Unmanageable Risk Swing Trading AMC and Other Meme Stocks | Podcast Episode #356

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 and today’s episode we’re going to talk about AM CA little bit here. This stock has fallen the crap over the last few days. Now for those who aren’t aware, they had a reverse stock split and that’s reverse stock split sent.

0:45
The stock just completely fallen apart. It went from 42 down to 12. Now they did a reverse stock split of 1 to 10 and all you got to do is figure out the price before then is is to just divide the thing by 10 and you get what the previous stock price used to be. So previously it was trading at 4:20 just at the end of last week and then it completely fell apart.

1:05
This week trading down lower each and every day trading all the way down to about $1.26 or what. Today would be at about $12.63 currently, so pretty bad week for the longs on AM C and we’re talking about the longs on a stock like AM C You’re talking about people that for the most part I know there’s some level head of people in the bunch, there always is.

1:25
But for the most part there’s some pretty crazy people. I get more hate about AM, CGME, SOFI and all those other stocks than any other stock and AM C probably one of like top three or four stocks that just I get a lot of hatred for. DWAC is another one of them. So today’s e-mail comes from a guy just getting lit into and he writes Hey Ryan, first up mad props for your podcast, been binging every episode and man you draw some serious knowledge.

1:53
So here’s the deal. I got into some AM C shares and this reverse split situation got me all twisted up. I’m now stuck between peace out AM C and just chilling ride this weight. Given your swing trading knowledge, what’s your gut saying about AM C? Is this a post split mess, something stocks usually go through?

2:09
Should I be taking my gains or grabbing some popcorn and just waiting it out? I totally get that the markets like the Wild West sometimes, but man, this one’s brutal and your two cents could really be helpful for someone like me just trying to make sense of it all. Thanks for keeping it real on your show, hoping to catch some wisdom on your next podcast episode.

2:26
Catch you later. Now the guy kind of sounds like he was at the beach riding this one or riding away, so I’m going to give him a name of Slater, a good Florida surfer name this time. He might be our first Florida surfer guy, but Slater, he’s in a tough position because like I said, post split just this week, the stock has dropped from $40 a share all the way down to 1263 currently.

2:47
And when you’re looking at that from a percentage standpoint, you’re talking about almost 75% and losses. And that’s not something that’s easy to come back from. And a lot of people who are trading AM C, they’re not just doing like small position sizes here. They’re not doing like a 10% position size or even a 20% And 20% is a pretty large position size.

3:07
These are people who are probably going into margin. They’re probably getting cash back offers on their credit card and they’re putting all of that into the stock, hoping that the stock is going to go instead of going from 40 to 12, going from 40 to 10 million a share. And that’s really not an exaggeration. People really think that these stocks are going to go to the moon and circle Mars.

3:25
And that’s where a lot of people get themselves in trouble is because they have these outlandish expectations. If you have these outlandish expectations for what you think you can make on a stock, you should expect some outlandish results to the downside. And the reason why is, is that you go back to that Batman movie, I think it was Batman, The Dark Knight, and he’s sitting there at the table with Harvey Dent.

3:46
And Harvey Dent says die the hero or live long enough to see yourself become the villain. And how does that pertain to trading AMC? Well, for one, it was probably shown at an AMC theater. But the way that it really ties into it is that if you stay in a stock long enough and let’s say you get 1015% out of AM C and you could have had that back in July, you had a huge pop.

4:09
You could have made a good amount of coin off of it. But most people didn’t do that. They wanted more. They didn’t take any profits. And so now, instead of getting out at like $60.00 a share like you could have gotten out of it back in late July, you’re now sitting at $12.00 a share with more than 75% losses.

4:26
And that’s what’s happened there. They could have died the hero, they could have closed the position out and made some good coin, but they held on long enough to see their position get completely wiped out because they weren’t using stop losses. And here’s the thing. Stop losses don’t keep you from making a whole bunch of bad trading mistakes. It keeps you from making that one really bad trading mistake.

4:45
Because what ends people is not usually a whole bunch of bad trading decisions or a whole bunch of bad trades that go against them. It’s usually just one trade that completely defines them, completely destroys them. They keep doubling down, they keep adding to the position, they don’t take profits when they should, and they don’t use stop losses.

5:02
And they’re not managing their trade. And as a result, that one trade defines them. That one trade ruins them. That one trade takes all of their money and all the capital out of their account. And so when I talk about using stop losses, it’s not to make sure that you don’t have a whole bunch of bad trades, It’s just to make sure that you don’t have one really, really bad trade.

5:21
But something that’s not really, really bad swingtradingthestockmarket.com. Yes, I’m going to plug it and every one of these podcasts, but in any case, for those who don’t know what that is, it is my patron website that goes alongside of this podcast. You’re going to get all my stock market videos. If you like what you’re hearing on this podcast, you’ll love what you get from swingtradingthestockmarket.com.

