A Bad Losing Streak | Podcast Episode #411

0:06
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. You can succeed at the stock market and I’m ready to show you how.

0:34
Hey everybody, this is Ryan Mallory with Swing Trading the Stock Market. In today’s episode, we’re going to talk about a really bad losing streak here. The email that I received is from a person in Australia and of course to conceal this person’s identity. I like to give them a good old Florida redneck name being that I’m from Florida and got a little redneck in me anyway. So give this person the name Betty for a Florida redneck name.

0:56
Okay, so Betty writes, Hi Ryan, first, thank you for reading my email and thank you for all your informative podcasts. I’ve listened nearly to all of them and learned a lot about swing trading strategies. I am a woman of my sixties. That’s her, not me, just for clarification. Trying to become successful at swing trading. I live in Australia and I have wanted to join your group, however, with the time difference. I’m not sure that that would work. It actually would, believe it or not, you still get the information.

1:21
But in any case, I have not invested very much in the U.S. market and both of my attempts have failed with stocks plummeting Pfizer during COVID-19 and just recently Amazon, just as the heat has come off of big tech stocks. I have had moderate success with the ASX Australian market, but most recently I have had a run of losing trades, 10 plus, and have lost some confidence in placing trades as I seem to be getting burned all the time.

1:44
I am losing with good stocks with market caps over $2 billion and an upward trend and some of the stocks that I’ve held have just triggered my stop loss and then the stock has gone on to jump higher. I think I am either timing my entry point incorrectly or having my stop loss too close at 3%. Would you consider giving me your wisdom on what to look for in an entry point? Is it the candlestick formations or moving averages or both? If you are able to help, I would be very grateful. I am also going to enroll in your patterns to profits course to see if it can help improve my track record.

2:15
These are some of the most recent failed attempts at my swing trading. I bought Amazon on April 9th at $185.37. I got stopped out on April 18th for $181.55. I bought Karoon Energy on the ASX market, Symbol KAR on April 11th for $2.31. I got stopped out on April 16th at $2.24. I bought Northern Star Gold ASX stock symbol NST on April 12th for $15.42. I dropped down to $14.66 today and I am still in the trade down over 5%. I feel like I am the only trader in the world who can lose on gold. Regards, yours and trading, Betty.

3:03
Okay Betty, thank you for writing the podcast show here. There are a number of things that stands out to me that I think is important to say. She uses a 3% stop loss. Do I think that’s too tight? No, but depending on the kind of stock that you are trading, it could very well be tight. There is volatility within each stock. Some volatility is pretty strong. Like you took SMCI for instance. If you try to use a 3% stop loss on SMCI, in most cases that would be difficult, especially if it’s on one of those days where it’s jumping 20 or 30%. 3% could just happen with a sneeze and it doesn’t even do anything to mess up the stock.

3:33
That’s why putting your stop loss at a key support level is so important because if it breaks below that key support level, yes, it could still bounce back, but there’s a better chance than not that there is something technically wrong with the trade setup and you don’t want to be in that trade anymore.

3:49
Now, as far as losing streaks, have I had some bad losing streaks? Yes, I have had. I think my worst one might have been like 13 in a row. That was a long time ago. It might have been like 2015, 2016. So yeah, I’d consider, yeah, 2015. 2015 was when I had it. It was 13 in a row, or at least when I stopped counting. But here’s the crazy thing about that. You can lose 13 in a row. You keep your losses tight and manageable. You can almost make all that back with one or two really good trades. And that’s true. I mean, the way that you approach risk reward when it comes to trading is that if you do have a few losing trades in a row, it should take one trade, maybe two, to completely wipe out the losses from that handful of bad trades that you might have had.

4:34
So don’t get too discouraged. I think trading in general is very difficult. You go on Twitter and some of the most well-known people on Twitter, I see it all the time. They talk about their winning trades like, dude, do you ever have a losing trade? Do you ever talk about losing trades? And it drives me nuts because I know these people do. And then they’ll be talking, no joke, they’ll be talking on Twitter. These guys, I don’t want to call any of them out because I don’t really feel like starting a war, but they’ll be talking about, oh, I bought these call options at this price and this is going to the moon. And I’m like, man, that guy’s pretty confident that this stock’s going to go really well.

