Trading What You Know | Podcast Episode #360

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, everchanging 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. In today’s episode, we’re going to talk about trading what you know for this episode. We got a guy that sent me an e-mail giving me his whole life story, which I really do like.

0:43
I like it when you guys dig into the details of your life and and share that story because it gives a lot of fresh perspective on what you’re dealing with. And who knows how many people that are listening to this podcast are actually dealing with the same thing. So for today’s episode, the guy asks to be called Fresh Hop, which is probably one of the more unique names that we’ve seen in a long time.

1:02
But I’m going to go with it, man. Fresh Hop emails me and says, hey Ryan, you can call me Fresh Hop, which I did. I have a brewery in Beaverton, OR I blew up three or four trading accounts in college that I funded with online poker winnings.

1:18
I recently read Jared Chandler’s Mental Game of Trading Book and Price Volume Analysis by Ann Culling. Are there any other books that I should read? I’m about to start making my first trades. What has really sparked my interest in trading is that after reading a simple path to wealth and picking up some index funds.

1:35
Other than those, my only other stock I have is App Folio Appf. For those keeping track at home, I am a property manager. The brewery is the fun hobby. I wish I had a brewery as a fun hobby that actually sounds really fun. Geez, I need to get a brewery and I use App Folio and I like the idea of investing in companies that I’ve done hours and hours of research on and chosen to give them my business.

2:01
In July they started charging all of their units a $2.50 fee. They managed over 11,000,000 units for E checks. Instead of it being free based on My Portfolio, about 50% of my tenants are sucking it up and paying the fee. The other half are mailing checks, which sucks for me.

2:17
Should I be mailing that check? For sure. I’d be extrapolating that to a yearly cost savings of what are we talking here, $30 a year? Heck yeah, I’ll be sending in that check fee minus the $0.59 for the stamp. Absolutely. Their revenue guidance only raised their revenue about 5 or 10 million, but I think it should be about $100 million change.

2:38
This was the fee that they’ve always been holding in their back pocket, which would monetize their businesses. It seems like it could be them getting ready to sell in a year or two. Honestly, I want to bet the farm on this earnings report coming up as I have a high confidence trade on it, but all my experience in the stock market has been negative.

2:59
I lost about 25% of my poker wings in 2007 and 2008 and I put the rest in real estate which was done.

3:15
But now I have a nice real estate portfolio which is finally starting to spit out some cast which I want to maximize my expected value on. Obviously managing risk is a huge thing, but also take an opportunity when it presents itself is a huge thing too. I’d love to hear your feedback. Thank you for your thoughts.

3:34
Cheers. Fresh hop. All right, Fresh Hop. Fresh Hop is giving us some good tidbits here, and there is a lot to talk about here. First of all, he asks about some books that I’d recommend, usually the same ones I like Anything by Alexander Elder. I think the guy has a great way of talking about the right mindset to have as traders.

3:53
He’s written a lot of books, really, really good stuff that comes from him. I’ve never met the guy before, but it would be an honor to meet him one day or even, you know, I’ve never had a guest on the show. I put him on the show for sure. Oh yeah, Cuz I think that would be something that I would learn a ton from. And, you know, most of the time I get people who are wanting to be on the shows that are just really just trying to pump their own businesses, which I’m not here for that.

4:09
I’m just trying to help you guys learn a little bit more. And the other book that I would say definitely read, and this is one that I think you could read 10 times in your lifetime and you probably still be picking up new tidbits. And that is Reminisces of a Stock Operator by Edward Lefferve.

4:27
I never even know if I say that last name right. Honestly, I’ve never Googled it or anything but Reminisces of a stock Operator. It’s about Jesse Livermore, who’s considered by some to be the greatest stock trader of all time. I don’t know if I would say that he was necessarily the greatest stock trader of all time. I think he’s blown up multiple accounts. And I think in the end, if I remember correctly, he ended up killing himself.

4:43
So. But the knowledge and the tidbits that in his story, it’s just phenomenal. If you look at my copy of the book that I have, it’s just a paperback. But man, it is. It’s there’s more words underlined than there is not underlined in the book. That’s that good.

4:59
I think sometimes I could take the book and get a whole bunch of podcast episodes off of that book alone because there’s just so many golden Nuggets in that book. So if you had to read any of them, definitely reminisces of stock operator. If you’re wanting something more, check out Alexander Elder as an author. He has some really good stuff so fresh off here.

5:16
He’s an interesting guy. He has a property management firm, a company. He has a whole bunch of real estate in that portfolio. He used to be a professional poker player, or at least one that made some money because he blew up some accounts. With the winnings from that, he lost 25% of his winnings, but the rest in real estate.

