Stops Too Tight Part 2 | Podcast Episode #325

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.

0:35
episode. We’re going to talk a little bit about stops. I know, you probably think, right? You talk about the stuff way too much and I probably do, but if it’s for good reason, because if you’re not using stops, you’re probably not going to survive the stock market. So you got to use stops and there’s always so many questions that come around about stop losses and about how I use them.

0:54
And there’s a lot of frustrations that come along with using stop losses. So, it means something to spend a lot of episodes talking about stop losses, because there’s just so many variations and so many Unique cases and circumstances that we come across that when I’m reading about somebody else’s issues, it actually helps me to because it makes me have to think about while I didn’t think about it in that light.

1:16
Or I didn’t think about it in that situation. How can I change things to make it a little bit better? So this guy, he actually is given me a name to call him not to use his real name but to use the name Road Hog for this particular email. Now, I don’t know what the name Road Hog means to him, but it’s kind of a unique name.

1:34
I’ll tell you that. That so Road, Hog rights. Hello Ryan. My name is road hog. And I have started, seriously learning about trading for about a half a year. Now, I used to dabble in crypto about five or six years ago, but really didn’t take it too. Seriously, since I’ve gotten back into it, I have become fascinated with technical analysis in just stocks in general.

1:54
I’m a very busy person with my full-time job and I’m also a full-time single debt. Every spare moment of my time is spent learning how to trade and look at charts, and how to interpret them. I listened to your podcast every day on my way to and from work and I have learned so much from your podcast episodes.

2:11
I joined your Patron, just the other day and I’m really liking all the information that is on there. But anyways, I just wanted to introduce myself and tell you about this trade that I got stopped out of. I don’t have a large account at this moment because I’m trying to still find my strategy and get more familiar with my process.

2:27
My account balance is a little under a thousand dollars and I’ve probably made seven or eight trade around the break-even level. I thought I saw a Sitting Bull flag pattern and bought a couple of shares that 102 dollars and 82 cents. I bought these shares on April 3rd and I had a price target of around a hundred and seven dollars and set a stop loss at 101 dollars and 33 cents.

2:49
I saw the Google going up and that’s the stock that he’s talking about here. Google that stock symbol goog l or in other cases it might be goog. But anyways, I’m going to assume that he’s talking about goog L. That’s at least the one that I use on a regular basis when I Google.

3:06
So he continues by saying I saw Google go up, and once it got to 105, I raised my stop-loss. 210, 3.99 on April 5th, the price won’t back down and I got stopped out of my shares and sold them for one 04. .01 the very next day, the price shot up to over a hundred and nine dollars.

3:24
Enclosed in the grain I’m wondering if I should have not moved my stop loss up so high like I did I was just trying to manage the risk to the best of my ability and I take my Capital very seriously. I’m In this to become a good Trader and not to get rich fast, I love learning about this stuff and love, looking at the charts, and I can’t wait to see what the future holds.

3:43
If you have any feedback, I would appreciate it. I definitely plan on joining the trading block sometime in the future. Thank you for your podcast and all the knowledge that you share with me and everyone else that has a passion for trading and technical analysis. I’ll see you on patreon in the podcast. Have a good one, sincerely Road, Hog.

4:01
Alright, Road Hog, there’s a lot to dissect here because before I Started recording this podcast episode, I went back and looked at the chart. I’m pretty familiar with it and there’s a lot to actually unpack with it. Now, one of the things that I don’t want to do is to get too heavy into the technical analysis to where you’re like, holy cow. He’s doing audio on technical analysis and I need a chart in front of me and of course, when you’re listening to a podcast, you don’t have any visual. So I try to keep that as simple as possible. So you don’t really need to look at the chart. So I try to be very descriptive about the chart itself.

4:33
If I’m having to actuate dig in, To that. Also I’m breaking out a new bottle of bourbon tonight and man, it is really good. It’s Elijah. Craig Barrel proof, went to my nephew’s wedding about a week ago. His name’s Luke and stopped at a really good liquor store there and they just had everything I could imagine. I could have spent way too much money there. Thankfully, my wife Jen was there and she didn’t let me get too out of hand. Those I coulda probably persuaded her because she likes bourbon probably more than I do. But I got the barrel proof one, it’s like 62.4%. It’s a proof of 124.