5:14
I mean, he’s like really bullish. And then the market sells off like what we saw, you know, in the beginning of April through mid-April. And I’m like, I wonder what he ever said about that stock. So I go back into his timeline and start up, cannot find that tweet anymore. Somehow it magically disappeared. Now, how in the world would that disappear? Surely he wouldn’t delete it, right?

5:38
But you’re going to have that. One thing I can say, I don’t delete my tweets. I really don’t, unless there’s like a horrible typo or something that I did not mean to say that I said, but if it comes to a trade, here’s the thing about trading too. If a person’s out there trying to promote how right he is about his stocks or about a stock or about the market, he’s a horrible trader guaranteed it.

5:58
And it’s all over the place. There’s this one woman on there that I see on Twitter all the time, like, just as I predicted, just as I thought, just as I said two weeks ago, just as I mentioned before, guys, if you’re that hung up on being right, you’re a horrible trader. It’s a fact because you’re ego driven and you’re trading. I put three or four charts probably out on Twitter each trading day.

6:20
And if you notice, there’s nothing really grandiose about what I’m saying. I’ll highlight different support and resistance levels, but I’m not making any bold proclamation saying, oh, this one’s going right back up to all time highs. If I get any sort of like predictive and what I’m saying on the charts, it’s more of a say that the odds are that it bounces here and goes a little bit higher versus going lower. I always expect that there’s potential out there for a stock to go back down and to ignore the technicals.

6:48
And really, it’s not even ignoring technicals. So you take a support level right at $100 and the stock comes down and tests the support level. And then it bounces. We’ll say, oh, support held, it bounce. And it comes back down and it tests it again. Oh, support held, it bounced. Does it again. Look at there. It just keeps bouncing off of that support level. And then the next time it comes down there to $100, it goes right through it. And it’s down to like $90, like, oh, what the heck?

7:13
See, I told you, everybody will tell you, oh, I told you, and technical analysis doesn’t work. No, it still worked. It did exactly what it was doing. It’s just showing you that there was a change in the behavior. It broke below the support. Support’s not going to hold forever. Resistance isn’t going to hold forever.

7:27
And so when it breaks below it, you have to ask yourself, what is it telling me now? And we don’t do that enough as traders. We just try to say, oh, man, that stock really screwed me or oh, it was wrong. So when I’m posting charts, I don’t necessarily think that it has to follow exactly what I laid out there. I draw a trend line. Does it have to bounce if it comes back down and tests it? No, it can go right through it.

7:47
And if it does, what does it tell you then? That’s the questions you have to ask yourself. It broke the rising trend line. Now what? It broke through resistance. Now what? Is it a breakout play? Sure. If it’s breaking through resistance, it’s breaking out above it.

7:59
So you go on Twitter and it looks like everybody’s right, and everybody claims to be right. You know, look what I did. Look what I did. But in the end, if they’re really trying to get hung up about how right they are about something, more than likely that they’re a horrible trader and they’re just trying to compensate for all their losses that they don’t want you to know about.

8:20
I have losses. I have losses all the time, guys. But what I try to do is I try to minimize them. I don’t shy away from them. I know that when I have a trade that I put on that there’s a good chance that I’m going to be wrong on the trade.

8:32
In fact, I would probably say on every trade that I take, there’s about a 45% chance that I’m going to be wrong. Being wrong about a trade or losing on a trade, does that make you a bad trader? No, only if you don’t manage the risk, only if you don’t manage the losses. That’s really what makes you a bad trader is when you can’t manage the losses.

8:46
Because one, playing your trade, two, manage the risk, number three, let the profits take care of themselves. Always manage the trade. Always manage the risk. Regardless, if you’re up on the trade or down on the trade, you manage the trade. And if you do that, the profits will come.

9:01
If you do that, the profits will come. One of the other things that you should try to check out is swingtradingthestockmarket.com. Yes, another plug for the service. But hey, that’s what pays us the bills, right? swingtradingthestockmarket.com. You’re going to get all of my stock market research each and every day. And in the process, you are going to get my daily watch list. I also send out a watch list review later in the day. Plus you’re going to get updates on the stock market as a whole. You’re going to get updates on all the big tech stocks. And you are going to get my bullish and bearish watch list that I do at the very beginning of the week, usually like Sunday night or Monday morning, I’ll send it out. But in any case, really cool features, really cheap price, check it out swingtradingthestockmarket.com.

