Keeping Strategies Separated | Podcast Episode #367

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. And today’s episode we’re going to be talking about the separation and accounts, keeping things separated so that one strategy doesn’t affect another.

0:43
If you’re a swing trader, you really don’t want things being muddled together with longterm trading or you’re a dividend accounts or maybe you’re a futures trader and also do some options trading. It can be very difficult when the goals are different, when you have different aims and to have all of that being put into one separate account.

1:01
So going to talk about that a little bit, Going to talk a little bit more about cash as a position. I’ve talked about it some in in a previous podcast as well. But I think there’s still more things to be said about that. So we’re going to talk about both of those elements. And today’s e-mail comes from a guy who wants to be called Johnny Cash.

1:17
That’s the name that he wants to go by. So that we’re not giving away real names. Like I said before, and many other podcasts, I don’t give away real names because you just never know if you end up regretting it. These podcasts are out there forever so I never want to use personal information on here. So Johnny writes.

1:33
Dear Ryan, I love the podcast. I’ve listened to you for years. If you select this question, please call me Johnny Cash, since in today’s market I feel like I’m walking the line. You answered another listener’s question recently about cash. Being an options trader, I always hold tons of cash.

1:48
Since I need to hold cash to secure puts that I sell. Today’s 5% yield is a nice change. That was a great podcast too, as often I see traders bashing others as stupid for holding cash, which by the way, that’s absolutely insane. The allocation that you have to cash is just as important to how many positions you have, so again, I’m not going to get sidetracked just yet here, But he says.

2:11
However, I have grappled for years about how many accounts to manage. I have had a non margin account for my holdings that don’t have options like municipal bonds, ML P’s and CE F’s. Recently I moved them all into my margin account thinking simplifying into one account would be an improvement.

2:30
I kind of already am regretting it since I have too many holdings so I have held a non margin account for my holdings that don’t have options like municipal bonds and L P’s and CE F’s. Recently I moved them all into my margin account thinking simplifying into one account would be an improvement.

2:47
Kind of regretting that already since I may have too many holdings, so I may move those positions back. It’s at the same broker, so it’s just a Ledger entry. I’m undecided. I know you have mentioned keeping your longterm holdings separate from your swing trades. Do you do this with separate accounts?

3:02
With regards to multiple accounts? What things do you recommend? Thanks, Johnny Cash. All right, Johnny. So right off the bat, yeah, I have separate accounts, but most of the time you can merge those accounts together. Like for instance Fidelity, they usually have like a drop down window or you can click on your accounts and it’ll just like list all the accounts that you have, tell you the money that you have in each one.

3:26
Think or swim or if you’re using TD Ameritrade, I use Think or swim software a lot. So when I go on there, you know, I can have linked accounts. You essentially just go in there, link your accounts. So even if it’s like your wife’s account or a kids account, you can actually link all those together. Doesn’t have to be actually under your name, it just has to be linked between both accounts.

3:45
So what I like about the Think or Swim being able to link the accounts together is that you can log on with one and if you want to look at the aggregate you can do that. You can see all the positions that you have, whether you know it’s a long term accounts, short term account options account, Divvy account, futures account, and you can see them by each class, so you’ll see them sectioned off by equities, by futures, etc.

4:06
And that’s cool. I like tinker Swim for how they display your positions in different accounts. I don’t usually look at the entire aggregate as a whole. I usually like to just look at the individual account that I’m trading in. And most of the time that’s just my swing trading account. So I’m going to be focused on that particular account in the positions.

4:23
And the reason why I like to keep things separate is because, for one, what if you’re, let’s say you’re buying into Apple, right, And you have always had a longterm Apple position. Let’s say you have been in the Apple position since 2006. You bought 1000 shares of Apple.

4:40
Well, in 2006 that stock was trading insanely lower, like like dirt cheap compared to where it’s at today. Let’s say in your swing trading strategy, you’re looking at apple in the short term and saying, hey, the markets pulled back about 7-8 percent, Apples pulled back as well.

4:58
It looks like it’s getting ready to bounce. I’m going to buy 100 shares of apple right here. Well, if it’s all the same account, you have this long term position in apple that’s done phenomenally well. And then you have this short term position in Apple that’s just getting started. You don’t know if it’s going to be a successful trade.

5:13
You don’t know if it’s going to be a winning trade. But if it’s all one account, then all of a sudden that 1000 shares that you bought back in 2006 is being clumped together with the 100 shares that you bought just recently for a short term trade. And then your entry price is being affected for based off of the 2006, it’s going to start you know telling you what your average entry price is based off of what you got in the 2006 and then what you just got in the 100 shares that way higher.

5:38
So, so things like that get affected and that’s important because you really, if you have Apple from a long term account, you want to be able to continue to view it from a long term perspective. You don’t want your short term things to start meddling with your average entry price from your long term because in the short term you’re not going to be staying in those hundred shares of Apple for very long, especially as a swing trader who doesn’t.

