Getting Out Too Early | Podcast Episode #324

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 going to be talking about getting out too early and your trades. That’s probably one of the biggest points of frustration for Traders. That I’ve noticed over the years, they’re always frustrated that they got out too early and they see the stock just keep climbing higher. After they get out at a point where they thought was a really good price to get out.

0:54
They were feeling very good about it, they were happy with the return and then the next day and the days that followed, they just see it keep going higher and higher and higher. So today’s episodes going to be called getting out too early. What can we do about that? What are Things that we can do to help our emotions during those times. And this email comes from a guy.

1:10
He actually asked to have his full name be used. It’s John O’Neill hails from Ireland. Always excited about somebody from Ireland email in the show because they have been a huge impart of not only this podcast but also with SharePlanner over the years.

1:26
There’s a huge number of people from Ireland that have been faithful to SharePlanner to this podcast, over the years. And I’m greatly appreciative of them for that, so John John John O’Neill. Writes. Hello Ryan. I hope you’re keeping well as always a big. Thank you for all of your information.

1:42
I highly recommend SharePlanner for everyone as your trading style, has taught me so much. I am trading for about a year now and I’ve made many mistakes along the way, but I’m learning from them before. Christmas swing trading was not working well for me mainly due to time and running my business, I started scalping Tesla at the open and now I got lucky as I got lots of wins, and grew my account, 20% in a couple weeks.

2:01
And then after Christmas, I forgot all that I learned quickly lost. 20% and hit another low point of my trading. I was so annoyed at myself, as I broke all the rules and started thinking about money and not what the charts were telling me. Anyways, Looking Back Now, I actually learned a lot in that up and down time and it has turned me into a much better and more disciplined Trader.

2:21
And I’m really ready and focused on not making as many mistakes again over the last six weeks, I have had my most consistent run a trading which I am very pleased about mainly trading the major Trend reversal patterns on a five minute chart in a simple breakout strategy. Jion the 10 minute chart but one thing I am finding very frustrating and annoying and nearly a similar feeling to losing on a trade, is getting out of a trade too early, only to see it, run even higher, it’s definitely a mentality issue.

2:48
And something I have to work on. Have you went through the getting out to early stages? That frustrated, you also, you can use my real name as I hope my sons will list them back over your podcast when they are order my seven-year-old came into my office today and said that’s a head and shoulders pattern on the chart Daddy and it was actually very funny and actually ahead Shoulders that he was correct about.

3:07
So, thanks again for everything that you’re doing. John O’Neill from Ireland. Thank you, John. I appreciate that. And it’s actually pretty cool to hear that, you know, a seven-year-old boy, is actually recognizing patterns on a chart. I got to get my voice to recognize some of those patterns as well.

3:22
So, there’s a lot to unpack here. I get the whole getting out too early. I think it’s something that used to frustrate me a lot. It’s not that if I get out of a stock. Now let’s say I got into a stock at $100 and I get out at 110, I made ten percent off of it and forget. Good reason why I got out but then it still continues to run higher.

3:38
It goes from 110 to 120 130. Yeah, that probably would annoy me. Some, I mean, I remember gosh way way back. This is when Visa stock symbol V was an IPO. I can’t remember exactly what it was. Let me check. What that was?

3:54
I have a feeling it was like I want to say like 2006-2007 pull this sucker up on the I have to go maybe even Beyond a weekly chart. Yeah. It was like 2008. Okay. So Visa, I POS. So that was, that was a crazy long time ago.

4:10
And I was actually at a really bad time as well, but I remember getting into this and the stock is split since then, so I’m not probably using the correct numbers. But I do remember, I think at the time I was trading at $40, which now that’s like 11 or $12, but there is a nice nice basing pattern in the later stages of 2008 and I got in.

4:28
So we’ll say, I probably got in around like 1453 or so when which, when you’re thinking about what 1453 actually. It’s now it’s actually quite crazy it set trading at $227, and I’m going to tie this into everything that we’re talking about here in just a second. But I got in around 1450 and again, I’m not exact on these prices, but I remember making about a solid 10 to 11% on the street and I was very, very happy about it.

