2023 Lessons Learned | Podcast Episode #383

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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.

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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.

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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.

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As we come near the end of 2023, one of the things that I like to do with this podcast is each year reflect on the lessons learned from a personal standpoint, from me, from my trading, and usually I’m pretty critical of myself, so bear with me there.

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But I think there’s a lot to be critical of.

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This year in particular, I found that this year was probably one of the more challenging, one of the more difficult years of trading that I’ve had in quite some time.

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And I looking back, I think a lot of it is understandable. Some of it I could have done better and there was just a lot of new variables that were introduced to this market that I don’t know if we’ve ever seen so much crazy change in one year for a stock market.

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So this podcast episode I’m highlighting the lessons learned from 2023. So no e-mail today, no questions being asked from listeners.

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Today is more of a self reflection. This is podcast episode 383.

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I appreciate everybody that has continuously supported this podcast over the years and I encourage you if you enjoyed this podcast and wanna learn more about trading to check out swingtradingthestockmarket.com.

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So check that out swingtranetestockmarket.com and in the process supporting this podcast. So I’ve got just a whole list of things to go over on this podcast episode.

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So years like 2022, I enjoy it because I didn’t do a lot of wrong things. I was like spot on all the time. 2023 Man, this is probably not my favorite episode that I’ll be doing.

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So first lesson, things learned.

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Better off letting the market news play less and less influence on my trading decisions. With of course the exception of earnings on the individual stocks.

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I’m not gonna hold a stock through individual earnings ever, but that’s at least from a swing trading standpoint.

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But from a market news standpoint, it can really mess you up on your trades. You can say to yourself, OK, we got CPI this week and PPI, we got Apple earnings and we got the FOMC.

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What day are you gonna trade if you’re going to be basing all your decisions off of these big events that are going to affect the market and then you get through these eventually?

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Like, man, they were really duds.

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Or they might have been really big and they might have worked out in your favor had you hold. Or you might have been stopped out.

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But either way, you probably would have been better off just ignoring them. And because half the time too, you get a CPI report where it shows inflation running hot.

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You get the initial move lower and then you take off for the rest of the day or it comes in that reflation is running cool and we still sell off.

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So it’s better off to look at for me, this is. And when I’m talking about this, I’m talking about it from my own swing training standpoint.

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The things that I’ve learned is that I need to let less and less these market risk events play less of a role in my trading decisions, less of an influence.

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The other thing, and I think this is probably a big one, is getting better at the market reversals before it used to be OK, you know we’re gonna sell off.

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You’re gonna short it while it’s selling off and then it’s gonna bottom finally and it’s gonna start to base.

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Well, not anymore. Well, I mean I shouldn’t say not anymore.

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We’ve seen plenty of V shaped bounces over the years, but even when you get AV shaped bounce, you’ll get like a little bit of a pullback at some point that gives you a better opportunity to get in.

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But with some of these rallies, especially the one off the November lows and the one that we saw following the regional banking crisis in March, it was straight up.

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I mean it was like no looking back. And so going into the November bounce or the late October bounce, I was short there for like the past month.

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I was doing really good, being short on the market join.

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I had one of my best months of the year doing that and then the market reverse will happen. I get, you know, taken out of my shorts, which is fine.

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I walked out of them with profits. I’ve been taking profits along the way as well.

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And then you’re like saying to yourself, holy cow, when do I get in? And so then going back to the first point of letting the market just play less of an influence on you.

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I see the FOMC statement coming out and I’m gonna go right, I’m gonna let this pass because we’ve already run pretty hard into the FOMC statement.

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And we’ve been, you know, selling on for three consecutive months and we’re just putting in probably a higher low.

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And then you get the FOMC statement and then like the last final hour of trade and we, you know, blow it up to the upside.

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And then you get this massive gap higher of like 2% the next day and you just keep on rallying from there.

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And now here we are in mid to late December and the market it’s still rallying since then it really hasn’t hardly pulled back at all.

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I mean you could barely get it a pull back on the hourly chart, much less on the on the weekly.

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I mean it’s rallied eight straight weeks, so better at the reversal. That’s one thing especially with the upside when I’m coming out of a short position, I need to get better at coming out of my reversals from the short side, recognize the change and get long a little bit quicker and not let it just keep playing out.

