareplanner.com.

18:05
All the best to you and I look forward to trading with you soon.