Managing Profits and Profit Taking | Podcast Episode #349

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 episode. We’re going to talk about what to do with those pesky gains. Sometimes you can get up a when you have a really good trade, you get like fifty, 7500% up on a trade.

0:43
You’re looking at conditions in the market where it’s overbought in an extreme way. And you’re thinking to yourself, man, I don’t want to be looking back a year from now and saying I should have sold this when I was up 100%. Now I’m looking at only 10% in gains or maybe even a loss, especially with some of the price action that we’ve seen of laid out of stocks like and stocks like TUP&YELL TUP&YELL.

1:04
These are companies that most people don’t even think is going to exist in the near future, yet they’re catching bids and going through the roof. And what do we do with those gains when we’re actually brave enough to trade those or in just in a trade in general where we just have some outlandish gains. I’m going to talk about some recent gains that I have had in some of my longterm positions when I started feeling a little bit uncomfortable with those gains in terms of its longterm prospects and what I did with it.

1:29
So make sure to like and subscribe to this channel here on YouTube. If you’re watching here, click the subscribe button down below and like the video. Also, if you’re listening to Spotify or Apple, make sure to leave a 5 star review. Send me your emails. I want to hear your stories. I hear your questions.

1:44
What do you have for me? ryan@shareplanner.com. I read all the emails and I try to make episodes out of all of them. So today’s e-mail, we’re going to go with a guy, I’m not going to use his real identity, we’re just going to give him a good redneck name of Bowser, he writes. First off, I want to say thank you for helping me and thinking of the little guy accounts. I’ve been watching your videos about swing trading, trying to hone in my own swing trading strategy. And if you decide to use my question for a show, I’m a Kentucky redneck by blood. So any good redneck name will fit. The one thing you preach about is stop losses and not turning a losing trade into a long term trade. Hit home with me stopping those losses AT-35 or 8% was a game changer.

2:22
Also a couple videos back you mentioned that you use separate accounts for different holdings like dividends and longterm positions because they should be treated differently and that got me moving during this latest market rally That led to taking good profits and building my cash holdings. Looking for more great entries after this earnings season.

2:39
Which brings me to my question about taking profits, specifically in my recent trade of Sofi stock symbol SOFI. In that particular swing trade. I’ve been a user of SO5 banking app since 2019 and recently started a substantial position of 30% of my account back when it was trading in the high fives and now it’s currently trading at $11.00.

2:58
After this latest run, I have more than doubled my money and consider this a longterm play. But when you’re 100% profit in your position has now ballooned to over 55% of your holdings, what do you do? I have already taken 1/4 of the position out but it still continues to be a huge holding percentage for my account.

3:16
Do I let it ride or do I take the emotion out of being a long term trade and just take the profit along the way till the trend breaks and then rinse and repeat which will get the position being no more than 10% of My Portfolio. Hope this makes some sense. The losers don’t bother me and cutting losses is easy since I’ve been playing poker for decades now.

3:34
But this 100% profit position has got me all flustered because I know it can change quickly into a loss. Thank you for your expertise and I hope to hear your opinion once again on taking profit. Good question. What I First off want to say is that when it comes to trading, we get so caught up in trying to make these big time winners here.

3:50
We’re we’re seeing in the past week where people are trading in stocks like TUPYELL. For those who are are watching this video or listening to this podcast in the future, I’m talking about 2023 in the month of late July and early August. But what you’re seeing there is stocks doubling and tripling and quadrupling off of the idea that these companies are probably going bankrupt and yet people keep buying into them and yoloing into them or maybe they don’t go under, but they’re still and severe catastrophic situations here that should be troubling for anybody who’s trying to invest.

4:22
I know what some people will tell you is like, well, Ryan, I’m going to go get into this and try to ride that momentum. I don’t care about what it does long term and and that’s fine swing trading. I don’t care what the stock does long term either. But there is also that idea of trying to chase the stock after it’s up 150% and thinking to yourself, you know what, I’m going to ride it up for another 30 or 40% and then you wake up the next day, like what you see a lot of these stocks already doing, they’re down 30, they’re down 40% and people are getting their heads handed to them.

