Position Trading vs. Swing Trading | Podcast Episode #345

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.

0:25
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. Today’s podcast episode we’re going to talk about position trading versus swing trading, how they’re similar, how they’re different, how I intertwine both of them and how position trading can also work with longterm trading as well.

0:46
So we’re going to get into all that in this episode and more for this podcast. Today we are hearing from a guy, he’s out there in Montreal, Canada. So he asked me to pick out a good Montreal like name for him. And I came up with Guy Lafleur, he’s the great NHL hockey player, won five Stanley Cups with the Montreal Canadiens.

1:06
So I thought that would be a pretty good choice of names for this guy. So Guy writes, he says, hi Ryan, my name is Guy, but you can give me any typical French name that, you know, I’m a French Canadian from Montreal, so excuse my English. I started trading literally one week before the Pandemic and market crash, and fortunately I didn’t put everything I had into the market at that time.

1:28
I only started with one small position without knowing what I was doing. Anyways, I learned a lot since the those past three years and I went through all the feelings that you can imagine and did all the mistakes that you can imagine. But fortunately I haven’t blown up my account. And thanks to you for that because I discovered your podcast in my early trading journey and at the beginning of your podcast you really focused on caution and protection.

1:51
So that influenced me a lot and I always had this in my mind while trading, even if I didn’t always follow you to what you exactly said and made a lot of stupid beginner mistakes as well. So over the last three years, I’ve learned a lot that there are different types of trading. Day trading, swing trading, longterm investments, and I believe I had to find which type of trading was right for me.

2:09
Leaving my job to be a fulltime trader never came to my mind because I have a pretty good weekly salary and I’ll never be able to have the same kind of constant or consistent income from trading. And by keeping my job, I can still trade Anyways, I found that my fulltime job and my two kids and shared custody keep me.

2:28
Very busy. So I don’t have a lot of time to put in the stock picking and follow up of my position. So I think swing trading is not for me and I really don’t enjoy longterm investments either. But I like to invest in great companies that seem undervalued or have had a big pullback.

2:44
And by giving a few months or years for those businesses, I believe that they can give me a good reward and return. So I think position trading is right for me. Do you do any position trading? If so, can you explain how to trade with position trading and? I think that this could even be a great subject for a few podcasts.

2:59
I think position trading can be somewhat similar to swing trading, but on a different time period and without worrying about the earnings and small share price fluctuations. It’s less stressful and requires less time. What do you think? Sincerely, Guy.

3:15
All right, Guy, good question. We’re gonna get into that here right away. So. Speaking of position trading, there’s a lot of different things that I would say makes position trading different from swing trading. You have the time frame that you’re trading and really with swing trading you’re looking at from a couple of days to a few weeks.

3:32
For me, I think the Max that I’ll hold a swing trade if I got into a stock the day after reported earnings and held until the next earnings report is really about three months. So it’s about a three month window Max for me on a swing trade. On position tradings, yeah, you can probably hold a stock for.

3:49
Like a couple days. I think that’s really the rarity behind it, just like, you know, holding a stock for three months and swing trading for me is a rarity because I rarely do I get into a stock the day after earnings and hold it till the next earnings report. But with position trading, it’s usually from like a few weeks or maybe many weeks to a few months to maybe even a couple years.

4:08
So that’s the the time difference between position trading and swing trading. From trading frequency, there’s a lot more swing trades that are taking place. You can have a year where you’re making, you know in a in a really good bull market you might be making 100 to 200 trades and swing trading. Whereas with position train, because you’re having to give it so much more time to play out, you may be only talking about 15 to 20 trades in a very busy year.

4:29
So it can really fluctuate in terms of the number of trades that you’re making and then you have risk and reward with swing trading obviously. I like to keep my swing trades in terms of losses anywhere between 4 to 5%. I don’t like if I can get it down to 3% even better.

4:46
But with Position Train, because you’re looking at a lot longer a time frame and because in a lot of cases you are holding through earnings because we’re talking about a much longer time frame here, you’re looking at potentially bigger losses, but also a position trading. You’re looking at much bigger rewards swing trading.

5:01
Yeah, you can still have. Really big trade returns, but they’re probably going to be less frequent because you’re working on a smaller time frame. And then of course there’s the way that you approach your trading when it comes to swing trading versus position trading. With swing trading, for me at least, I don’t think there’s a fundamental aspect for swing trading that exists.

5:20
I think it’s very difficult to get short term trading to line up perfectly with the timing of fundamental analysis. Often times you can see a really bad economy, but the markets not going to recognize that until months or years down the road. But with position trading, that’s a little bit different.

5:35
You do have to incorporate some of the macro analysis. And yes, still with position trading there is very much a place for technical analysis. So I think having technical analysis is very important. I don’t think you necessarily have to be really good at analyzing balance sheets and cash flow statements. I don’t think that’s.

