Trading Within Your Means | Podcast Episode #397

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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. 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 in.

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Today’s episode, I’m not doing an e-mail, I’m doing a topic that I really don’t want to wait for an e-mail on to be able to talk about it, so every once in a while I’ll get inspired on a particular topic that I’m thinking to myself, man, I need to do a podcast episode on this thing as soon as possible and there’s no guarantee I’ll get an e-mail from somebody ask me about it.

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So I go ahead and make the episode myself. I don’t have an e-mail today. I don’t have any fancy order red like names to assign the person who sent the e-mail. I’m just doing this off of a topic that I want to talk about and that’s trading within your mean and I think this is something that. Golly, it really escapes I would.

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Say most traders honestly if. We were to. Truly be honest with ourselves if we. Were truly look at how we approach. Trading. I think most people would say we do not trade within our means.

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That doesn’t make you a bad person. It just may be that you’re doing something without realizing it.

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It may be. That you’re just have too high of. Expectations for the money that you’re trading and surprisingly you would think that new people coming into the stock market.

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That they wouldn’t be as. Gung ho about oh, I’m going to turn this $1000 into $25,000 so I can get rid of the PDT or the patterned day trader thing or I got this $25,000. I’m going to turn it into six figures.

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Well, I got 100,000. I’m gonna turn it into a million.

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It’s really misplaced expectations and approach to trading that doesn’t fit within the means of the the.

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Capital. That you’re actually trading, I mean.

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People will have a few good trades, few. Good winning trades.

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And then all of a sudden they’re like, oh man, this accounts going to explode to the upside and you hear.

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The stories you always. Hear the stories.

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I remember when I was in high school, I had a teacher named Miss Mills and she was doing a stock market unit with us.

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And she would. Always talk about the stocks if you would have bought.

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This stock when it was trading at 2 pennies a share and I think the example back then was. Yahoo.

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Yahoo. When it was trading at and it’s not even trading now anymore, but back then when it was trading at.

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like a few pennies back in the 90s if you would have. Bought it.

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It was worth millions of dollars. Now if you would have bought $1000 when it was trading in the pennies.

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And so you hear about that stuff. And so that gets ingrained in our head because of that whole theory of compounding.

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And yes, it’s it’s an amazing thing. But the odds of?

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Hitting a stock, trading at a few pennies a share and saying, you know what, I’m going to hold this thing forever.

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Is very very unlikely, because the more than likely what you’re going to have happen, the stock goes up, you know, from a couple pennies. Let’s say it goes to a dollar, OK. And you’ve made an incredible return on your trade.

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And then it goes from a dollar down to $0.80. You’re going to be cashing out. You’re going to be cashing out. You’re not going to be like, Oh no, no, I’m holding. I’m holding until it gets to $200 a share. No, you’re going to be sold out.

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I’m telling you that’s it’s human nature. Nobody holds a stock from a couple of pennies all the way until like 200. I’m not saying that it’s never been done before.

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But it’s like basketball the likelihood of you being the next Michael Jordan, or the next Larry Bird, or the next Kobe Bryant or the next Shaquille, O’Neal is very, very unlikely now, if you’re one of those folks that are listening that I just named that are listening to this podcast, Congrats.

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But by and large, none of us will ever have that kind of a talent. And by and large, none of us will really ever have that kind of a trade either.

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I’ve never had a trade that I’ve taken from a couple pennies to hundreds of dollars and I don’t ever expect to. But that’s what they taught us. When I was in high school in Mrs. Middle’s class and so we get into trading for the first time and

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we think we’re gonna make it big. We think that. Hey, after a few. Couple winning trades and I swear there’s something about beginner’s. Luck that just. Blows my mind.

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Often times you’ll get a new trader and their first few trades are just incredible. And then that’s where they’re almost signing their own death certificate. For their capital.