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Better at coming out of my reversals from the short side, recognize the change and get long a little bit quicker and not let it just keep playing out dip buying, now dip buying, something has been going on forever.

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People have been buying at the last 30 minutes. People buy especially. The more bullish the market gets the more aggressive people get with their dip buying, dip buying is ingrained in the market mindset post COVID.

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And I think with the reason for that is if you remember you were trading back when you had the COVID sell off. You had a significant moment of selling when they shut down the whole economy where the market dropped like 30% in the matter of like five or six weeks.

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And then you got this bottom when they started stimming the the crap out of the country.

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And then when the Fed injected all this money into the system and cut rates down to 0, the market took off.

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And I think a lot of people who bought that dip were emboldened here this year after 2022 to buy the dip again and then in late October to continue to buy it as well.

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So the dip buying is definitely ingrained in this market post COVID. Now you go.

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Before COVID, dip buying was always a popular strategy. Buy the dip, buy the dip, buy the dip.

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But even more so and even more aggressively here in post COVID.

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So the next two points are pretty similar.

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First one, don’t fight. the Fed really doesn’t have much worth anymore. When you see how successfully the bulls are able to fight the Fed despite the fact the Fed is telling you we’re gonna be higher for longer.

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Market keeps ripping higher. the Fed says, oh there’s probably gonna be like two to three rate cuts next year but don’t guarantee it.

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We’re not guaranteeing anything.

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And then the market price is in like 6 or 7. It’s like oh we don’t believe you.

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So market is fighting the Fed and they’re getting away with it and the the popular actually I’m from years past has always been don’t fight the Fed, don’t fight the Fed.

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And it’s true. I mean you know I mean in 2022 the market sold off while the while the Fed was raising rates that did work then but this year completely different.

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So that doesn’t doesn’t mean that it won’t come back into play again where you essentially you don’t fight the Fed.

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But right now that is not the case.

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And the market doesn’t believe the Fed until it proves otherwise because, and this is the second point, it doesn’t believe it because it has a track record or a history of bailing out the markets.

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But it happened during the regional banking crisis. the Fed jumped in and bailed all the regional banks out, set up the bank term funding program or whatever it’s called, which continues to creep higher every week here.

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And nobody’s really saying anything about that.

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So somebody’s blowing up behind the scenes and nobody’s wanting to tell us who.

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But the market doesn’t believe that the Fed will ever let the market go down so much that it wouldn’t intervene again.

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So there’s this backstop with the Fed.

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Some people call it the Fed put, and the market’s not going to believe that the Fed won’t cater to the whims of the market until it eventually shows that it won’t cater to the market.

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Right now it’s still caters. I mean, if you saw the last FOMC statement, Jerome Powell, probably the weakest Fed chairman that there’s ever been, weaker than Yellen, weaker than Bernanke, completely succumb to the market’s wishes.

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At the last FOMC and the market, he still even took it to further extremes than what he went to. He’ll say one thing, but then he’ll say a completely different thing during the press conference.

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So that’s been frustrating and it goes back to not paying much attention to the market news because the market news, it’s not that it doesn’t impact the market, but you’re better off just focusing on price and volume and following the price and volume then trying to incorporate market news into the technical analysis.

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At least for me kind of going through these a little bit slow, maybe I’ll pick it up before the end here, but the next one market is as inefficient as it has ever been.

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This goes back to the market fighting the Fed, the market putting in some crazy PES on stocks that don’t deserve it.

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Take NVIDIA. Yes, I know that they’re the leader on these chips with the AI and everything else, but they’ve got like, you know, triple digit PE ratios here, that it’ll take decades and decades for it to fully realize that potential.

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You got Apple trading at over a 30 PE. You’ve got just scores of companies that are incredibly overvalued.

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I mean just look at the 2023 chart for Costco, especially late in the year in the kind of run that it has made very inefficient market, very if you look at the going back to Costco, if you look at it and you look at their increases of memberships year over year and that’s where they make most, most of the money is from membership, yes, memberships are increasing, they’re increasing the stores and everything.

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What are they increasing to the extent that the stock price is increasing.