4:52
So essentially, it be like going from my 1450 up to like sixteen dollars over in a couple of days. Very happy about it. Well then it pulled back for a couple days and then it just went on this epic tear for You much the rest of 2009 going from for teens all the way up to 24?

5:09
I just remember saying to myself, why did I sell that thing? That was kind of really torqued and in the fact that it just kept going higher like that. And now I mean, like I said it’s trading at two hundred twenty seven dollars a share. So do I want to be mad about the fact that I didn’t hold it all this time when I traded it back in 2008?

5:28
Yeah, I mean I could definitely be mad at myself but it doesn’t get you anywhere because in the end stocks are going to continue to go. Go up and down after you get out of a trade. The market doesn’t know that you personally got out of the trade so it doesn’t care that you got out of it. So it’s not like it’s trying to pick on you, often times, we feel that the markets picking on us and you go back to 2008 when I traded that Visa stock and it continues to go all the way up to 24 from 14.

5:53
There would have been a heck of a Payday back then for me. But the difference between then and now is that wouldn’t bother me at all. Now it just doesn’t because I know that it’s, we’re really just doing traits and then after I get out of a tree, I don’t really care what the stock does. I don’t really even follow it until it becomes a trade setup again that I wanted to jump on.

6:11
So when you start to look at it from the Viewpoint of, we’re just taking trade setups here. We’re not marrying ourselves to stocks and when you come to the realization, that stocks will go up and down some stocks will go down until they’re not in business anymore. Some stocks will continue to go up after you get out of it and once you realize that that hey stocks are going to go up and down.

6:31
I know I’m talking in kindergarten terms right now. But it’s something that’s very difficult for a lot of traders to get past because it’s something that’s taken personal like it’s an error in judgment. Now, there is some things that we can do to be able to help with that.

6:50
Now, there is some things that we can do to be able to help with that. One of them is taking partial profits along the way. Now, partial profits aren’t sexy. One of the things I would say about partial profits is that oftentimes it’s not the fact that you’re getting out at a much higher price along the way with a smaller position because you took profits along the way. It’s often because you took that initial profit That you’re not dealing with a losing position at the end of your trade and you’re actually getting out with a small profit.

7:11
So many times, I will get into a stock, let’s say stock XYZ at 100. And no, the I’m not talking about any stock specifically. I’m just giving you a made up example here, but you get in at 100 and then it goes up to 105 and you take some profits. Usually that first profit-taking, I never want to take profits, that’s usually when I’m the most optimistic about my trade is that first moment where I have to Start taking profits.

7:36
How many times I have seen a stock go from 100 to 105. And let’s say, I move my stop loss along the way and it’s like at 99 and it comes back down and it stops me out and it keeps going lower from there. I can’t tell you how many times that’s happened and I actually walk away with a small profit but the profit nonetheless because I took a third of my position out at 105 and didn’t avoid the whole idea or stay away from the notion of taking profits along the way.

8:01
So we talked a lot about avoiding unnecessary losers, Well, sometimes you can get some undeserving winners by taking profits along the way by taking that initial profit. It saves you. From a lot of losing trades because just because you take initial profits doesn’t mean the stock is going to go up from there.

8:20
You’re just taking some risk off the table, you’re taking some profits, Aloft the table so that if the stock does reverse tear you stand a very good chance of still coming out on top and not having to take a loss on the trade before I did partial profits. I was always all in an all-out and one of the the things that I would say about always being an all-out, kind of a traitor where I don’t take profits along the way is that I wouldn’t let the stock run as much as I would if I was trading with a partial position because I had taken some profits already.

8:49
And so one of the probably the most nerve-racking things is when I would buy a stock at 100. It goes up to 105 and I have a full position but I got to decide where am I going to get out completely? What am I going to do it in my gonna do it right now that I’m up five percent. That’s a pretty good return but it doesn’t necessarily mean I’m getting a good reward risk.

9:05
Off of it. When, you know, I have a 5% stop loss that’s really just the one to one return. And then, all of a sudden, you see it, go back down to 100 dollars of pulls back, and retrace is and test that breakout support level. Here’s I go. I mean, I’m not letting this thing go to read on me, so you get out.

9:21
And then when you get out, you see a bounce right back up again and it keeps going higher and higher. So you get out flat or with a small profit or when you’re doing like that all out mentality, you get out, let’s say like five or six percent and it just, you know, keeps on rally and without you and you’re like, man. Why did I have to sell that? Why can’t I not hold a stock long enough.

