Problems With Winning To Much | Podcast Episode #373

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 coming to you today with the subject matter of winning too much, What could possibly be wrong with winning too much?

0:41
Well, I have got a good e-mail here from a guy who has really found himself in a mess, and I actually relate to this far more than I would care to admit. And that’s when you get too high on yourself, when you’re on a winning streak, I think, especially for guys in general, I think it’s a it’s a difficulty.

1:00
You start winning and you start feeling like you’re way better than you are. Your ego gets a little bit more involved and you don’t want to have another loss. In fact, you think you shouldn’t have another loss. And so when you do come across another loss, it almost like trigger something in your mind to create more losses.

1:16
So that’s the point or the topic of this particular podcast episode. Winning too much. This person writes me with the subject line. Winning then losing big. How do I stop this madness? He writes.

1:31
Hi Ryan, man, I’m at my wit’s end here. I’ve been tuning into your podcast every chance I get. Darn good stuff, by the way. But I’ve hit this insane wall and I’m hoping you might help me with some good advice. Here’s the crazy cycle that I’m on. I get on a winning streak and it’s like, I’ve got the Midas touch.

1:49
Everything’s golden. But then it’s like I get drunk on my own. A success or something, and I start feeling invincible, making wild bets, throwing caution to the wind, and just forgetting all the trade management principles I know that I should be following. And you guessed it, I’m then slapped with a huge reality check that hurts the wallet big time.

2:10
It’s so frustrating. I mean, I know better, but it’s like I can’t help myself. What would you do if you were in my shoes? How can I keep my cool and not lose my head and my cash when things are going well? Hope to hear from you soon, either in your podcast or an e-mail.

2:26
I’m genuinely lost. Thank you. I forgot to give the guy a redneck name. Didn’t I? Shoot. Let’s give him Shelby Joe for a redneck. Sincerely, Shelby Joe. All right, So what can I contribute to this conversation? I can contribute some personal experiences.

2:42
I know that 2022 for me was an incredible high. The market sold off pretty big. It was a nasty, nasty market for probably 99% of traders. And it wasn’t your typical market like what we saw in 2020 and 2021 where it seemed like the market was just going to go up indefinitely.

2:59
Instead 20/22 was hit with a reality check of its own, slapped the traders around and all of a sudden you’re looking at 2030% losses across so many stocks, if not more. I did really good that year. I traded primarily like QID and SDS and PSQ and SH.

3:17
That’s pretty much just shortened those and even some shorts on the Russell and all that jazz. But coming into 2023, there was really no reason to change the strategy and it was just a new calendar year, right? There was no reason to think, oh, we’re going to just go completely bonkers to the upside. Nasdaq’s going to rip like 35 plus percent.

3:34
Yeah, nobody was thinking that. So going into 2023, I was continuing to short the balances and stuff. But this time in like 2022, that wasn’t working. Even going against like solids, you know, resistance, overhead and it was good trade setups. It was just blew right through it. And a lot of it was because of your big tech stocks, you know, your Apple, your Amazon, your Netflix, your Google, your Microsoft, your Tesla, your NVIDIA and Meta, Those stocks just went absolutely crazy.

3:56
Now things have changed a little bit with a lot of those of late, but those first 6 plus months of the year, you’re going for January to like the end. Actually let’s say seven months go from January to the end of July. That was a crazy rally. And so there was a number of times where I was short on the market and I was just getting my, I’m gonna say I was getting my head handed to me.

4:15
I was just getting constantly tapped out on the risk side. So when you go into a trade, you have the risk and you have the reward. The reward is what you hope to realize on your trade. The risk is what you hope you don’t realize, but that’s the risk management side of it. That’s the stop loss portion to where if it does get hit, you’re out of the trade. And I saw a number of trades get hit at the stop loss side and I think a lot of it comes back down to is I was having a really good year for the previous year that was and I was winning a lot.

4:39
Winning a heck of a lot, felt good about myself. But I was probably winning too much. And as a result I was hit with that reality check too that I had to understand what was going on here that hey, you can’t rely, you can’t rest on the laurels from 2022. You got to recognize that the conditions are changing in 2023, and now things are actually starting to pick up to the downside again.

5:00
I’ve been shorting the market over the last few weeks and it’s been going well over the course of pretty much all of October. But the point of that whole story is, is that I came off of a year where I was winning too much. And it’s not that we should say OK, we need to win far less. We can’t allow ourselves to win.

5:16
We got to put in some real crappy trades here just to keep us from having even more crappy trades. I’m not saying that at all. But what I’m trying to say is our response to winning has to be measured. We have to talk ourselves down from where we stand. And like I said earlier in the podcast episode, this is more of a problem for men than it is for women.

5:33
Women are much more methodical when it comes to trading. And I’m not trying to whatever be politically incorrect or something. I’m just telling you what I’ve observed from coaching people, from same people in the trading block over the years. And it’s not like women are perfect traders either or anything like that. But I think sometimes they do make better traders though.

5:50
I think from what I’ve observed though, they don’t get hung up on the wins and losses. So if I get way up on a number of trades, like five or six in a row, OK, or let’s say 12 or 13 stocks are winning in a row, not all at the same time. Let’s say it’s spread across the, you know, a month or two. I’m going to feel pretty good about that next trade, that 14th trade, that in that 15th trade.

6:09
And as long as that streak keeps hitting, I’m going to feel pretty good about it. But then when that loss comes, what do you think’s going to happen? You’ll be like, no way this is happening. I don’t lose. Heck no, I don’t lose. And so it puts you in a position to have to choose between losing and admitting that you’re not perfect or throw risk management out the window and keep losing even more.