5:51
Necessary for position trading, but having a better understanding for the overall macro environment, Sure, I think that can be really important. And I think you saw a lot of that come into play in 2022 and we’ll get into that in just a little bit. But first, if you haven’t done so yet, check out swingtradingthestockmarket.com.

6:07
This is the patron website that goes along with this podcast For YouTube, it’s just simple by clicking the join button down below, but for you guys. Listening to it on Spotify or Apple? Go to swingtradeinthe-stockmarket.com. It’s going to be great. You’re going to get all my stock market research each and every day.

6:24
I’m going to be doing videos on the overall market, the big tech stocks. I’m also sending out daily watch lists and and master updates on my bullish and bearish watch list. Really good stuff to check out by going to swingtradingthestockmarket.com. So 2022. Offered a lot of good opportunities for position trading and what I like to do is I like to kind of have this hybrid approach to position trading with my longterm investing.

6:47
I would not say that I’m necessarily a purist when it comes to longterm investing. I don’t hold stocks for 1520 thirty years. That’s very rarely ever happened. I mean I’m trying to probably hasn’t happened. But I do more of a positional trading where I like to take advantage of extremely overbought markets.

7:05
Now I just don’t go plunging into the stock that’s seen a significant sell off right away. What I like to do is combine it with an indicator that measures the percentage of stocks trading above their forty day moving average. Some people will use the 200 day moving average, but what I like to see is the percentage of stocks trading above their forty day moving average get down into the single digits, like 2-3 four percent when you start to get into those.

7:29
Situations. You’re getting into extremely, extremely rare oversold markets to where you can essentially capitalize on some stocks that has taken some significant hits relative to their actual value. But one thing I try not to do is when I’m getting into a stock for a position trade is to just dive into it all at once.

7:49
It’s kind of going into the pool and testing the water with both feet. What are you going to do? You’re going to sink to the bottom. But when you start to see where the market’s getting extremely, extremely oversold, you can start adding some money. Maybe you have a total of $2000 that you’d like to commit to that stock over time.

8:06
Maybe you start adding by putting like $50 a week into that stock. And as it goes down, you keep adding. Maybe it goes up, you keep adding to it. But you build your position over time and often times, especially in a bear market like what we saw in 2022, the original price that you started getting in at.

8:22
Is actually one of the higher price purchases for that stock and that by buying over time you actually decrease your average buy in price by spreading it out over time. Now that’s different with swing trading because you don’t have the luxury of doing this over like 10 to 20 weeks. You have really sometimes three or four days that you’re holding a swing trade.

8:40
I just got out of Tesla the other day and that was a not even a weeklong trade. I think that was like 4 days Max. It had earnings coming up. I wasn’t going to hold it through earnings. I don’t hold any stock through earnings. So I got out of it, but how the heck would I have ever added to that position over time, right?

8:59
You can’t do that. And that’s usually the case when most of your swing trades, I know some people will stair step their way in, they’ll do it intraday even, they’ll start buying as a stock is going down and they’ll they’ll buy like every hour or two. I’m not really a huge fan of that. I mean, you can do it and you can probably get away with it, but often times if you get into a really good trade, there’s not going to be that opportunity to stair step down into that position before it finally takes off.

9:21
But with position trading, you really do have that luxury of being able to do that. So position trading came in really good over the course of 2022. From a position trading standpoint, you could get in pretty cheap on a lot of shares like NVIDIA or Tesla or AM D They didn’t necessarily always flash great swing trading setups, but they from a position trading standpoint, knowing the value of those companies even like with Apple trading at $120.00, knowing the value of Apple, you saw about a 50% increase in the share price from the October lows, so.

10:05
Usually it’s going to be from a few months to a few years. I got into Chevron, I want to say it was like A at least a year ago and I got out of it earlier this year. I bought in at like $80.00. I thought it was a good longterm position trade.

10:20
I was hoping that I would hold it for a few years, collect that 8% dividend that it was paying out. I was liking it a lot. And then it just went absolutely bonkers. And 2022 it doubled and then I went ahead and closed out my position. I think it was earlier this year. It might have been last year, but I can’t remember.

10:40
Energy, if you recall, was like the one sector that just shot through the roof was like up over 40%. In 2022, largely because of the war that was going on and and everything else that shot the energy prices through the roof, we went way over $100 a barrel. I think it was like $130.00 a barrel at one point or pretty close to it.

10:59
But that cost stocks like Chevron and other energy stocks to go through the roof. So from a position trading standpoint, I went ahead and closed out that position. I actually think it’s trading below where I got out at, which is which is nice. I’ve actually contemplated getting back in.

11:15
But just because I really do like the dividend that Chevron has, but I would like to see a little bit more of a collapse in energy prices before I would get back in again. But again, using indicators that help to measure oversold stocks that are really high in value can be a huge asset and one of the best places to go with that is the Fang stocks.