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Because the confidence is unhinged. At that point, they start making the spreadsheet. You’ve heard me in other episodes where I talk about Don’t make the spreadsheet, don’t make the spreadsheet.

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Because what everybody starts to do is like. Oh, if I make 10% on every one of my trades going forward, if I make 10% per trade by the time I’m 30, which?

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Is like a couple years away. Not for me, the person, person. I’m imitating here. By the time I’m 30, I will.

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Be worth millions of dollars. And they’ve created. That spreadsheet that shows how what looks like just some. Pure simplicity of like, oh, just 2% per trade or 3% per trade or you know if they’re like the 10%

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or whatever, you know, they essentially what I’m trying to say is they think that they’re just going to. Get loaded with. Capital and they’re starting with like $1000 we want to make.

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Riches. Out of nothing, you know, you hear. That that theory that. You know, it’s it’s hard to make your first million dollars.

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But after that. It’s much easier to make your second million or you take NVIDIA for instance, it took 24 years for. It to get.

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To 1 trillion. But then that went from 1 trillion to 2 trillion in eight months. What?

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But yeah, that’s very true. The more that you have, the easier it is to make more. And so when you’re making $1000, trying to get to $1,000,000 from $1000 is gonna be very difficult. It’s gonna take time.

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You’re gonna have to put some more of your own capital into it because the odds of you making it from 1000 to 1,000,000 is just very unlikely.

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I mean, you would have to get so incredibly. Lucky you’d. Probably have to have insider information. Which is illegal.

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To be able to cash in on some way out of the money options, and even then there’s a good likelihood you won’t get there, but trading is.

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Meticulous. It’s. Something that’ll make you wanna. Pull every last. Strand of hair. And trust me, I’m losing it at a rapid pace right now.

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But you can’t have these misplaced expectations about what you’re going to be able to get out of your money.

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And So what that does in order. To get there, we have to take huge, huge. Swings from the market. Now let’s say you’re trained with 100. $1000 portfolio.

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What most people will start thinking about when they have $100,000 in the market is how can I get it to $1,000,000?

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How? Can I get? It there as fast as possible, and So what they do is they take some big swings they’ll start getting into.

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Leverage 3X. ETFs. They’ll start trying to short things, or they’ll try to start buying call options way out of the money.

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Or they’ll. Try to buy the dip. Every time they can. And then they won’t use position sizing because they want to go all in on the trade.

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And why are they doing that? Why are they taking the big swings?

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Because they’re trying to make more than what they should. Realistically expect.

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From their portfolio, I’m not saying that you’re not going to have some amazing trades in life that won’t go up 100 or 200% on some of my long term investments just from October of 2022 have been

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phenomenal. Back in 2022 I bought AMD at like 59 dollars.

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Now when I got into it at the time I was not expecting it to go to, you know, whatever it is like now, like $180.

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But I also wasn’t swinging for the fences on it either. I didn’t even get a full position like I would have loved to have had.

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I was adding it over the course of time. My average buying price was around $59 and I never got the full position.

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I got a good position, but I never got a full position. And so yes, you can make some good money long term from the stock market.

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You can have some trades. That double, triple, quadruple for you.

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But often times where we. Try to. Trade way beyond our means. Of what the capital is capable of.

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Is when we start trying to get into taking these big swings, these big swing trades, not long term investments, big swing.

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Trades with leverage. With the belief in the very short period of time, it’s going to give me a lot of money in return,

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and that’s really not likely to happen. What’s more likely to happen is that you’re gonna blow out your account, you’re going to lose most

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of that money that you put into it that you’re gonna panic sell at. The worst possible.

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Time. And then you’re gonna watch. The market actually do what you expected it to do, but without you.

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And that’s because you’re not trading within your means.

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I tell you what would be a great goal instead. Of trying to get $1000 to become $25,000.

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Try to get $1000 to become $1400. Try to get $25,000 to become $40,000.

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Try to get $100,000 to be 130,000. Dollars because.