6:30
Because then when you take that first loss, if you’re not recognizing what’s happening, that this loss is just part of the normal course of events where as a trader you’re going to have losing trades and that your winning streak, if let’s say it was 25 winning trades. OK, that’s a lot. But let’s say it was that extreme.

6:46
Well, guess what? That’s an outlier. We talk about statistics, we talk about probabilities, we talk about all these different things in trading. We’ve got to look at it, our trading success in the same way we go on a streak of 10 or 15 trades in a row. Look at it as a statistical outlier that OK, it’s great while it lasts, let’s enjoy it, but let’s not let it ruin us to where we swing the pendulum in the opposite direction to where we can’t admit that we’re having a normal event here with a losing trade.

7:16
So you get the losing trade and all of a sudden you’re like, no, no, I’m not doing that. And you start to give back some of the games. Like, no, I was on such a streak. I was expecting myself where I’m currently at now to be, you know, 1000 or 10,000 or $20,000 richer. You can’t do that. You have to look at the fact that you’re going to there’s give and take and trade.

7:34
You’re going to win some and then you’re going to lose some. I hate losing. I really do. And this is a hard subject for me to even talk about because I can feel what it’s like even when I’m not on a losing streak. I know how. I think when I’m on a winning streak, it’s easy to get caught up in that.

7:50
You feel good about yourself? I feel like, hey, I’m a pro. I know what I’m doing. I’ve arrived and that’s what we have to avoid. We have to bring ourselves back down to earth. One thing that will help you, whether you’re in a losing streak or a winning streak, is swingtradingthestockmarket.com.

8:06
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8:21
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8:38
So there’s really no excuse not to sign up. I also think about streaks and basketball, and if you watch basketball at NBA college, it don’t matter. Let’s talk about it from Anba standpoint. There’s this guy on the Magic, Jalen Sucks. He frustrates me a lot because he has all the talent in the world.

8:54
He’s really good. Really good on defense too. But holy cow, he kind of becomes unhinged after he hits a couple of shots. And I think he could be a good shooter one day. But right now in his third year, he’s not a good shooter. I mean he’s like a 33% shooter from three-point range. His second year. I think 20 something percent in his rookie year wasn’t good.

9:12
He’s he’s not a guy that you want to have the ball in his hands a lot but they recently just started the NBA season the first game in one of his at first attempts at shooting a three, he drills it and then what do you think he did thereafter? Man he started just heaving them and I’ve seen it happen a lot. I’m a Orlando Magic fan. That’s nothing to really be proud of.

9:28
We’ve been to two NBA Finals in 35 years so we’re not getting much of A return for spending a lot of time watching them or going to their games over the years. Another guy that comes to mind is Dennis Scott. A really good 3 pointer, but freaking streaky as anything. I remember watching Dennis Scott growing up and this was like 90s right?

9:45
With Shaq and Penny Hardaway. Dennis Scott wouldn’t. He would start hitting these threes and you were thinking man, this guy’s on fire right now and he thought he was on fire too. And don’t get me wrong, the guy’s one of the great 3 point shooters of all time, but if he hit five or six in a row, which is a lot, I’ll give him that.

10:04
The dude didn’t know where to stop. And I remember there was this one game in particular where he was going for the record. And I think he adds up to like 12-3 pointers or 11/3 pointers, whatever The record was back in the early 90s and he still had probably like a whole quarter to play. But he started heaving the threes and he it was like he couldn’t accept the fact that they’re not all gonna go in.

10:23
And so he just kept heaving one after another after another after another. I think one of them did fall and he did get the record for a time. But it’s kind of like that with trading we we start getting on the streak and then we start thinking that we shouldn’t have any bad trades or a losing trade.

10:38
And then all of a sudden we don’t manage the risk and we start taking, I would even say more so than not managing the risk is we start accepting less quality trades. If anything, when we start seeing ourselves getting on these really good rolls, we should be a little bit more picky about the trades that we’re taking.

10:53
We shouldn’t start believing the hype behind our trades, thinking like everything. I touch, like this guy mentioned, the Midas touch. We can’t think like that. We’ve got to start thinking to ourselves, OK, we got to be a little bit more measured. We’re on a winning streak. It’s easy to to let that get to our heads. You got to talk to yourself about this.

11:09
You’ve got to talk to yourself through it and say, look, I’m not going to let this define me. I know this is a statistical outlier and I’m not going to let it affect my trades at the end of the day. So winning too much? Yeah, it can be a problem. It can be a huge detriment to your trading because what you end up seeing is a lot of frustration where the pendulum swings real strong in One Direction.

11:30
And then when that momentum wanes and you start to take less quality trades or lower quality trades, you start seeing that pendulum swing the other way. And then you start making stupid decisions. You start ignoring risk management practices and you try to get that money back that you lost, and that money continues to compile and you just keep taking worse and worse trades, trying to get that money back right away, maybe even double down or triple down on on existing losing trades.

11:51
I don’t know. But that’s what tends to end up happening. And then all of a sudden you get on that winning streak again. You start riding that wave of emotion and then it comes to an end. And so you find yourself on this pendulum that’s swinging back and forth and eventually you probably just blow your account out from something even more stupid. But what I want you to do is not do that.

12:08
Recognize it. Talk yourself through this whole issue. Go back in time and look at your trading journals and say to yourself, man, look at this time when I was up, you know, 5 or 6 trades in a row. What happened thereafter? How did the how did the results thereafter when that streak ended compared to what a normal losing streak would look like or normal period of trading would look like?

12:29
If I might win typically five out of every nine trades on in normal trading conditions, what did my trading look like then when I after I ended up pretty phenomenal winning streak? What did my trading look like thereafter? Was it an outlier as well? If so, you’re probably starting to believe your own hype and you need to straighten that out as fast as you can.

12:49
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13:07
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13:23
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13:45
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.