5:05
Point eight. And I’ve had this before and I regret not buying it and turns out. Like I had it in my hand and then I put it back on the Shelf. Yeah, I took like the Walk of Shame were, you know, you got all the guys looking at all the bourbons and I’m like I got a good one and I’m taking the Walk of Shame back to the place on the shelves that it came from this time. I was like no I’m not doing that again. I’m getting the good stuff and I did and wow I am really impressed by it scale of 1 to 10. I’m giving this thing probably like 8.8, it’s really good. My wife said it’s a party in the mouth. So So don’t want to dive too far into that expression but yeah, really good stuff. Elijah, Craig Barrel proof.

5:39
So Road Hog here. He’s a single dad, it look. I’ve been a single dad before too, you know, I’ve gone through a divorce. Been a single dad, it’s not easy. It’s not easy. When you’re picking up kids from school and you got the stock market going on. At the same time is really difficult, so I get that. I know it’s really hard and if you’re able to balance trading demands with a full-time job, with being a single dad, you’re doing something really special right there. That’s really awesome.

5:55
So, A lot of people who work there times very limited in terms of how much time they can spend at night, you’re trying to learn, you’re trying to apply it to real situations. And so the balance is very difficult because especially when you’ve only been doing it for a year and a half that a lot of that time needs to be spent learning as much as you can. But at some point you also got to apply it. So one of the good things that he’s doing here, he’s not starting off with a lot of money, starting off with, like a thousand dollars. It’s a lot of money.

6:29
I mean thousand dollars means a lot to me. I can do a lot of things with a thousand dollars, but in terms of trading, if a person was To blow up his account tomorrow. You know, assuming that he has a full-time job and could he come back from that? Yeah, but like what Road Hogs talking about here, he says he’s taking a very serious. He’s not looking at it from The Profit standpoint but becoming a good Trader. So he gets into Google on April 3rd, there’s this bull flag pattern forming, he wrote Bear Flag on the email that he sent me, but I think he actually meant bull flag.

7:05
So I’m going with bull flag especially since he’s getting long on the stock, which you wouldn’t do that with a Bear Flag play, so he gets in at 102 point. 82. He has a price target of 107. He has a stop loss at 10 1.33 so the stop-loss, it’s about one and a half percent from his entry price, his targets about 4.1% away from where he gets in at. So he’s got a little bit more than like two and a half to one that he’s working with, that’s a good ratio.

7:23
Anything between two and three is a really good ratio to aim for and your traits. Now, you’ll hear me talk about, hey, you don’t want to necessarily at least. This is my approach to trading. I don’t want to go after You know, stop losses. That require me to place them 10% below my entry price.

7:39
Why is that? Because if I want a 3 to 1, then I need to get like a 30% gained just to get a 3 to 1 return or a 20% to get a 2 to 1 return and that can be very difficult. I mean stocks are just not popping 30% at every Twist and Turn. But if you have a stop loss of like four or five percent, you can look for a good favorable technical pattern, that could create maybe like a 8 to 10 percent return.

8:02
And if it goes higher than that, that’s fine. That’s not a big deal. You but what you don’t want to do is put yourself in a situation where you got to make these really out size gains because if you get happen to get stopped out at a 10% loss, that’s going to take a lot to make up for, especially if you string like two or three of them together in a row and yes, in trading, you will have multiple losses in a row.

8:21
I’ve had multiple losses all the time. I’ve had multiple losses this year. I’ve had it before. Where I’ve had like six or seven losing trades in a row. It’s not uncommon, not for me, not for anybody. I remember one time I was talking to a Trader and I said to him, I was like, what do you do if you have like a Couple losing trades, like two or three losing trades in a row.

8:37
And this is a guy that he’s pretty prom and I’m not going to call them out by name. But he said to me, he’s like, I never have to losing trades in a row and like that is the most BS answer I’ve ever heard from somebody. I lost all respect for the person cuz I knew he was lying right through his teeth at that point in time. So if you’re a Trader know that you’re going to have times where you’re losing multiple trades and the road, that’s why you don’t want to be taking 10% stop losses, all the time because those do start to add up quite a bit, if you have multiple ones in a row, And then trying to make up for its even worse.

9:07
But what I think road hog has done here is kind of cut his nose to spite his face, he’s got a stoploss way too tight and when I looked at the Google GOOG L and he later sent me an email that I found that he said, hey I was actually referring to goog L. I forgot to tell you that I looked at. Okay. Why did he put a stop loss at 101? 33 on the chart, I can’t find it. I really can’t find it if it was be trading, the bull flag break out and he was right about the technical pattern. There was a bull flag breakout that did occur on. The third and you could have maybe even been a little bit more aggressive and said that the bull flag breakout happened on March 31st.