5:32
So he must have had a pretty good haul that he made from doing poker. And there’s a lot of correlations between poker and trading stocks, a lot of that same kind of mental edge that you need to have risk management and so forth. And a lot of things that you might learn from playing simple, you know, game of Texas Hold’em can be applied to trading as well.

5:47
What happens when you go all in and you’re wrong? It’s usually cataclysmic for your poker hand, just like it is in the stock market. When you go all in on some Yolo call options that are expiring today, he’s also looking to start back his trading. He has a brewery on the side. Really cool stuff.

6:03
I’m really jealous of the brewery too. We love to know what that that beer company is that he has. I would love to try some of it. And then he’s got a stock, a PPF, which is something that he uses every day for his real estate portfolio. So a lot going on in this e-mail and let’s break it down.

6:19
First of all, he talks about how he has a lot of confidence in a PPF. For those who don’t know what a PPF is, it’s essentially a property software management tool. And I know I’m really watering that down. I’ve never used it before. So there could be definitely some inaccuracies in how I describe it.

6:44
But it’s essentially trading at its 52 week highs. I mean it made, you know, new 52 week highs here already in September and it’s trading right there at it today. So the thought was that maybe Wall Street isn’t pricing it in completely. There’s a good chance that it has. There’s a good chance that it knows very well that the potential for it because unlike most of your stocks, IN2022APP F has recovered all of those losses and then some.

6:59
It didn’t have all that bad of a year in 2022 like most of your big name stocks did And then in 2023 it recovered more than those losses and it’s trading at a much higher price now. I mean it’s essentially from the beginning of the year has gone from around one 10115 all the way up to 198.

7:15
So there’s definitely a lot of growth there and Wall Street does know something. Now whether or not it knows everything about the full extent of the two $0.50 fee per unit and how much that equates to the bottom line, I don’t know. I’m not really what I would call a strong fundamental trader.

7:31
I know stuff about fundamental trading. But one thing that I would say, there was a stock back in the day, I think it was TXMDA. Lot of people in the community, they love the stock a lot. There isn’t some people that worked for it and they were really high on it. Like, man, you got to buy this stock.

7:55
It’s a good stock. And so a lot of people in church, they were buying the stock. I never bought it. And I wouldn’t say that I wasn’t tempted to buy it. I was definitely tempted. And sometimes I felt left out when people would ask me, did you buy it? I’m like, no. And so I understand, like the kind of like the group think that went along with this TXMD stock where everybody was in it, so everybody was afraid that wasn’t in it, that they were going to be missing out eventually on something if it actually did take off.

8:10
The stock never took off. I mean, I think they just had a recent 1 to 50 reverse split. And that’s usually not a good sign when you’re trading in the pennies to have one of those. It’s training like $3 a share now, and it’s been hammered. And so, like, along the way people were saying it’s just the shorts.

8:34
You know, Wall Street shorts are just killing it for no reason. At some point there’s value to it. They’re not gonna just keep shorting it. I mean, a lot of people will blame shorts for why their stock isn’t performing very well. That’s a pretty common theme across a lot of stocks. But had I gotten into it and let’s assume I didn’t put any risk measures into it, when I got into it, I’d probably be losing like 90% of my investment, if not more, maybe like 99%.

8:49
I don’t. I don’t know what the exact numbers are when I was told to get into it, but I never got into it. I know a lot of people that did and they took heavy losses for it. And so sometimes trading what you know or or the things that you think that is going to materialize for the stock, it may already be priced in.

9:15
I remember going back to TXMD how there was all these great catalyst that was going to send the stock soaring. It’s going to be amazing. This was going to be like a $500 stock or and it never was. And thank goodness I didn’t buy into the hype. So sometimes when you’re looking at it from with App Folio for instance, you’re seeing your scenario here and you’re seeing what your tenants are doing and you try to extrapolate that across the entire platform and then try to assume that Wall Street doesn’t know what they’re talking about.

9:31
There’s a good chance that they do because there’s a good chance to that they may be using the the app as well and they already see that same potential. And when you’re seeing it trading at all time highs, there’s a good chance that it’s already factored in. And I think too, I want to check to see what the P/E ratio is on something like this.

9:50
It’s a $7 billion company. Oh, they don’t even have APE ratio. It’s in the negative. I guess that goes back to what he was saying about the e-mail. They’re monetizing their business. So that would make sense. But I mean, trading at a $7 billion valuation and they’re not necessarily profitable. Yeah, I mean earnings per share is negative $2.21 per share.

10:09
I would say Wall Street might be pretty gracious with it right now. I mean at least the fact that it’s still trading at all time highs didn’t really see too much of A meltdown from 2022. Yeah, it did see a pretty good sell off in 2021, but hey, it is trading back at its all time highs. So and there’s a lot of uncertainty too with how will they be impacted if there is a big market downturn.