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When you start over leveraging, when you start trying to shoot for the moon, you don’t take profits when you should be taking them.

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You don’t take losses when you should be taking them, and you’re simply just holding onto your positions far too.

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Tight this past week we saw. Bitcoin form A.

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Beautiful, beautiful bull flag. Pattern broke out of it and in the last three days it’s been amazing.

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Huge run to the upside if you bought into something like IB. ITI bet it’s a ETF for.

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Bitcoin, you did amazingly. Well, but.

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In the end, that is. Just a trade.

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Even if it goes up 100%. From here it is just a trade.

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It’s not something that you need to be basing your whole entire life’s future on. You don’t need to be over leveraging on.

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You don’t need to be saying to yourself this is the one and only trade that I’ll ever have to make because it’s going to make me all the money that I’ll ever need.

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And there’s a lot of that mentality with Bitcoin trades right now. In the end it is just.

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A trade? I even saw tweets today, people getting into it.

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And then I saw tweets that were like, the next time that I sell Bitcoin will be when I’m at a cafe buying a Starbucks.

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Latte. What is that?

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That’s a motion that is a. Person with misplaced expectations Who doesn’t see?

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The trade as just a trade. Becomes married.

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To that trade. He’s taking a big swing with that trade.

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His validation is through that trade. But let me tell you one thing that you won’t have to over leverage your capital in order to be able.

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To use. That would be swingtradingthestockmarket.com a.

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Really cheap service. Like I said, you don’t have to leverage yourself to be able to afford it.

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Very cheap service. That goes alongside.

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Of this podcast. It’s a really cool feature, that.

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Provides you with all my stock market research each and every day. That’s gonna be my.

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Daily Watch list, that’s. Gonna be stocks from my master, bearish and bullish.

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Watch List Watch List Reviews Big Tech updates. Updates on the market.

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Just a really phenomenal service in the process. You’re supporting this podcast, So I.

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Really do appreciate if you check. It out swingtradingthestockmarket.com.

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So we start taking these big swings with our trades. We start over leveraging ourselves because we’re not trading within our means.

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We’re we have misplaced expectations when it comes to our capital and so we don’t sell at the most. Obvious places to sell.

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We need these trades to win and we need them to win big, so we don’t give up on them. I mean think.

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About all the people. Who are trying to do the diamond hand stuff with GameStop in 2021 and AMC?

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I mean, where are those stocks at now? Holy cow, some of those people.

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Probably had tons of money, but because everybody was telling them to hold on, that we’re sticking it to the man.

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And trust me, I love the movement. In hindsight, I was.

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Probably a little. Bit hard on the people because I thought you know the way you’re managing trades is just.

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Absolutely stupid. You know you’re not selling, you’re up 100 or 200% and you’re gonna take a loss.

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And they did, most people. Did.

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But looking back, I I mean, I love the movement. I love the message that they sent.

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But golly, it was. Such a conflict within for me because I’m watching people just like not take profits when they

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should have been. Because they looked at it also.

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As more than just a trade. It’s just a trade.

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And so when the trade becomes. Very, very profitable.

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When you’re up 1520%, you fight against that notion that it’s not just a trade, that it’s more than a trade, that this is a life changer, that this is something that’s going to set the course for

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future generations of children that come from my family tree line. You can’t.

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Look at it, it’s just a. Trade and the inability.

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To wait for that portfolio to. Grow over time, instead of wanting that thousand become 25 and that 25 become a hundred, and that

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hundred become a million. There’s an inability.

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To wait. From needing something now, we want the returns right now.

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So we’re taking the big swings. We’re taking the.

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Over leveraged. Positions.

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We’re not paying attention to position size you take. A day like.

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Today I’m recording this podcast on the evening of February 28th that the trading session of 2024 too.

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At the trading session extremely boring, the volume extremely low. I mean it.

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Was so slow. Paint drying was more entertaining endeavor for the day.