5:40
All my market research including daily watch lists, weekly bullish and bearish watch lists videos providing you with updates on the overall market, on the big tech stocks. Just a whole array of stuff. Check it out. swingtradingthestockmarket.com and you’re supporting the production of this podcast in the process. As traders in the stock market, as swing traders, we’re all going to have bad moments.

5:58
Okay. What the stop losses are going to help us do is to keep those bad moments from becoming very bad. I can easily get into a trade that has a result that ends up like AM C What’s going to be the difference maker for somebody like myself that uses stop losses, that plans out The trade is that I’m putting this line in the sand of what I am willing to lose on a trade before I’m willing to get out.

6:20
If you just go in there blindly, you don’t even know what you’re willing to lose. So you go in and you get into something like AM C and it goes down 75%. You could have prevented that by just having a stop loss after the first day you would have been out and you could avoided the next four days of heavy selling.

6:36
The stop losses help you to protect you from yourself. And while swing trading is about technical analysis and finding good trade setups, none of that means anything if you’re not willing to use stop losses and protect yourself from making decisions that will define your entire trading career for the worse.

6:53
And here’s the other thing that I get. A lot of times I get emails about people that are in trouble after the fact, Just like Slater here, Slater’s in it. He probably got in around the 40s or 50s per share. Now he’s looking at a trade that’s in the 12th. And then the question becomes, what do I do now?

7:10
Do I set it out? Do I go ahead and close out the position? And the the answer to that question is, I don’t know. And it sounds very callous and maybe uninformed to say I don’t know, but I’m going to be honest with you. I don’t know what you do. I don’t know what you do at that point.

7:30
When a trade goes that bad, do you sell it and take whatever you have left and take, you know, the remaining pieces of your ball and go home? Or do you hold it out hoping that it gets some kind of bounce back? I don’t know. And the reason for that is because I’m good at managing and planning my trades before I get into the trade.

7:49
Where it becomes difficult for me or for really anybody is to manage it. After you’ve got all this emotion in the trade and it’s down 75%, there’s really no right answer.

8:05
Like, why did I listen to that guy? He’s told me to sell, and then if I tell him to write it out and it goes to 0, he’s not going to be in a good shape either. There he’s going to be. Why do you tell me? Hold on. At least I could have walked away with at least 25% of my capital. I could have lived to a trade at least a little bit of that money going forward.

8:23
So there’s no good answer because if you’re not planning ahead of time, if you’re not planning before you get into the trade, you’re not really going to be planning after the fact. When the emotions are high, when the cards are stacked against you, the only time the cards are not stacked against you is when you’re not in the trade.

8:39
And so you got a plan for when things go bad. How are you going to get out? Where are you going to get out? And if you don’t do that beforehand and you wait till when things have gotten really bad, I couldn’t do that for myself. I wouldn’t know what the right answer is. Because when you’re talking about 75% declines or even 50 or 40% declines, you are introducing a whole set of emotions into that trade that you really can’t quantify what the right answer is because the right answer would have been to have actually planned the trade before you ever got into it.

9:06
And I know I’m sounding mean here, OK? And I don’t mean anything to Slater. I really hate to see emails like this where people are in some bad situations, they’re losing a lot of money and they don’t know what to do. They asked me what, what would you do? And I have to be honest with them. I don’t know because there’s no right answer after the trade has already experienced massive amounts of risk that’s come to fruition.

9:28
So whatever Slater ends up doing, he needs to tell himself okay, there’s no right answer. He probably has to almost just pick something and go with it because for me that’s what I would have to do. Maybe Slater has some better insight. Maybe he knows somebody that has a better insight into what he should do going forward.

9:44
For me personally, I wouldn’t know what to do in that situation because where I have my edge at in trading is by managing the risk before I get into it, knowing where I’m going to get out before things go bad. And so that when things do go bad, I know that I need to get out right then and there.

9:59
Because when I had no stake in that tray, when I was rational in my thinking, that’s what I had decided. And then when it hits that stop loss, I’m out of that trade. So if you enjoyed this podcast episode, I would encourage you to like and subscribe. Make sure you’re sending me your emails. ryan@shareplanner.com I can’t stress that enough.

10:17
How much this show relies on your emails, your questions, your stories, what you need help with The things that are really boggling you and racking your brain. I want to hear about those things. I want to know about it, so send them to me ryan@shareplanner.com. Also make sure to check out swingtradingthestockmarket.com.

10:33
Think you guys will like it? Thank you guys. 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. With your membership you will get a seven day trial and access to my trading room including alerts via text, e-mail and what’s that.

10:55
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 e-mail me at ryan@shareplanner.com.

11:15
All the best to you and I look forward to trading with you soon.