Coming Back To Trading | Podcast Episode #388

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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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And today’s episode we’re going to talk about a person coming back to trading. What should that person think about know about what are the challenges ahead for a person that left trading because of some difficult situations pertaining to trading?

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Unfortunate lessons that had to be learned.

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And then now it’s coming back to trading. What’s the take away there?

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What should we be talking about? What should we be encouraging that person to think about as he makes his way back into the world of trading?

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As always, I never use people’s real names.

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I always give them a fake Florida Redneck name. And this instance we’re going with Pearl May, Pearl May, writes Ryan.

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And by the way, this is kind of a long e-mail, but it’s good to tell the emails. It gives you understanding of what other people are thinking and what other people are feeling

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because so often when we’re trading, we’re just in front of our screens. We don’t see the emotions out there from other traders.

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So one of the valuable aspects of this podcast is being able to see the questions and the emotions that other people are sharing.

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And they can write that stuff to me because they know I’m not gonna give away the real identity.

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The only thing that’s not authentic though is the name that I use in this podcast. So Pearl May writes Ryan first thank you for what you’ve been doing with the trading community.

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I have been binge watching your YouTube videos for the last couple of weeks, probably 100 or 50 so of them completed so far.

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Additionally, listening to your podcast on my daily 50 minute commute to and from work, I find them refreshing in the fact that you are not hyping the outlandish get rich fast buy Here Now promotions

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that are plagued within the market. Thank you for that.

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I can’t say that I’m new to the stock market, but I will say that I am inexperienced. Much of my experience education were paid for directly from a small TD Ameritrade account that I had

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several years ago. Fortunately it was not a vastly expensive education but was to the detriment of the account I was

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working with at the time. I wish I had found your podcast back then because I literally covered and experienced most of your

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do nots first hand, lol. Education and experience can be both expensive, but it’s what we take from them that determines its

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value. Wow, that’s actually pretty deep, right?

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I mean, you can have all the experiences in the world if you don’t take value from them or you don’t take the lessons learned from them.

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What what good were they? All right, so Pearl May continues by saying With all of that said, I’m wanting to open and refund a

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small account with $5000 or so to start trading. In several of your podcasts, you’ve mentioned various brokerage accounts that you have tested and

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used, and was hoping that you might suggest one or two that you have experienced with and liked its functionality.

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I’m not looking for something like Robin Hood as it seems to be missing a lot of tools. I also enjoy the charting and the analytical side of trading, so I would be liking to something that

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has those abilities without overcomplicating it for a noob. I do still have the Ameritrade account now owned by Schwab, and I like the Thinkorswim platform that

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I used previously. Commissions were like $10 a trade and I didn’t know any different charting software out there, so

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that may date me when I first used it. But I do like the T21O8 indicator and from what I can find it’s proprietary to TC2000 software.

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TC 2000 seems to be a user friendly powerhouse with analytics for a monthly fee and the brokerage gets you a discount but also charges a few dollars per trade.

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Is it worth opening the brokerage account with them and using TC2000? Any suggestions are greatly appreciated.

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I know you’re very busy but I’m just hoping to restart on the right foot. Also intrigued to learn about your stock market oscillator?

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I genuinely respect the approach that you are taking with trading and promoting discipline versus the typical billionaire in 60 days at 30 minutes a day.

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My overall goal as a part time trader is to trade regularly but learn while building an account over the next 12 years or so, hoping to have a modest account by then that I can continue to trade and

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that will provide some additional income to my retirement portfolio. I’ve been a career paramedic FF in the 911 world since I was 19 with almost 28 years in and now

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serving as Chief Officer for the last five, I find myself looking to the next chapter of my life after work.

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Again, thank you for your time and service that you’re providing the training community. I look forward to learning from you sincerely, Pearl May.

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OK. So there’s a lot to talk about.

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And the real emphasis here, it’s not so much the specific questions that he’s asking, but the fact that he’s coming back to trading.

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And that’s really what I want to highlight here because when we look at 2020, I was reading a stat on this the other day in 2020, when everything started shutting down for the COVID lockdowns, 10 and a half million people opened up trading accounts.

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That’s a lot of people and a lot of people probably opening up trading accounts that didn’t know what the heck they were doing.

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And then in 2021, another ten and a half million people opened up trading account.

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So you’re talking about like what 21 million people that are jumping into the stock market. And I would say in 2022 a lot of those went away never to come back again.

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But we have one here, Pearl May coming back into the stock market. So I want to spend some time talking about what we should be thinking about as we come back into the stock market for another attempt at glory.

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First though, a few housekeeping items here pertaining to the questions in this e-mail.

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One, I like to use thinkorswim for my swing trading. That’s that’s one of my favorites.

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If I have to choose another one, it would be Fidelity. I think they’re pretty good as well.

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I do use a separate charting platform outside of them. I think both of them do have adequate software programs that are included.

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But I do like TC 2000 for one of the reasons. The T21O8 indicator is one that I I use and I really like a lot.