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So very inefficient market people are hyping themselves up to buy everything, insight and there’s No Fear.

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And that is because the market is as inefficient as it has ever been because a casino mindset is now ingrained in the market.

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You look at just professional sports right now. What do you see in almost every commercial?

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You see DraftKings and you see all these different websites, ESPN, which is owned by Disney’s trying to get into the gambling.

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Now, who would have ever thought those two would go together? Disney and gambling.

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Unless you’re watching the Pinocchio movie and you got parlays, man.

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People were blowing life savings on this stuff with the hopes that they’re going to make some money off of it and they can do all the disclaimers they want.

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That’s not gonna deter somebody from gambling.

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They’re not gonna say, well, I was gonna make this big monster bet on this game, but because Peyton Manning told me to seek help if I’m gambling too much, I think I’m gonna follow his advice.

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No, but that same mindset that you’re seeing in sports and how corporate America is seizing on the opportunity to jump on this gambling bandwagon.

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I’m not saying that it’s bad. I’ve played DraftKings before.

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I’ve lost every time because I think sports is probably one of the most unpredictable events that you can bet on.

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Just look at how difficult it is to win fantasy football.

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But in the same sense, that mindset has taken over Wall Street as well, especially among the retail crowd.

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Traders are obsessed with it.

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It’s another form of gambling for them. It’s almost like, you know, Eli Lilly, Tesla, AMD, NVIDIA and Apple is like their dream fantasy football lineup.

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If you could equate those to Patrick Mahomes, Travis Kelsey and Christian McCaffrey and Tyree kill all on the same team.

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That’s kind of what these people are relating these companies to.

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It’s almost like a fantasy football kind of a deal. And so the casino mindset has been ingrained.

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And that’s one thing that I have to be willing to recognize is that the crowd mentality is going to be stronger than ever because there’s so much more of the crowd in it and they’re desperate for gains in the very short term.

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That’s why they can run the market up 9–10 days in a row because they don’t know any balance to their degree.

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They haven’t been punched in the face yet.

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Like some of us seasoned traders have been punched in the face that realizes that risk reward does play a part in all this if you’re going to last for the long haul.

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So let’s now go a little bit away from some of my macro observations. I talked about how I need to be better at reversals and one of the ways that I can do that is start building positions faster.

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I don’t think I did a great job of that this year.

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I need to build positions faster. Even if I take on some losses in the early going, that’s OK.

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But when then when I get it right, when I do get into the trades, then I can continue to add more and more positions.

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And as the market continues to rally, I can have 7–8–9 stocks that’ll be in the portfolio. And yes, I might have lost in the first two or three trades, but that’s being far outpaced now by the 9 or 10 trades that are now profitable because I’ve been able to build My Portfolio up over time.

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So I need to build the positions faster, be a little bit more aggressive, and I probably wouldn’t even say a little more, probably a lot more aggressive.

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Now.

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That doesn’t mean I’m gonna go right now after eight weeks up to the upside.

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The market’s just, like, raging. I’m gonna be like, I’m gonna start adding all these new positions to the portfolio.

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No, I’m not gonna do that. I also think shorting is as difficult as ever.

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There’s just not a long enough window there to make it advantageous. I’ve had some decent short trades this year, but then when it’s over, holy cow, is it over.

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In 2023, when the window for shorting was over, there was no basing. It was straight back to all time highs over the course of eight weeks in such a phenomenal fashion.

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Something that is as crazy as I haven’t seen since really since COVID.

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But that was explainable because we are stemming the crap out of the economy right now.

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We’re not stemming anything in this economy. We’re actually going the opposite direction.

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But yet the market was able to beat the odds, bite the Fed and push it back up to all time highs. So that makes shorting very, very, very difficult.

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And I’ve done some podcasts this year and it’s worth going back to. Is shorting dead?

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I think I did two of them on that. And in many ways, yes, it is dead because there’s this belief and that doesn’t mean that it can’t eventually come back.

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Maybe it’s just on life support, but people have got to realize that they can lose money in the stock market.

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And right now everything just always comes back.

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Yes, you might take 40 or 50% losses, but hold on, it’ll come back.

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When you short stocks and you’re willing to go long stocks, then there’s three variables you’re playing with.