10:30
I personally think there will be a big market downturn. I I’ve been thinking that for years. It hasn’t happened yet. So again going back to what we think versus what we think about the fundamentals of the market or of a stock and and then actually playing out can take a lot of time and that also goes back to trying to interlace fundamentals with technical analysis.

10:48
You can see a really good fundamental picture for a stock. But then trying to get it to play out on the technicals is this completely different thing. They it’s almost like they don’t talk in the short term. In the long term the market gets it right. So short term it it often does not. I mean, how many crazy things have we seen like GME and AM C and all these others?

11:04
Long term it gets it right. Short term, it usually is just absolutely chaotic. I mean there’s there’s stocks that I’ve swing traded before that I would never want to be a long term investor in. But in the short term there was a technical catalyst that was showing that was breaking out and I was able to make money on it. Long term, would I want to hold it?

11:21
No. Perfect example was PayPal this year got into that I think, I don’t know, I think I might have made like 2 or 3%. So it wasn’t a time, but it’s a stock that I wouldn’t want to own long term. Why? Because that stock’s an absolute disaster right now. And so I don’t know when it’s going to turn around, and it has shown those rules signs of wanting to turn around.

11:36
Just. But one thing I do think you should check out is swingtradingthestockmarket.com. Yes, that is the patron website that goes along side by side with this podcast. You enjoy this podcast? Check out swingtradingthestockmarket.com. You’re going to get all my stock market research each and every day.

11:52
That’s going to be my videos, my foolish and Bearish watch lists each week. You know, for my master watch list, that’s also going to include my daily watch list of stocks that I’m looking to get either long or short on, plus big tech stock updates and market updates throughout the week.

12:14
All videos really good, and also other videos each day sharing some trade ideas like that come to mind that I’m seeing on the charts. So check it out, swingtradingthestockmarket.com and you’re supporting this podcast and it’s cheap. The other thing that fresh Hop, Fresh Hop, Fresh Hop says about trading is he uses the term high confidence trade.

12:29
I don’t know if I like that because it sort of implies that there’s a low confidence trade out there. I want every trade that I get into to have some level of confidence. I’ve talked about another podcast that I assume that every trade is going to go against me and maybe that means that I use, I have low confidence trades on all of my trades.

12:49
But I say that because it makes me have to focus on the risk side of the trade. If I don’t do that, then I’m setting myself up for a disaster. For a TXMD, you have to know when it’s time to get out of a trade, got to use stop losses. High confidence trades tend to make it to where you don’t feel like you need to use a stop loss, that you don’t have to mitigate risk because this is a high confidence trade.

13:05
This is something I’ve done a lot of research on and I know what I’m talking about here. And then all of a sudden what you know and what you think and what you believe should happen doesn’t materialize into the share price And so it becomes a very frustrating ordeal and as a result you take a huge loss.

13:21
So if you’re going along with the concept of high confidence trades, it kind of assumes that you’re taking on trades that you probably shouldn’t be taking on and those would be low confidence trades. So having high confidence and low confidence on your trades isn’t necessarily the best thing in the world.

13:34
Again, I talk about having low confidence on my trades, but I only say that because I know that I have to manage the risk. Do I take on good trade setups? Yes, the best of my ability. I believe that each trade that I’m getting into or or solid trade setups, but I also believe that they could go completely against me and that’s why I have to use a stop loss.

13:55
Essentially what I’m trying to say here, cuz I think I might be getting a little bit on the confusing side of things, is to make sure that you’re really putting your trade setups through the grinder, making sure that they’re all good like you want good quality reward risk trade setups now should assume that they’re always going to lose on you, that they’re not going to go in your favor.

14:15
Thus the reason for using a stop loss. If you assume that they’re always going to work out for you, you don’t use stop losses, you don’t use risk management. But when you assume it’s going to go bad, you do use risk management. So let’s not have low confidence, high confidence trade setups. Let’s have equal trade sets.

14:37
Let’s go through trade setups that have strong reward risk ratios to them, good technicals you’re trading off of. The fundamentals should be the same thing. We don’t want to take stabs at things that just look like crap, and we want to make sure that what we’re going after has some really good opportunity to it.

14:53
So if you enjoyed this podcast episode, I would encourage you to like and subscribe. Make sure that you’ve left me a 5 star review on whatever platform that you’re listening to, whether it’s Spotify or Apple, Amazon or Google. I appreciate those things. I appreciate your feedback. Send me your questions. Send me your stories. I wanna hear them folks. ryan@shareplanner.com I do read them all. I try to make everyone an episode, so do that for me. Check out swingtradingthestockmarket.com Thank you and God bless.

15:11
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15:31
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