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That measures the percentage of stocks trading above their forty day moving average. Now there’s probably other platforms out there where you could probably code something that would give that to you.

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You probably could figure out how to code it in thinkorswim for all I know.

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I’m not sure. But and then I also like Fidelity.

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I think their their order entries are pretty good. I I think I get good fills when I trade with them.

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So I’ve always liked those two and a lot of it’s just more from familiarity more than anything else. When I first was working in corporate America, I had a Fidelity account, so I got familiar with it

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there. And now I use my long term accounts in Fidelity.

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So I think they’re a pretty good outfit. And thinkorswim I mainly use for my my swing trading and there’s a couple of compliments that he

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paid towards me about not being the person that’s over hyping stocks or you know, pushing a get rich quick scheme.

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And why is that? Why is it that I don’t do that Not to brag on myself that’s not what I’m intending to doing.

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But it’s really focusing on on so many of the charlatans in the industry that are out there to give you false hopes.

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One of the things I don’t want to do is give you false hopes. Trading’s very hard.

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Trading’s very difficult. It’s mesmerizingly taxing on the brain.

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I’ve broken mouses before or mice. I don’t know what you called the plural of a mouse, but I guess it’s mice, right?

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I mean, it would make sense. And then I’ve also broken keyboards over the years.

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It can get frustrating. It can get emotional.

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So I’m not gonna tell you on the hype. Oh man, you can do this stuff in 30 minutes a day or 15 minutes a day.

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And there’s plenty of websites out there that will try to tell you that. And probably what you’re gonna find is that it’s just going to be a dumpster fire for your portfolio

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because you’re gonna lose a ton of money in the process. If you have a system that will allow you to work a couple days a week for 30 minutes a day, that

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would probably be the Holy Grail of trading. And we all know that the Holy Grail of trading doesn’t exist.

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In fact, if there was one thing that I would say that would be the closest thing to the Holy Grail of trading would be managing the risk because that will keep you in the game.

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Now coming back to trading, there’s probably going to be a lot of people enticed to come back to trading.

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They they might have blown out their accounts in 2022. They missed out on a lot of the run from 2023.

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They saved some money. Turn that time and now all of a sudden they’re thinking to themselves, hey, look at the stocks.

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S&P 500, all time highs. NASDAC 100 all time highs.

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They look at the Russell, they probably don’t care. They see NVIDIA trading at +600.

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Netflix just had blowout earnings. Man, what a time to be in the stock market, right?

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So all of a sudden with the market at all time highs, a lot of people who blew out accounts the first time around are suddenly interested in getting back into the stock market.

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So with the market new all time highs, let’s ask ourselves a simple question. Why do you want to come back?

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Because isn’t the very act of coming back into the stock market right now at all time highs kind of like chasing a stock?

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You’re in essence chasing the stock market by getting back in. And that’s OK because usually the reason why we get into the stock market originally or, you know,

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for a second time around or a third time around isn’t usually for the best of reasons. But despite those motivations, if we can condition ourselves to manage the risk to be not one that

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just tries to yellow into every popular stock and everything that might take place throughout the course of the day, we might have a fighting chance.

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Because whether the market moves and continues to move higher from here, we’re at all time highs. Maybe the NASDAQ runs another 5000 points or the S&P 500 runs to 6000, but maybe it doesn’t.

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Maybe the S&P goes back down to 3000. Maybe the NASDAQ goes back down to 10,000.

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Whatever the case, whether the market moves higher or the market moves lower, you want to make sure that you remain steady.

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And by steady, what does that mean? It doesn’t mean that you get caught up in the euphoria, even if that’s why you’re coming back into

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the market, because you see the markets at all time highs. You feel like you’re missing out on something.

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Once you’re in it, you have to make sure whatever the market does, that you remain steady, that you’re not chasing, that you’re letting the opportunities come to you, that you’re doing things in

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such a way that manages risk, that keeps you alive to trade for yet another day. There was a book that I’ve read probably, gosh, I want to say, about 20 years ago.

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And it had a huge impact on my life. It was called ordering Your private world has nothing to do with the stock market.

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But there was a part of a book where it talked about a boat captain. And he’s out at sea and his boat is being tossed around by the waves, and everybody on the ship is

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panicking. The crew, they’re going to the captain, they’re saying, and they’re panicking.

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And there’s like, what are you going to do? What are you going to do about it?

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He has this incredible calmness about him. He knew his boat.

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Things were in place to weather the stormy seas, and so his private world was in order. And just like the captain was able to stay calm despite the stormy seas, despite the waves that were

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crashing up against this boat, we as traders have to approach the market in such a way that whether it moves higher or lower, whether we’re facing the stormy trading markets on a day-to-day basis,

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there’s uncertainty all around us. We don’t know if the Fed’s going to cut.

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We don’t know if inflation is going to get tamed, don’t know if there’s a recession on the horizon or if we’re going to have a soft landing.

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Our private world has to be in order. Our trading strategy has to be in order.