6:02
For me personally, I don’t believe in holding a stock through earnings when it comes to swing trading. I think there’s too much volatility for that kind of shortterm trading. So I’m going to be selling that within the next few weeks before they report earnings. But in the meantime, that’s going to, you know, play around with your longterm accounts, your longterm positions in Apple.

6:21
So I think you got to keep it separate. You start to get into tax purposes and I’m not a tax accountant by any means and some of this might be even wrong, but I would imagine too that it could have some implications on what shares does your account by default choose.

6:37
And I know you can adjust those first in, first out, etcetera, but you may not have the right settings on there to work. Instead of selling the most recent trades, you’re selling the most early trade. So now you’re taking long term capital gains on a swing trade because when you got into those 100 shares and because it’s in the same account as your long term, you may not have adjusted the settings on your account and it’s selling your early shares that you got out of instead of the most recent ones and you might not want that.

7:04
So it creates a whole host of problems. And so combining strategies into one account really isn’t a good thing. I think for me personally, at the bare minimum there has to be a long term account and a short term account. But then when you start getting into options, when you start getting into like dividend place, for instance, even from a long term in a dividend account, let’s say you weren’t even a swing trader.

7:26
I think those need to be separated because long term you’re looking for growth out of your long term place. You’re looking for stocks to go, you know, from $100 to $150.00 over the next few years, dividend counts. It’s not as necessary for these stocks and a lot of them really don’t move all that fast because people are buying them for their dividend accounts.

7:44
Like there’s one that I’ve had that’s that’s really been in the same place for years. It hasn’t hardly moved at all, but it pays like a 7 or 8% dividend, and I love it for that. But if that was in my longterm account, might be getting a little annoyed that stocks never moving. So I think it’s good to have things separated in that regard because you don’t want one strategy that you have in the market having an influence on other strategies.

8:07
So in my dividend account, I don’t have these huge grandiose expectations for massive amounts of growth. I’m really wanting to just collect the dividends. That’s what I care about my longterm account. Careless really about the dividends. See how some of them get dividends and those are nice too, don’t get me wrong. But what I’m really looking for is for those big moves in price over the long term.

8:27
You know, you buy a stock at 100, hopefully in 10 years it’s trading at 500 or 300, whatever it is. But I’m not really focused on the dividends. So I want to keep those separate because the dividend accounts I’m interested in income generation. My long term I’m interested in the expansion of the price per share.

8:47
What’s also good to have is swingtradingthestockmarket.com. Go to swingtradingthestockmarket.com to get all my stock market research each and every day. You’re going to get my weekly watch list of stocks that I’m following from a swing trading perspective. Also, you’re going to be getting my daily setups that I’m watching each and every day.

9:06
Plus you’re going to have access to my stock market updates to the big tech updates. You’re going to be getting all of that and so much more. A lot of good videos are a lot of good research. I highly recommend you check out swingtradingthestockmarket.com and in the process you’re supporting this podcast.

9:24
And the other thing that I would say about dividend stocks and longterm trading accounts and swing trading accounts even like swing trading versus day trading can be separated as well because swing trading can be very much different than day trade.

9:40
Day trading, you’re getting in, you’re getting out the same day that if you’re not doing that, it’s not day trading, it’s swing trading. So that can be very different versus what the market’s doing from the first day that you get into a new swing trade to the 10th day that you’re in the swing trading, you get out and between, you’re going to have days that the market’s going higher, the days that the market’s going lower.

10:01
But if you only look at it from a swing trading standpoint, you may have a bad day day trading but a good day swing trading. But you’re letting the bad day and day trading affect your decisions and your swing trading. So you don’t want that because it’s two totally different worlds day trading.

10:19
You’re looking more so at the five minute charts or the one minute charts or whatever time frame that you operate out of for day trading. But then the swing training is usually like from a daily chart. And so you can’t muddle those two things together and allow one to make decisions for the other. And then if you’re having an emotionally charged day as a day trader, you don’t want to be like, screw it, I’m stopping for the day.

10:39
But you also decide to just make a panic sell on all of your swing trades, which we’re actually doing really good. But because you’re having a really bad day trading day, you go and mess yourself up. So we don’t want to do that either. And there’s going to be years to where your long term account does much better than your swing trading account or your swing trading account does much better than your dividend account.

10:56
I don’t think this year has been really good for the dividend stocks at all. I mean, dividend stocks have been getting destroyed. When you look at some of your big players like Verizon, AT&T, look at next year energy, that hasn’t necessarily had a great dividend over the years, but it’s been a very steady stock.

11:13
That stock has gone from 93 or $92.00 a share all the way down into the 40s over the course of the past year. So big moves and some of your more consistent dividend plays. I’ve been seeing KO, Coca-Cola getting slammed. And so there’s a lot of dividend stocks out there right now just getting absolutely railroaded.