9:38
And I also noticed that a lot of times when people trade with two, big of position sizes, because their trade was such big position sizes, there’s a bigger amount of emotion and their trades and let’s say they’re shorting the market and they’re wanting it to go down and they’ve been taking some losses along the way and then all of a sudden they get back to break. Even what’s the natural tendency is to go ahead and close out the position at break?

9:55
Even while the market doesn’t know what your Breakeven isn’t, it doesn’t care what your Breakeven is, but then all of a sudden he keeps going down, like, man. Why could I not just held longer? Why do I always do that? Why do I always Get out right at the best possible time for my stock trade to start. Making me some money in that case, it’s because you’re trained with two big of position sizes and other cases like in John O’Neill’s situation here, he’s not treating it with the idea that he needs to take partial profits along the way.

10:20
And so what partial profits also do ultimately is allow you to maximize the value of your trade. Now, speaking of maximizing value, what’s one thing that you can do to maximize your value? Is by signing up for swingtradingthestockmarket.com Yes, you knew that was coming at some Point in this podcast episode because I talk about it for like 30 seconds, every time it helps pay for this podcast that helps support it.

10:41
And in the process, you’re getting all my stock market research each and every day that’s going to include updates on all the Fang stocks that’s going to include updates on the market and the Seas. That’s going to include my bullish and bearish master, watchlist that I provide each and every week plus my daily watch list and the stocks that I find the most intriguing on a day-to-day basis.

11:00
So check that out. Swing trading the stock market.com. Think you’ll like it, and That’s the end of that plug so I can actually go back to talking about letting your winners run. So when you start taking partial profits along the way you get into a stock at 100 and it goes up to 105. There’s that part of you that says, man, I could just get out right now, make my 5% but then, you know, there’s that fear that it’s going to keep on going higher.

11:21
So you don’t want to do that. And then because you don’t do it, it goes back down and you take a loss on the trade, but if you take profits at 105 regardless, if it goes back down or it goes keeps going higher, you’re going to benefit either way. If it goes down, well, you took some of the The risk off the table and you’re still walking away with a winning trade assuming that you’re managing the risk properly but keeps going higher.

11:40
Yes you took some profits at 105 but it kept on going. So there is that other two-thirds of its trade or 75% of the trader, whatever the partial prophetess leaves, you with that, allows it to keep on going higher. And so maybe it goes up to 115 and you take another third off the table and from 115. Yes, you only have a third of a position left, but we all know that if you have been trading all in and all out, you probably would have just gone out at 105.

12:01
And then been frustrated now that you’re seeing at trading at 1:15, because you don’t have Skin in the game. And then from 115, it goes for the 130 or 140, and then it starts to finally pull back, and you take some profits and maybe like 125. And you’re a happy camper. That was a really, really good trade.

12:17
But for most people, that would never be realized if they were not taking partial profits along the way. That’s the reason why I do partial products. Look, I can’t tell you before when I was always all in, or all out. How many times I took profits at times, I probably should have been taking profits because the trade hadn’t been completed, but because the prophet it’s that I was holding at that time and because I didn’t want to see a stock that was up seven or eight percent.

12:39
Go back to zero or if it’s like pulled back, two or three percent, I would just be like, aw forget it. I’m out of here. But when you’re taking partial profits, along the way, you expand your central, your bandwidth, or your tolerance, for risk, because you’ve already taken a lot of risk off the table, so you can use wider.

12:55
Stop losses. In fact, usually the last third of my position is my widest, stop loss because I’m only dealing with a third of a position at that time and so I can give it a lot more wiggle room to continue to March higher. If it And to do so.

13:13
If it And to do so. So the cool thing about trading and taking partial profits along the way is my stop loss is always the tightest in the very beginning. Why is that? Because I want to find out fast if I’m going to be right or wrong on the street. I don’t want to hang around in a losing trade for longer than I have to, because then that means that’s a opportunity that I’m not taking elsewhere. When my money and capital is tied up in one particular trait.