4:48
But what I want you guys to think about is that trading is more than just hitting a home run, hitting a Grand Slam, clearing the fence. That’s not going to make it to where you hit it big by nailing it on one good trade. Where you become successful at a trader. Where you become a good trader is when you can become successful on one trade to the next.

5:07
Yes, you’re gonna have losses along the way, You’re gonna keep those tight. But you’re gonna let the winners run wild on your other positions by taking profits along the way and consistently reducing the risk as this trade becomes more and more profitable. But trading so often is more about hitting singles and double s, walking, stealing base.

5:25
If we’re trying to use baseball terms here, I like to go back to the movie Moneyball, if you haven’t watched it yet. It’s an incredible movie. It’s about the Oakland A’s. It’s a true story using baseball analytics. And so one of the things that the character that was played by Brad Pitt was always saying was that I’m not trying to get another Jason Gionbi.

5:44
I’m not trying to get another big home run hitter. I’m just simply trying to replicate in a different way the same analytics that he was able to provide. Gionbi was the big hitter at the time and he was the guy that was smashing home runs out of the park. And then he left him free agency and they had to replace him. Who did they replace him with?

6:00
People that could barely walk. You had a guy, David Justice, who was a wash up at this point in his career. He’s a great player early on for the Braves, but by the time he got to the ace, he was pretty much a shadow of his former self. But what did he do? He was able to walk and get on base, and that’s what they were trying to replicate.

6:15
They were trying to hit singles. They were trying to get on base by getting walks. They didn’t care how you got on base, they just wanted you to get on base. And so oftentimes with trading, we just look at those trades that can provide us with that big home run opportunity when we should really be looking at how can we get on base consistently, how can we hit singles and double s and we’ll get walks because that’s truly where the success is going to come from.

6:38
Because when you hit it out of the park with a swing trade, what are you going to do with the next swing trade? You’re probably going to swing at everything that comes by you and you’re going to probably miss in dramatic fashion. And in trading terms, that means you’re going to be taking some pretty big losses and going to be a bad quarter of some of these stocks for life.

6:55
One of the things that you want to remember too is that the key to these, these big winners that you see a lot of people talking about and and bragging about on social media. If it’s true that they made hundred 5200% on that particular trade or 300% on the trade, they did it by getting in before you did.

7:11
They did it by getting in before everybody was talking about it on social media. They got in at the early stages of it, but what everybody else gets in trouble is they see that person making all the money. It’s like, I gotta have that too. So they get into it, and by the time that they’re getting into it, that person that they’re trying to follow into that trade is offloading their shares.

7:27
And it’s a lot of money that they’re offloading. And there’s not enough people to be able to absorb all of that selling power. And as a result, the stock drops. And we just did a podcast episode on this. So if you want to go back and look at the swing trading penny stocks at podcast episode, I’d highly encourage you to do that. It was my previous podcast episode.

7:44
I get a lot more in depth on that kind of stuff. So one of the things that I want to go back to is last year, 2022, the market was selling off pretty good. I don’t remember what the exact dates were, but it was in the second-half of 2022 when the market had already taken a substantial hit. I started loading up on some of the names that I knew that would be around that.

8:02
I like the companies a lot of that. The P/E’s have dropped a lot as well and they were providing some really good values from a historical basis. One of the things that I like to use is the T 2108 indicator and measure the percentage of stocks that are currently trading above their forty day moving average. When it starts to get into single digits, that’s usually the time that I like to start adding new positions to my longterm accounts.

8:22
I don’t like to do it at points like what we’re seeing right now in mid 2023 where you’re seeing P/E’s like just off the charts and and really unsustainable. But back in 2022 there was some really good opportunities. There’s some that I wish I would have probably been a more aggressive about adding and there’s some that I didn’t add at all that I wish I would have.

8:41
One of them probably being NVIDIA hindsight that was probably a great trade to make, but I also made some other good longterm investments and a couple of them more than doubled. I had AMD at 59, let’s see here. I had DK GI bought that one at an average price at 12:40, TTD at 47, shop at 36 and they pretty much all doubled if not more so.

9:02
And along the way when we started getting into that double territory, was I shocked that the positions that I put on for my long term accounts back in the second-half of 2022 were suddenly doubling here in 2023? Yeah, I was. I was a little bit surprised. I don’t have a lot of confidence right now with all the headwinds that we’re seeing with interest rates continuing to go up, with credit getting downgraded, not overly thrilled about this market.