11:22
So with Meta and with Amazon and Apple and Google and Netflix and Microsoft and Tesla, one of the things that I look for is. They’re very much immune to huge sells. We haven’t seen that much in 2023. But when you get a strong bear market, it’s usually because those stocks which have so much market cap to them, I mean Apple and Microsoft alone account for six trillion in market cap.

11:45
I think the Russell 2000 combined is like 3 to 4 trillion. So they’re more almost double the value of the Russell 2000, just those two companies. But when they sell off, they take the whole market with them obviously as well, but. What a lot of people like to do with their long term investing or with their position trading, they like to find these stocks they’re trading at like 2 and $3 and they hope that it gives them a huge return over time.

12:09
And then often times if it doesn’t work out, they might find their investment down 80 or 90%. I’m not into that. I don’t like that at all. What I like to do is focus on the stocks that are known to have really good value. Like obviously Apple has been a really good company over the years. If there’s going to be a market rebound, Apple’s probably going to lead the way.

12:26
The same can be said about Amazon and Google. These are stocks that typically lead the way higher. And So what I like to do is I like to be able to invest in those stocks that have taken some really hard hits, maybe they’ve pulled back 40 or 50% and then try to capitalize on them. Look like NVIDIA, for instance, that stock pulled back incredibly, so did Tesla.

12:43
So did AM DI think AM D at in October was trading at 59. Now it’s double that. That’s where I think position trading can really come in handy. But finding those opportunities don’t come every month or every week or sometimes not even every year. Sometimes it takes years for you to get a. Reading on the T21O8, that’s down in the single digits.

13:02
We got it on about two or three occasions in 2022. We got it back in 2018. I think you even saw it during the whole huge sell off back in 2020. And it’s actually the most frightening time to add positions to your portfolio at those specific moments because it feels like everything is falling apart, everything is crashing, but it’s usually those times where it feels the worst.

13:25
Where the market starts to put that bottoming process in because the selling has been exasperated and going back to Guy’s e-mail, he talked about how he started a week before the pandemic crash. That was a really good opportunity for him to learn because he has seen a lot from the market over the course of that time.

13:42
He saw the incredible push lower as a result of everything just being shut down. And then all of a sudden at the rapid rebound that V shaped bottom that took place, he also saw. Just the absolute craziness of the buying that took hold of the market in 2020 after that sell off and that persisted all the way through the end of 2021 and then he saw how crazy that the market could get in 2022.

14:06
So Guy here has seen a lot in terms of what the market can do from both a bullish and bearish standpoint, what we haven’t seen a lot of except for probably the Russell 2000. Is sideways price action. We haven’t seen a lot of that since then. You’ve seen that big dips, you’ve seen the big rips, you’ve seen another big dip.

14:23
And one of the things that I’m glad that guy’s been able to see and for those who have just been trading over the last three years I’ve been able to see is that you’ve been able to see not only a quick sell off like what we saw on March of 2020, but you’ve also been able to see that the steady sell off that took a very, very long time to come to fruition and come to an end.

14:41
And we may still not be out of the woods yet. We still may see another leg lower in this market. Maybe we end up taking out the October lows. That’s really possible, especially if you know everybody’s wrong about the soft landing. We do have a significant recession that pulls prices back down again. That’s the case.

14:57
You want to start watching some of these indicators. Now remember, when it comes to indicators, there’s no fullproof indicator that’s going to be right all the time. There’s going to be times where these indicators are wrong. But what I try to do is try to find one that has a pretty good track record. Not a perfect track record, but a pretty good one that can help me reduce my risk by being able to get in on the lower end of things.

15:18
I would rather get into Apple after it’s sold off at, you know, 50% or 30% or whatever it was, then try to buy it at the top when it’s much more prone for a pullback. So I try to take a lot of the risk of the equation by having it already pulled back a significant amount. That’s one of the ways that I approach my longterm investing and.

15:36
Knowing that they’re very good companies historically is another way to try to take a little bit of risk off the table as well without having to perform really hardcore indepth analysis. Because when you start getting into the penny stocks and the dollar stocks or where stocks are just not as well established, yeah, you might strike it rich and hit a home run on a $2.00 stock that goes up to three or $400.00 over time.

15:55
I know a lot of people are hoping that with like stocks like Sofi, but if you’re wrong then the losses are usually going to be much, much worse. So if you enjoyed this podcast episode, I would encourage you to like and subscribe to my YouTube channel. You can go there by typing in.youtube.com/shareplanner.

16:11
You can also find me on the YouTube app or check me out on Spotify or on Apple or whatever podcasting platform that you like. I’m doing the videos obviously now as well so check that out. Make sure to keep sending me your emails. ryan@shareplanner.com. I read them all and I really do try to make an episode out of each and every one of those.

16:29
Make sure to leave me 5 star reviews guys. Thank you and God bless. Thanks for listening to my podcast Swing Trading the Stock Market. I’d 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.

16:45
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17:06
If you have any questions, please feel free to e-mail me at ryan@shareplanner.com. All the best to you and I look forward to trading with you soon.