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You’re playing with longs, shorts and cash. How much cash, How much long or how much short?

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3 variables. When you’re just gonna be optimistic, it’s always gonna be how long do I wanna be, How much long exposure do I want versus cash.

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So if you’re not very optimistic at all, you go 100% cash.

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If you’re very optimistic, then obviously the Max optimism would be 100% unless you’re gonna go into margin, which I’m not a big fan of because when you see the market going up like it has over the last eight weeks, what other option is there?

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Right.

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That’s how it feels at least now do I think we’re never gonna get another sell off ever again? At 2022 was the end of sell offs?

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No, but you still have a fed unless you get a Paul Volcker back in there, you’ve got a Fed that’s gonna constantly accommodate the market.

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And one thing I don’t think I’d acknowledged early on, I thought it was just kind of a stupid phenomenon at first with the role of 0 DTE, it just sounded so stupid on the surface level.

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But then it became ingrained in the market and now most of your market activity on a daily basis revolves around options that are expiring the same exact day.

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So what does this all come down to? What am I trying to take from all this one?

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I think the biggest thing is I need to be more aggressive in the early stages of a little market of adding positions.

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I need to do that much more, even. It means that the first few trades I don’t get right.

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Ultimately, when that bull market rolls around, I’ll be in a good position to seize upon it. Does it mean that I won’t ever short the market?

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That’ll be something that I don’t think I ever give up completely. But I’m gonna be much more selective about what I short and when I short.

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Because when the market finally does reverse, it can be hard to get back to the long side because you’re looking for that opportunity to short the dead cat balance.

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And if it doesn’t come, you’re on the outside looking in. I also think, too, that I want to do a better job, and I talked about this in a previous podcast here, I think last week maybe, or the week before about scaling out of losers.

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But I think too that along the way I can scale out of a losing position. I did that some this year, but I didn’t do it entirely enough.

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But I found that when I did do that, actually the results were much better. Oftentimes gave me enough time to stay in the stock to where instead of just completely getting out before the stop loss ever hit.

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Sometimes when the stock starts to move against me and it’s like a head fake on a bull flag and it falls back into the pattern, like screw it, I’m gonna get out of it.

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It might not be a bad thing just to sell a third of it or sell 1/2 of it and then wait to see what it does.

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Sometimes it’ll come right back and it’ll make enough to offset the small loss that you took early on.

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So I think that’s another thing that I need to be a little bit more aggressive about in 2024 is scaling out of losers instead of just completely settling out of them all together before the stop losses hit.

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Because I’ll do that often times when I feel like that the market conditions are changing on me and that or something’s gone wildly weird on a individual trade.

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I’ll say OK, I’m gonna go ahead and just get out of this trade and see step back and see what happens.

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Sometimes it doesn’t hurt to just get out of it a little bit longer. Just like scaling out of a winning position can give you an opportunity to to ride the stock much higher than you ever thought.

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Scaling out of a losing position gives you the opportunity for the stock to reverse and go much higher and reduce some of the emotions in the process.

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So that is my lesson from 2023.

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One of the things that I don’t shy away from is like these are things that I’ve learned over 2023. I encourage you to do the same in your own trading.

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Like when I mess up, I take ownership of it, I learn from it, and it’s an opportunity to do better in the future.

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Like 2024, I’m excited about, I’m optimistic about. I’m ready to seize on those opportunities that 2024 has given me.

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And a lot of those will be because of the lessons that I learned in 2023. There was a lot of good winning trades, There were some losing trades, There were some head scratchers that I had from a trading standpoint.

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I was like, why did I do that?

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Why did I buy that stock? Why did I short that stock?

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But in the end it all builds on having a better 2024.

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So if you enjoyed this episode, I would encourage you to leave me a five star review and check out swingtradingthestockmarket.com and send me your questions ryan@shareplanner.com I understand your struggles.

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I’ve been there. I’ve probably made worse mistakes than you have.

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So send me your questions. And I would love to make a podcast episode ryan@shareplanner.com.

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I’ll read them and do my very best to give you your own podcast episode. Thank you guys and God bless.

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If you have any questions, please feel free to e-mail me at brianshareplanner.com. All the best to you and I look forward to trading with you soon.