9:40
There was two candles that were really close to each other at the bottom of that pattern at 99 74. That was their lows and 99 78. That that’s a pretty good support level for a stop loss placement to wear if it would have broken below that.

9:56
That’s where I would be putting my stop loss at so I don’t quite get the one-and-a-half percent but that’s not really what sunken though that would have never have come into play either, but I’m just trying Say, for the purposes of this discussion, I would have had a little bit wider of a stop loss and it would have made it closer to that 3%, stop loss.

10:12
But I think to that 107 might be a pretty tight price Target to go after. And there’s a lot to unpack about that as well, but when he got into it, he saw the stock go up to 105 and that’s a good trade at that point, he’s feeling pretty good about life, seeing it close the next day at like 10 558 but then he raises the stop-loss to 103.9. 99.

10:35
Which to me, looks like he put it below that same day’s low of the day. The current day that he was in, he just put the stop loss below that low the day which is not something that I would have done. What I would have probably done in that situation towards the end of the day and he says that he’s trading with shares in the plural.

10:52
So I’m assuming that he has like two or three shares at least in this thousand dollar account of Google, what I would have been doing is I would have just sold one of my shares. Let’s say he has three shares. I would have sold one of those shares and in doing. So I’m Using the risk on the trade because you’re taking a third of the capital off of the trade and giving yourself some room to let the rest of that Capital run now in doing.

11:13
So it’s almost has a similar effect as if you raise the stop loss without having to raise the stop-loss, you’re taking some gains off the table to wear. If it does come back down, you’re not going to be losing all that money that you made, at least you booked some profits on a third of a trait. And I have a lot of Trades over the years, where I’ll get in, let’s make up some like a fictitious example here, I get into stock XYZ at And it goes up to 104.

11:37
I booked a third of my gains right there, I don’t like doing it. I never like booking partial profits because when you’re in the mode of a winning trade, you have the excitement of what it can do. But you also know from experience of what it ends up doing, that’s not in line with what you hope for. And so I’ll get, let’s say, a third out at 104 and then all of a sudden, the next day and the day after that, it comes back down to 98 dollars and stops me out of my original stop loss or something.

12:00
Or maybe it’s ninety seven dollars. But because I took some profits along the way, I was actually managed to able to He’s out a profit on that trade and here with that initial move to that 105 area, he’s up about 3% if that’s a place where he wanted to take profits at that point in time, I would have only done it with a third.

12:17
I would have done it with the whole thing because then that scenario that happens the next day where he raises the stop-loss to protect that entire positions profits. Because he didn’t take any partial profits, then has him raising that stop-loss way too tight below the day’s lows and then the following day, Google gaps higher.

12:35
Her and then spends the rest of the day selling off. Eventually triggering his stop loss and taking them out now where it becomes frustrating is the next day. I don’t remember what it was. That drove it up, but it went all the way up to a hundred and nine dollars this year. And that’s frustrating that’s really frustrating because you’re thinking to yourself, man.

12:51
I could have had a nice little payday right there, that would have been a beautiful trait. So by taking some partial profits, you’re an Essence taking Capital off. But you’re also having a similar effect as if you raise the stop-loss. Now, sometimes I will take partial And raise the stop loss, but when I raise the stop-loss, it’s below a key support level that says, hey, if this stock drops below this level, there is no reason to remain in it.

13:13
Now on Google, I wouldn’t have seen a reason to raise my stop-loss just yet because again, I would have kept it below the lows. Were you have like two days where it was trading at the Lowe’s at 99 75, out of still have my stop-loss there? I would have had a third off.

13:29
And then when that stock popped to 109, I would have taken another third off. And so now I have to thirds off and I have 1/3 of my position remaining and that’s like a ride-or-die position to where you can say to yourself. All right, let’s see how far this one really wants to go. Now maybe it wants to go to 110, maybe it wants to go to 118 but instead what we’ve seen over the last two days as its pulled back, some back down to that one, 05:35 level, where he took the initial first third at and he still okay, I mean he hasn’t lost money on the trade, I think, at that point, he can probably start raising that stop-loss a little bit more.

14:02
There was a price level hit. There were following the I prefer to sell off where it got Tyrant, like I was mentioning and it came back down and started to fade. He could put it below those loads of the days of that point. So I threw a whole bunch of numbers that yet. I don’t expect you to remember all of them, but in essence, if you don’t go back and listen to this podcast and have the chart in front of you, that’s okay.