13:31
But as we become more profitable in that trade, my stop-loss actually starts to widen some. As I start taking profits, because taking Do you know 5% loss on a trade that I’ve already taken a third of my position on isn’t nearly the same as taking, a four percent loss on a full trade. So by the time I get to that final third or that final quarter, I may actually be sitting on like a eight, nine, ten percent stop loss on that final third because I want that final third to run wild.

13:55
I want to give it as much opportunity to continue that run higher and remember Market doesn’t care about your situation. It doesn’t care about your circumstances. It doesn’t care that you got Early that you got out later that you got out right at the optimal moment. It’s not going to high-five you. It’s not going to console you.

14:11
And so what it’s going to do, it’s going to keep going up, or it’s going to keep going down, or it’s going to do some sideways price action, but in the end, that’s not going to be determined by whether or not you’re in the trade or not still. And so we can’t take that personal. And the last thing that I would like to touch on as the first paragraph of this guy’s email.

14:28
John O’Neill’s email, he talked about how he struggled some and the beginning mainly due to his time that he had you know that or that he was able to dedicate to trading and the amount of time he was spending running his business and it’s important when you’re trading that you adapt to a strategy and to a approach and trading that’s conducive to your way of life to your lifestyle because when you do that, then it’s going to fit along the lines of what you’re capable of doing and what you’re capable of achieving so many times.

14:55
You know, if you’re working a tractor out in the middle of a farm field, you can’t be a day trader. Be maybe a position Trader or a swing Trader, but State ratings can be kind of hard. And if you’re day trading in your work, A tractor all day long. And you’re let’s say, you’re working it off of your cell phone or something. But what do you do when you get distracted on the job?

15:11
Let’s say, you know, somebody comes and talks to you about, you know, what you need to do next in your job or something, or, you know, you meeting with a prospective client or a customer. Well, all of a sudden, you’re not focused on your day trading, you might be taking a massive loss because you’re trying to run your business.

15:27
So it’s important that your trading style reflects what your circumstances are and what your business is and what your lifestyle is and then he was up to 20% trading Tesla. And then he lost it all. I can’t say this enough. And I’ve said it in previous podcasts, but your winds are going to be defined by your losses.

15:43
Yes, you’re going to have wins. If you go on a really good streak, you’re just closer to taking on some losses because the losses are going to come with trading. So when you’re on a hot streak, don’t think it’s going to last forever, you’re just getting closer and closer to your next losing trade. And so what, it’s going to come down to is how you manage and keep that 20% will come down to how you handle your losing traits.

16:03
Are you just, you know, 20% on the trade and losing 20% on the next trade or a, you may be making 5% on a trade and losing 2% on the next trade. If that’s the case, then you’re preserving the majority of your profits. You’re moving forward in the right direction because then the next trade that you get, that’s 5%.

16:21
And then, let’s say, the trade, the follows, you lose two and a half percent, okay? You’ve had ten percent of profits, you’ve had two point, five plus two percent, and losses over to trades. As about four-and-a-half. You’ve kept slightly more than half of your profits, which Which is going to be much better than being up 20% and then losing 20%.

16:39
So in the end, one of the best things that I do for myself, when it comes to trading is taking partial profits along the way, allows me to maximize my gains on the trade. Oftentimes, it keeps me from taking a loss on a trade and have an undeserving winner when it should have been a well-deserved loser. So that’s where partial profits can come into play.

16:56
It also allows me to maximize my gains like I said and you got to make sure that you’re trading according to your lifestyle and in circumstances and not towards what you’d like, Do, but you can’t really do it because you don’t have the means or the ability to do it from a lifestyle standpoint. So, if you enjoyed this podcast episode, I would encourage you to leave me a five star review, those things, really do mean the world to me.

17:17
Secondly, make sure to check out swingtradingthestockmarket.com and thirdly make sure that you’re sending me your emails. I don’t get enough emails from you guys, so send me them. ryan@shareplanner.com, I want to hear from you guys. I want to make a podcast episode out of your questions. Is the best way to get some insight into the stock market.

17:35
by sharing with me, your circumstances, your backstory. I love hearing about it. It makes for good listening ears as well. Thank you guys. 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 with your membership, you will get a 7-Day trial and access to my trading room including alerts via text email and WhatsApp.

18:01
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 all the best to you and I look forward to chatting with you soon.