11:34
You look at MMM or Altria, Moi mean over an 8% dividend in Altria and in Verizon, their share prices are getting destroyed. A lot of your value plays are getting hammered at the expense of the overall market. And you look at, for instance, right now we’ve seen about an 8% pullback.

11:53
We finally got a bounce this past day in the stock market. But up until that .4 out of 11 sectors were trading higher on the year. And the 4th sector, which was industrial, it was only up like 2% on the year. That means everything else outside of communications, technology and discretionary are all in the red.

12:13
That’s your financials, your energy, your real estate, utilities, staples, healthcare, they’re in the red. And why is it that you have just like 3 sectors that are going 8? I mean, you look at XL C, it’s up 39% on the year, You look at XLK up 35% on the year and you look at discretionary, it’s up 24% in on the year.

12:33
Nothing else is even close, nothing. Industrials, like I said, up 2%. That’s the difference between 3rd place and 4th place in the sector list this year. You look at utilities down 18.8%, Staples 10.6, there’s some deep red in the market right now.

12:49
But if you just look at the NASDAQ and the S&P, everything looks like it’s a sensational here. It’s because of big tech. So unless you have a portfolio that is only big tech. And when I talk about big tech, I’m not talking just like stocks that are in the tech sector. I’m talking about Amazon, which is discretionary. That’s why discretionary is up 24%.

13:09
Amazon and Tesla and Netflix, they’re driving discretionary. And then you’ve got Google and you have meta and communications that’s driving the 40% move and communications. Then technology, Microsoft, Apple, NVIDIA up 35% overall in there. That’s driving it. And you look at something like NVIDIA, it’s up like what, 200%?

13:26
Something crazy. I don’t know what it is right off the top of my head, but it’s up like a crazy amount. And so if you’re not in those positions right there and let’s say you have more of a balanced approach, let’s say for diversification purposes, you went five out of five stocks out of communications, five out of technology, discretionary industrials, blah, blah, blah.

13:42
Okay, You have equal weighting in each sector and that’s includes utilities and staples and real estate, which are grossly underperforming the market. You’re not beating the SPY. There’s no way you’re going to be struggling. And it’s going to be frustrating because there’s a lot of days where the market and we, I’ve seen it even in the past week where the market’s up higher but all your stocks are down lower where you’ll only see one stock out of every six going up.

14:05
And yet the NASDAQ 100 and the SP500 are all well into the green. And so then you look at your individual place like why did I not make money today? Stock market’s up. I should be up, but it’s because you have about $12 trillion in market cap that’s driving this entire market found within just about 8 stock.

14:23
So I said I was going to talk a little bit about cash too in this podcast episode. I don’t want it to get too long. So, but there was a little bit of cash references from the name Johnny Cash to being harassed about from people online. I guess that you know if you’re looking at things on Reddit or StockTwits or Twitter, you have people out there that’ll make fun of you for holding cash.

14:41
And it’s true, but cash is paying 5% right now. So when you are not in the market in terms of like let’s say you have only like a couple of swing trades and 70% of your portfolios in cash, that’s a position, that’s a position that’s making a yield.

15:10
That’s not bad, that’s great because when we have cash that means that there’s not a complete certainty about future market direction. That’s what it really should be. If you have 100% certainty of future market direction, 100% certainty, which I’ve never had. I should be 100% long if I had 100% certainty.

15:26
But when you’re in a market like right now where you’ve seen a pullback of 80% and you’re starting to get a little bit of a bounce, yeah, I think there’s a little bit of a bounce coming here. So I’m going to be adding a little bit of position to the market here. So for instance, on Thursday, I bought into Microsoft. On Friday, I added some meta because there was an increased belief that we’re going to be getting a bounce.

15:44
That’s based off of my technical analysis, some of the indicators that I rely heavily on for gauging oversold readings in the market and the potential for a market bounce. So I was taking money from cash, putting it into equities because I was having a little bit higher of a confidence in the market overall.

16:01
But I’m still like 70% cash. Why? Because I don’t have a level of confidence that would make me want to have 50% of my money in the market or 60 or 70 or 80% about where is that right now at about 25% in 2022, I did really good short in the market.

16:20
It was a great year for shorting, but most of the time I would say I was probably like 70 to 80% cash. Most of the year. I was using the volatility from the market as a whole to be able to manage my risk and be able to extrapolate pretty good gains because you because there was so much volatility in the market in 2022 with some of the heavy sell offs, you would get days where the market was down 3 or 4%.

16:42
I didn’t have to have 100% portfolio in order to make an outsized gain. I could do it with one or two positions on a swing trading standpoint, but all that other cash is making a return because you can make roughly 5% just by being in cash right now.

17:00
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17:17
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17:35
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17:53
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18:14
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.