14:22
But in essence, what he ended up doing it was that he wasn’t taking partial profits along the way. And as a result, he was Raising those stop losses too tight because you wanted to make sure that he didn’t lose all the profits and it go back to read because there’s really nothing more demoralizing. Than seeing a stock trade go from green to red.

14:37
I mean, it always sucks, it does happen. But partial profit-taking is one of the ways that is the best. When you start to feel that fear of, oh, crap, what do I do? Because I don’t want the stock trade to go back to read. That’s probably a good place to start taking some profits, and not let the emotions, get the best of you.

14:53
And then this case in Google that would have worked really well. Now, one of the things that he doesn’t really mention in this email, but I think is imported that day where I talked about how it gets higher and Faded the rest of the day. There was some major resistance Distance right there at that level. And now it did break through it the following day, but it really resulted him just being a head fake because it gave up that level today.

15:13
Actually, there were the day that I’m doing this podcast recording. So the reason for that sell-off where a gap Tyrant and came back down of just a few days back and that was the day that he got stopped out of it was because there was a heavy level resistance there that price was rejected at. And so he has to be cognizant of that.

15:29
Another thing to be aware of as swingtradingthestockmarket.com, that’s going to be the place where you get all my stock. It research each and every day that’s going to include videos, watch list updates on big tech stocks, like, Nvidia and Tesla and apple, Amazon, Microsoft, Google.

15:44
I don’t know. I think I said most of them and then you also have updates on the market overall, as well. It’s a really good way to get all of my stock market research each and every day sent to my daily wash. This really, really cool stuff. So check that out. Road Hog does it and he seems to like it.

16:01
So I guess that’s a good thing. And yes, you can go to it by going to swing trading the stock market. Dot-com and support this podcast in the process. So that’s pretty much the analysis on Google. He raised the stop loss too much. He probably should have taken some partial profits along the way, and he didn’t see the resistance.

16:18
That was overhead, that would probably would have been enough for me to not to make the trade initially, because it had been rejected at that level three times, going back to middle of March, going back to February of this year. And also September of last year. So those were the high points for the stock were has also rejected Section finally did break out of it on Friday.

16:37
That was the place where he saw his stock go up to 109 without them. He did do some good things though. I mean I think he identified a pattern that was pretty good. It was a nice pattern. It just didn’t have quite the same reward risk ratio that I would have assigned it and he got into it pretty well. I mean it was a good well time trade in terms of Entry price, but there’s just some execution of the actual management of the trade that wasn’t really on par there.

17:00
But he’s learning, he six months into this and you can’t expect yourself to be a pro. You’re going to constantly learn from I do stupid things and I have to learn from it as well. And I’ve been doing it for. I don’t know, 30 years now. And one of the things that can be confused with being a strong disciplinarian person who really takes risk management, serious is keeping the stop loss is too tight.

17:19
I feel like I kind of go right up to that gray area, you know, where it starts to get a little bit too tight. I do keep my stop losses, you know, relatively tight compared to what a lot of people do. My stop loss is range somewhere between like that. 3 to 6 or 3 to 5% level. I would say hardly ever does it go over five percent so about three 25 percent, but doing it, like, like what he did here on this Google trade, I’m, he was lucky that he even got to move out of it before it had like, just a wobble of 1.5% that would have taken him out of the tree because stocks wobble, they wobble, and it’s easy to get knocked out.

17:48
If you have to type of a stop loss, and pretty much the whole time on the street, he was very tight on the stop loss, which you got to be careful about because one of the worst feelings is a traitor, is knowing that you should have still been in the stock had you had a better stop loss. I’ve done that myself before, but in this case, it’s pretty Is that, that was one of the big issues there as well and sometimes people will have very tight stop losses when they’re afraid to lose or lose too much money or they just can’t come to acceptance with the amount of money that they’re risking on a trade.

18:15
If that’s you you really want to rethink that. You know, the position size is that you’re trading with, and if you enjoyed this podcast episode, I would encourage you to leave me a five star review. I need those guys, I really appreciate those, and they do mean a lot to me. I know, I kind of say that every episode but they do also send me your email, send me your questions like this, and me your story.

18:34
Someone Uh, your your fears, your dreams, your hopes, your desires, tell me what you’re thinking about when it comes to the stock market and the things that you’re struggling with, and I’ll make a podcast episode out of it. Alright, thank you guys and God bless.

18:50
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 just email and WhatsApp.

19:06
So go ahead, sign up by going to shareplanner.com trading block, that’s www.shareplanner.com/trading-block. And follow me on SharePlanners, Twitter, Instagram, and Facebook, where I provide unique market and trading information every day. 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.