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That kind of boring. Yet people felt the need to trade.

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They had to trade something. There was trades that I was looking at that man, I really want to trade them.

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But the market conditions are not right. But if I needed something out of the market today, if I needed something for my trading right now,

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instead of waiting for the the next right opportunity, I would have taken the trades and I would have lost money on those trades.

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We have to be level headed about what our capital is capable of. We.

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Cannot believe that our capital can just magically turn, you know, a few $1000 into millions of dollars.

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The odds of that? Happening is stacked against you and what do we talk about in trading not to go into trades?

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Where the odds? Are stacked against you to be of a mindset where you have an edge, where you can manage the risk.

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When you start to aim for the fences, you’re not doing any of that. Stuff you’re.

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Blowing your capital instead, there’s a. Video that I saw, I don’t know, probably last year was a hilarious video, but it was like this.

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Guy, he was leaning up against the garage Doors cracked open a little bit enough for you to be able to slide something underneath it.

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So. The guy’s.

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Soft drink rolled underneath the garage door. He’s like, man, well then all of a sudden there was two soft drinks that were sent back underneath

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the garage door to him. So he had two soft drinks.

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So he’s like, huh, So he threw a sandwich back underneath it and in return he got two sandwiches. And he’s like, I kind of like.

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This threw his. Hat. And he threw more soft drinks and he threw his sandwiches underneath there, and by golly. He got a.

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Steak dinner, and he got a bottle of wine and a rare bottle of Kentucky bourbon. I don’t remember exactly what he’s got, but I’m just kind of explaining the story of what it.

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What it? What it’s essentially like and then.

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He starts to throw. A wad of cash and he gets, you know, twice the amount of cash back.

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And he’s like trying to find everything he’s got to throw underneath this garage door. And before you know it, he’s got a lot of stuff that that has come back underneath this garage door

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back to him and he’s, he’s loaded to the Gill now. He’s got a lot to go home with.

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And so he then takes all of that and sticks it underneath the garage door and the garage. Door shuts and.

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People say that’s kind of like the stock market, and it is. That garage door.

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Illustration is so spot on and that’s essentially like when you blow up your account and so. If you over leverage yourself.

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When you have misplaced expectations, don’t think about I talk enough about stop losses, you guys know.

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All about that but. What I want you to take away from this podcast episode is misplaced expectations.

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For what? Your capital is capable of.

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Especially in the short term, I’m not saying that $10,000 can’t grow into, you know, a couple $100,000.

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Over the. Course of many decades.

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And I’m not saying that you can’t become a really good trader, that you can’t expedite that a little bit faster.

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But especially. When you’re starting off, don’t have misplaced expectations.

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In fact, don’t have any expectations except to manage. The risk to treat every trade as just a trade to have.

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Position sizes. That are.

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Accommodating your personality and your style of trading, because when you do that, you’re far. More likely to hit your goals.

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Than you will by taking the big swings. You can miss a lot of times when you’re managing the risk.

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You can have a lot of losing trades, but if you swing big, you can’t have any. You have.

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To be spot on every single time.

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If you enjoyed this podcast episode, I would encourage you to leave me a five star review.
I really do appreciate those on whatever platform you’re listening to, whether it’s Apple, whether it’s iHeartRadio, whether it’s Amazon.

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Or Google, whatever. Platform Just leave me a five star review Spotify.

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I really do. Appreciate those and make sure to send me your questions ryan@shareplanner.com.

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I do read them all. I love hearing from you guys, hearing your stories.

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Your problems, What troubles you? Let me know I’ll be.

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More than happy to make a podcast that’s sewed out of. It and don’t forget to check out swingtradingthestockmarket.com.

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Thank you guys. And God bless.

16:13
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16:22
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16:27
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You have any? Questions.

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Please feel. Free to e-mail me at ryann@shareplanner.com.

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All the best to you and I look forward to trading with. You soon.