Doubling Down Your Trades | Podcast Episode #371

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. In today’s episode, got to talk about doubling down in your stocks and member of the trading block, we’re going to call him Lyle, give him a good Florida red nickname.

0:42
Old Lyle posted in the trading block that had some problems with a recent trade. And he’s found himself just doubling down constantly and he’s taking on some big losses as a result of it. So I told him instead of just talking about it in the discord for the trading block, I would do a podcast episode on it because I actually think a lot of people could benefit from this.

1:03
I think it’s something that we’ve all done at some point in time and a good chance, something that we find ourselves in the midst of right now or we have trades in our portfolio that are bleeding red right now because of decisions in the past that resulted in a lot of doubling down. So what I want to do here is talk about not doubling down, don’t double down, don’t ever double down on your swing trades.

1:26
All right, let me read the post to you here. It wasn’t an e-mail, it was just a post on the Discord, he says. I, Ryan, Mallory and all see actually opened this up to the entire group and there was some good feedback too. He says. I need some guidance on this. I have BYND stock from a long time ago. Every time it falls, I buy some to average it, but it keeps falling.

1:44
Right now my loss is even bigger than ever before. I’m wondering if I should keep averaging it or not. Is this a stock that can come back up in the future? Sincerely Lyle. Now he actually didn’t say sincerely Lyle, but I feel like because everybody does it on the emails, I had to do it on this particular one too.

2:00
But Lyle is in BYND now, BYND beyond me, right. This is a stock that has been a market darling back in the day. It IPO D back in May of 2019 went from 46 to 239. It was a straight rocket over the course of, I don’t know, like four or five months.

2:19
It was crazy pull back some. And then COVID came and it relived a little bit of its glory days, shooting back up once again. But then midway through 2021, it went from 150 down to current day price of $6. That’s right, 150 down to $6.

2:35
You’re talking like way beyond 90% of a sell off just from the 150 you’re talking about from like 239, like way over 95%. And you’ve probably seen this stuff in the grocery store. And I think sometimes that can skew what our thoughts are. It’s like I see this stuff, I eat it, I like it. I don’t personally like it. I never had it before.

2:52
Don’t ever plan on having it. I believe my burger should be made from a cow or a Buffalo or I don’t know, pretty much a cow I like. I like cow burgers, so not that we actually call them cow burgers, just just a cheeseburger, OK? But people see it, they might like it.

3:09
And so they have a fondness for this stock. It might be McDonald’s where it might be Tesla. Actually, a lot of people buy Tesla stock because they love the car. I have a Tesla car. I don’t like the stock. And it’s important not to let our personal opinions of the product or the service influence us or embolden us to take risks on it as an investment or as a swing trade that aren’t fitting.

3:31
Now in the case of Lyle here, he doubled down and he continues to double down. He actually says it keeps falling. And right now my loss is up bigger than ever. I’m wondering if I should keep on averaging it or not. Now, is this a stock that can come back in the future? Yeah, I don’t know what holds the future for stocks.

3:47
I think there’s a reason why it’s trading at $6. The Wall Street doesn’t have much confidence in it. I think if they had the same kind of confidence in it as they did, for instance, NVIDIA where it even take McDonald’s, the stock would be way higher, right? But they don’t, They don’t have that. There’s probably some reasons for it probably that there’s going to be increased competition.

4:06
There’s going to be new science behind new products. And so Wall Street at this point in time doesn’t believe that BY&D is in the same position as it was to capitalize on this particular market there was when it was trading at $150.00 a share or even $50 a share.

4:22
And there’s a lot of companies that have seen some heavy, heavy setbacks from its glory days, especially from 2020-2021 run up. I mean, you take a look at Moderna and Pfizer. I mean, those stocks have taken massive hits. You take a look at Zoom or Peloton, massive hits.

4:37
But the big issue here is doubling down. Most of the time, doubling down is takes place because we have a loser stock on our hands. That’s wrong. We can’t do that. We cannot double down on stocks because we have a loser on our hands. It’s like trying to make the losing trade feel less painful by inflicting more harm upon ourselves.

4:58
It’s like, oh, my elbow hurts. But OK, you know what? I’m gonna cut my knee or dash my knee open so that my elbow doesn’t hurt anymore. You’re still gonna have pain. It might not be as pronounced in your elbow anymore, but you’re gonna still feel a lot of pain. And that’s kind of like what you’re doing when you’re doubling down. You’re just increasing your pain by thinking that you can decrease the percentage loss, that it’s actually down, but your dollar amount is actually increasing now.

5:20
Does that mean all doubling down is bad? I think the common term for doubling down is bad. Now I think there’s a difference between doubling down and building a position. I will build a long term position over time and I go into the trade thing. You know what? I like this particular stock. I’m going to start building a position over the next six months on it.

5:39
And no, I’m not like Wall Street where it’s like I’m throwing $1,000,000 here and I’m like, it’s not like that small potatoes, OK. But for me, I’m trying to get in at the best price possible. So if for instance, a person has $100,000 portfolio and they want to put $5000 towards that stock, maybe they’re buying 50 to $100 a week over the course of many weeks until they get up to that full position.

6:00
That’s OK. That’s not doubling down, that’s building a position. So there’s a big difference in that. Now, I don’t like building a position in swing trade because by the time you finish building that trade, it may be time to already get out of it. So it doesn’t make as much sense from a swing training standpoint to build a position as it does with a long term position.