9:25
I think the markets moved too fast, too soon. I think there’s a good chance that this market pulls back further, but I don’t know that with 100% certainty. If I did, I would have closed out all of those positions. Instead, what I did is I took the original position off. It didn’t matter. I could say I took the profits off. I could took the original position off it.

9:42
Maybe it’s just sounds a little fancier taking the original position off. But that’s essentially what I did. The amount of money that I put in originally for those positions and I didn’t buy them all at once, I built it up over time. I took all of those off and I kept the profits that I had made in it as my remaining position.

9:58
So if my position goes down to, you know, where the position gets cut in half, 50%, well, I I still have 50% of a profit that I made on that stock originally. I’m coming away with that. So I’m not overly worried about it at this point in time.

10:13
I pretty much am in a riskfree environment unless the cop company goes out of business and then at that point I’m just simply losing all the profits that I originally put in. But I don’t, I expect AM D to go out of business. I don’t expect DraftKings to go out of business. I don’t expect Shopify to go out of business. And these were the four best performers.

10:28
One of the things that I wish I really would have done is been a little bit more aggressive and adding to them by the time that they started taking off, I think I had about 1/2 position total on each of those, which kind of stuck. But if the market pulls back again and that’s something that I really hope that does happen from a long term investment standpoint, I hope we see another dip even maybe bigger than the one that we saw in 2022.

10:51
And if we get that, that’s going to provide some really good long term investment opportunities, especially like some of the big tech stocks that we saw take some major hits back in 2022. You could have some really good opportunities with Apple and and Meta and Google and Microsoft and Amazon and I took advantage of those the first time, but I would like to be able to take advantage of them again by getting another significant pullback.

11:10
So right now in 2023, I’m not trying to add new positions to My Portfolio. I haven’t done really any all year long, but if we can get a dramatic pullback and we can get a sustained pullback, that like I said, I use that T21O8 indicator a lot to see where the percentage of stocks trading above their forty day moving average starts to get into single digits.

11:31
And let me tell you, when it gets down to those levels, you start to wonder if the whole financial system is about to fall apart because it gets really doom and gloom at that point. It’s probably the hardest time for me as a trader or an investor to pull the trigger on it. In fact, the first two times in 2022 and it worked out for my own good when we we saw some of those really stark readings, I didn’t even buy anything.

11:52
And then the third time when we printed a reading into the single digits for the percentage of stocks trading above the 40 day moving average, I did pull the trigger. And maybe that actually came back to bite me a little bit because I never got those full positions. I could have been adding them back in July or June and then been able to do it a little bit earlier and had a bigger position for when the market finally did bottom.

12:11
I would have made a whole lot more money, but in the case of Bowser here he has Sophie and Sophie. In case you haven’t been paying a close attention to it, I can go ahead and tell you exactly what this stock has been doing of late. For much of 2022 and a lot of 2023 up until about May, really, it has gone from about four to $5 a share, as high as 1175 ish.

12:34
And so it’s more than doubled and it’s provided a really good return. A lot of that’s fueled by the whole student loan repayment having to start back up again that benefits so five which has some exposure in that area and a lot of people are making some really good gains. I know that because back in like November or October of last year, I talked about how I wouldn’t own the stock and that was back when it was trading at 4 or $5 a share and nobody said anything for a long time.

12:58
And then you Fast forward like 7-8 months later and all of a sudden everybody’s like bashing me for saying I wouldn’t swing trade that stock. And when you’re talking about swing trades, you’re talking about swing trades that last from a couple of days to a couple of months. I’m not talking about longterm investments all that much on this particular channel, but on Sophie, I was talking about it from a swing trading standpoint, but everybody was one, to use the clown emoji and all that stuff to to beat me up for that.

13:21
But nonetheless, they didn’t really listen to what I was actually talking about in that particular situation. But he put a 30% of his longterm portfolio on Sophie. That’s a pretty big position. I don’t own anything with a 30% stake. And then in my long term or any of my dividend accounts, I think probably the only one that I could feel comfortable with doing that on would be SPY, just because you’re really owning 500 companies and not, you know, just one company, but doing it with one company that is pretty significant.