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We have to be managing the risk. And if you were able to do that, then yes, a certain calmness prevails.

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And you’re trading because when you come back into trading after being out of it for a while, you don’t want to be wiped out by the 1st hiccup or or in the case of the boat captain, by the 1st wave that hits your the side of your boat.

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You don’t want the whole boat to just sink. And like trading, you don’t want the first trade that doesn’t go your way to wipe you out because you weren’t managing the risk.

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So we got to keep that in mind. My next question would be is how will you manage the risk differently this time?

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We all manage the risk in some way. It’s how we manage it that’s the most important.

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For some people, it’s buy and hope. Yeah, I’m down 50% on the stock, but if it gets back to break even, I’ll get out right.

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You turn that swing trade that was supposed to get you like maybe like 10% and now it’s a 50% loss. What kind of horrible trading parameters is that, right?

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A one to five reward to risk ratio, that’s that’s not good. So how will you manage the risk differently?

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Because it’s the inadequate levels of risk management, of proper risk management that drove you out the first time.

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It definitely wasn’t winning too much that drove you out. It was how you manage the losers that drove you out.

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And not only just the losers, but then when you do have a winning trade, you have to make sure that you’re managing the winners as well.

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Risk management doesn’t just begin and end with losing trades, you also have winning trades that you have to manage the risk on as well.

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But ultimately, what is it that drove you out Because you probably had such bad trades, such horrible losing trades that it wiped you out of Commission.

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So let’s focus on that. What are you going to do differently this time to manage the risk that you didn’t do last time?

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Because if it was working out great for you, you never would have left. If you were making $1,000,000 a year swing trading stocks, you would never have left.

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You wouldn’t be like, yeah, this trading’s just not for me. No, you would have loved it and you would have stayed in it.

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So what did you do wrong with your losing traits that wiped you out? What did you do there that was so wrong?

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Focus on that and make sure that you don’t do it again. It could be that you were going too big on your position sizes, you were going all in on every

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trade, and then you have one bad trade and maybe it’s something that was completely out of your hands.

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Maybe you got into a stock that was trading at 100. They came out with, for instance, this past week.

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Adm right, Archer Daniels. Very steady, value driven.

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Stock. Doesn’t garner a lot of headlines, doesn’t make splashy moves.

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There’s like suspicion of accounting fraud or to something to that degree executive gets laid off. I don’t know the whole story behind it, but the stock plummets.

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It goes from 68 down to 52. Now let’s say that it had a good swing trade that was setting up and I had gone along on it the day

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before this news came out. Is that something that I can come back from?

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Yes, it is. But it’s gonna be very difficult to come back from it.

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If I was 200% long on a trade using leverage, yeah, that’s gonna be a real humdinger. But if I was managing trades, like, let’s say 10% of My Portfolio was on it and I’m losing plus 20%,

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yeah, that’s gonna stink. But if I’m I’m putting like 10% down on the trade, that’s about 2% of My Portfolio.

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And yeah, I can come back from that. That won’t ruin me as a trader, but if I’m let’s say I’m 200% long, let’s just say I have $5000

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account, I got 2 to one margin so I go $10,000 long on this stock. I just lost 40% of My Portfolio.

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Do you see the differences in risk management here, how it can wipe out one but depending on how your position sizing.

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So we have to ask ourselves what are we going to do differently this time around when we come back into the market and let’s look at it as a process, Our trading will be defined as a process.

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It’s not going to be getting right back into the market and being successful right out of the gate. It’s not gonna happen that way.

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There’s gonna be trials. There’s gonna be times where you wanna revert back to your old ways.

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So this process is really broken down into three areas, our growth and education. What are we learning?

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For instance, how are we applying new skills? What skills are we trying to attain?

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What is our strategy and how are we gonna better that strategy? That’s the educational process that we have to focus on.

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The second area is the trading process, making sure that our emotions are staying in check, that we’re not doubling down on losers.

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Instead of taking a small loss on a trade that didn’t go our way. Are we following the process?

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Are we following our strategy? Are we following our disciplines here?

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And then the third one will be the results. The results are gonna be a process, too.

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You go into it thinking that I’m coming back into it, I’m gonna turn this $5000 into $10 million. You’re gonna get wiped out again.

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OK, Just a matter of fact. The results are a process.

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The better you get at trading, the results should improve. So the results will improve over time as you become a better trader.

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We covered a lot in that podcast episode. So if you’re coming back into trading, I hope that it’s a successful experience for you and that you

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continue to manage the risk. You enjoyed this podcast episode.

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Please make sure to leave me a five star review. Those things mean the world to me.

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Check it out. swingtradingthestockmarket.com Send me your questions, send me your emails.

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Cuz I wanna hear from you guys so I can make more podcast episodes. Because this podcast relies on your questions, your pain and your agony.

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Your suffering. We need to hear those stories.

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I want to hear about them. If you have questions, let me hear what you have to ask.

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We’ll make a podcast episode out of it. All right.

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Thank you guys. And God bless.

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