6:17
And there’s big differences, like I said, between building a position and doubling down. Doubling down is acknowledging the fact that you got a really bad trade on your hands. And the only way you can think to make it look better is by doubling your position size on it, which cuts the losses at that particular moment in time in half. But then if it keeps falling, then you still have bigger losses on your hands than you ever had before.

6:36
And in some ways it’s almost like a Lotto play. You’re playing the Lotto every week with the same numbers. And you’re afraid to stop playing the Lotto with those numbers because you’re afraid the next week, the week that you stop playing those same numbers, is the week that those numbers are going to be called. And all of a sudden you’re like, the probably the best way to prevent that from happening is never playing the lottery.

6:56
Tie that back to doubling down. The best way to avoid, you know, dealing with the hardships of a really bad position from doubling down is never doubling down at all. Now This is why I talk about stop losses. So and before I talk about that again, I wanna make sure you guys know that swingtradingthestockmarket.com is the patron website that goes along with this podcast.

7:14
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7:30
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7:47
Risk management. Risk management is in place using stop losses. Planning your trade. Remember the mantra that I always talk about? Plan your trade, manage the risk. The profits will take care of themselves. We start doubling down when we start focusing just on the profits and not managing the risk. When we start focusing on the profits, we let the risk get way too big.

8:04
We start doubling down, thinking that this is the way to get to the profits, which sometimes the way to get ultimate profits is by shedding yourself of a loser trade, and it comes from a need to be right. When we start looking at trading from a right and wrong standpoint, we’re getting ourselves into trouble. We look at trading as I got to be right.

8:21
I cannot be wrong. Then we’re going to usually be wrong because we’re going to get into stocks that are ultimately going to destroy us. I’ve talked about my friend before. He says he’s never had a losing trade before because every one of his losing trades have never been sold. So technically, in his mind, he’s never had a losing trade.

8:37
And he’s probably right. He’s never had a losing trade, but he’s got a lot of losing trades in his portfolio. He’s just never realized any losing trades. But that doesn’t mean that he hasn’t lost that money. So you can’t go into trading with the need to be right. You have to go into trading, looking to trade and manage risk because when you plan your trade, manage the risk, the profits take care of themselves.

8:58
And you’ve heard anybody that’s listening to me for a long time, have heard me say that multiple times. And then not managing the risk entails doubling down, never selling, never having a plan going into it. And you got to have a plan to it. So if you find yourself in this position, what do you do? That’s where it gets tricky because there’s no right answer.

9:13
You could say, well go ahead and get rid of it, get rid of the trade, be done with it, take the tax write off and you’ll feel so much better. But then as soon as you do it, maybe they get bought out and what, like 100% premium and you could have made it at least, you know, a little bit of your money back. Yeah, that would be anguishing.

9:30
That would be frustrating. Odds of that happening probably aren’t good. So there’s no right answer because yes, it could come back. It could go run up to $20.00 for all I know. But what I do know at this moment is that there’s a losing trade right there and I don’t want to keep a losing trade around unnecessarily. And if I don’t have a plan for it, it’s very difficult to implement it.

9:47
After it becomes a huge drag on the portfolio. For me personally, what would I do? I’d cut it out and move on. Even if it goes up, I don’t care. At that point, it didn’t do what it was supposed to do. If I had been managing the risk, I would have been out of it a lot earlier. I’d chalk it up as a life lesson, and I move on.

10:03
That’s what I do. Can everybody do that? No. I’ve had enough losers in life to realize that how bad by staying in those losing trades can get. Now, I’m going to leave you with this, OK? Always assume that every trade that you get into will be a BYND and then you don’t have to worry about having a BYND in your portfolio.

10:20
And what do I mean by that? It means manage the risk coming to the trade with a trading plan. Where am I going to get out If this trade doesn’t work out? Assume it’s not going to work out. That will force you to put a plan in place for what happens when it doesn’t work out. If it does work out, and I hope trades work out for everybody, that’s great.

10:36
That’s what we want. But always go into assuming that it’s not going to work and let yourself be surprised. And if you do that and you put the plans in place, you don’t have to worry about these BYNDS. Yes, I get that. There could be some kind of fraudulent thing that happens overnight in the stock and it drops 90%.

10:52
God forbid that ever happens to me. That does happen. But again, that’s where position sizes come in, where we don’t wanna put 100% of our portfolio on a single position. But assuming like the extremes, like something like that happening overnight that we can’t really prepare for, go into the trade assuming that every trade’s gonna be like BY and D and you shouldn’t ever have a BY&D on your hands.

11:10
If you enjoyed this podcast episode, I would encourage you to leave me a 5 star review. Those do really mean a lot. I do read them. I read them on all the platforms. Keep sending me your questions ryan@shareplanner.com I want to hear from you guys. I want to know what your stories are. I wanna know what you have to say. What’s bothering you?

11:26
What are you struggling with? Trading? And I can make a podcast episode out of it. That’s what this podcast thrives on. If you guys aren’t sending me questions, I’m not doing episodes right. That’s kind of how it works. Send me your questions, let me hear what you have to say. And check out swingtradingthestockmarket.com. Thank you and God bless.

11:45
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12:03
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12:20
All the best to you and I look forward to trading with you soon.