13:50
It balloons from 30% when it double s all the way up to 55% of his account. If he sees a 50% retraction in his portfolio, if it goes from 1175 all the way back down to five or $6, he could be looking at you know a 25 to 30% drawdown in his account and that would be pretty bad.

14:06
In fact, as I’m talking about it right now, it’s down 3% today as of this recording and it’s gone from 1175 down to 10. That’s a pretty big impact to his portfolio right there. It’s not quite 20% but it’s getting close there in terms of the drawdown and so fight. You turn that into a portfolio that has more than half your account and that you’re looking at a 10% drawdown as a result of the effects in.

14:26
So fight for me personally, I don’t like to even go beyond 10% on a long term position in My Portfolio. So here’s what I do. Like swingtradingthestockmarket.com. If you go to swingtradeinthe-stockmarket.com, you’re going to get all of my stock market research each and every day. That’s going to include updates on the overall stock market.

14:42
That’s going to include updates on all the big tech stocks, getting my daily watch lists, my weekly bullish and bearish master watch lists. You’re also gonna get videos on stocks that are standing out to me as possible opportunities, so check that out. swingtradingthestockmarket.com. Really good stuff and you’re supporting this podcast as a result.

14:59
So I told you about the example in AMD. I told you about the example in Shopify and DraftKings and TTD. Really good long term investments. I took a lot of the profits off the table to where I was just really didn’t even have a core position. It was just the profits I was playing with. Here’s an example of 1 where I like the return that I got on the trade that this involves CVX.

15:19
This was in my dividend account and it really turned out to be a great long term investment that didn’t really go for that long. I ended up booking the gains after it made about 100% return for me back in 2022. So I liked it originally because of that 8% dividend. It was an amazing dividend.

15:34
I thought it was a really good value. So I went ahead and got long on it. Didn’t expect energy to go up 46% during 2022 when the rest of the market was falling apart. When it got to that level where I was sitting at like 100 hundred and 10% in profits, I went ahead and booked the gains close out the whole position.

15:53
I’m not in CVX anymore. Looking back, what probably should I have done? Well, why did I, why did I get out of it entirely? Well, if you got a position, you’re making an 8% dividend on it and the company’s pretty stable. That’s a really good dividend. But to be able to replicate that same amount that I just got on that hundred 110% return, it would take well over.

16:13
I guess it would take about close to 10 years to be able to get that, maybe eight or nine years, but nonetheless you’re talking about a long time. If CVX was to come back down to the original positions, I’d be holding that stock, just trying to replicate via dividends what I could have already had much earlier on. So I went ahead and closed out the whole position.

16:29
Looking back, I wish I would have done the same thing with CVX that I did with Shopify and AM DI. Wish I would have just gone ahead and gotten my original position out. Kind of split the difference with keeping the profits in the account and being able to still make some dividend off of CVX shares.

16:44
So that would probably be the one example that I would give up maybe where I didn’t quite do it correctly and I wish I would have done it differently. But as you can tell, part of trading is always about learning. Learn from your mistakes. You grow as a trader all the time. Still to this day. I’ve been doing this since I was 11 years old being in the stock market.

17:02
I have learned so much during that time and I’m still learning a ton. I’m learning more about myself as well as a trader. My emotions, the psychology behind my trades. Why do I do certain trades that I take when I wish I wouldn’t have becoming a more disciplined trader? It’s all about growth, learning, and becoming a better version of yourself as a trader.

17:23
If you enjoyed this podcast episode, I would encourage you to like and subscribe to my YouTube channel. Click that little bell for the notification button so you can know when I’m doing one of these or doing a live stream or doing a short, all sorts of good stuff out there on that Channel. If you’re listening to it on podcast or Apple, make sure to leave me a 5 star review.

17:41
Send me your questions to tell me your stories. I want to hear about them. ryan@shareplanner.com I do read all the emails. I love hearing from you guys. I get to know my audience a little bit better. What you guys need, what you guys want to hear about. So do that for me. Check out swingtradingthestockmarket.com.

17:57
Leave some five star reviews. Thank you guys 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.

18:13
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18:35
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.