9:42
So more about Betty here. When you look at her trades, she’s like, oh, man, you know, I got into to KAR at 231 and I got stopped out at 224. I would tell you this and I don’t know anything about this particular stock. But usually when stocks are trading in single digits, they’re going to be pretty volatile. If you’re trading a stock under $5, a 15 cent move, yeah, it’s a 3% move. That’s significant if you were talking about Meta or Apple or Microsoft. On a $2 stock, it’s nothing. And so it’s very easy to get stopped out of those. That’s why for one, you don’t see me trading single digit stocks. I trade stocks that are over $10 per share. In fact, I can’t remember the last time I’ve traded one unless it’s like an ETF that’s attached to like spy or attached to one of the indices.

10:29
And one of the fallacies about gold, particularly with the gold miners is that people don’t like to trade GLD. In the US, that’s the gold ETF. Why is that? Because it doesn’t really move that much. Like as I’m talking today, it’s up like a third of a percent, not much to get into the gold miners. And those things can really crank and there’s a lot more volatility to them. But while gold is making new all time highs, GLD, GDX is far from it. It hasn’t even reached the highs from 2020. Well off of those highs. And gold miners aren’t always going to move in relationship with gold. You take gold for instance, it’s down three out of the last five days. You take GDX, it’s up four out of the last four days. And the charts look totally different.

11:11
The other thing that I noticed too, for instance, she bought Amazon and this is within the US stock market. She bought Amazon at $185, stopped out at $181. And yeah, it was on a rising trend. I did some big tech updates where I was talking about, man, I don’t know. I was looking at Amazon, it’s like it’s holding that rising trend line, it’s pushing through some resistance. But you really got to wonder based off of everything we’re seeing in the market, whether or not there’s a lot of reward left in the stock. It was kind of getting choppy, it was getting a little bit messy. So I never took a trade on it. Came close to it, but never did. But also we shouldn’t be surprised that it did get her stopped out or she shouldn’t be surprised that it got her stopped out because the market was dropping.

11:49
She got into Amazon just a few days after the market had already reached its all time highs and then went on to sell off for six straight days. That my friend is a heavy, heavy seller that we saw. And as a result, Amazon took a beating as well. So it’s very important that if we do get stopped out of a trade, so much of our stocks price action, and you could probably put it right onto crew and energy and Northern Star, so much of an individual stocks price action is going to be heavily influenced by the overarching index for the US. It’s the S&P 500 and the Nasdaq 100 and the Russell 2000. But those indices, they play a huge role. If they’re selling off, more than likely your stock’s going to be selling off as well.

12:35
So that’s why you talk about a top down trading strategy in that you want the S&P 500 to be moving in the same direction that you’re trying to trade your stocks. In this particular case, the S&P had already started rolling over. That should have been a warning sign for Betty to say, okay, this is not cooperating. The markets are becoming a real problem here. They’re testing some key support levels. And now it’s starting to roll over. Probably don’t want to be in Amazon. And so those are important questions to ask in your trading.

13:04
Also important is the sectors that they’re trading in, because when the markets are bouncing and the markets are doing really good, which sectors typically do pretty good during those moments? It’s communications, it’s technology, it’s discretionary, industrials, materials, financials, the ones that tend to lag a little bit more. Utilities, staples, real estate, possibly healthcare. And then there’s one sector that just absolutely marches to its own drummer. You don’t know if it’s going to go up or down, regardless of the market that you’re in.

13:34
And that’s energy. You go back to 2022 when the market has sold off, energy was the one sector that was up. I think it was like up over 40%. So energy is very much a wild card tied to the price action of the price of crude. So with Amazon, with the other two positions that this person got into, got into it while the market was pulling back, that’s going to weigh heavy on Amazon, just like it weighed heavy on Nvidia.

13:56
Most people don’t realize this. Nvidia dropped 20% off of its all-time highs during that pullback. Nvidia could not hold it together. Now she also asks Betty, that is, asks about, you know, what do I pay attention to? Is it candle patterns? Is it moving averages or both?

14:13
Moving averages are great when there’s a history of price paying attention to them. For instance, a 20-day moving average, if I’m looking at it, and I’m seeing a history of a particular stock coming down to the 20-day moving average and consistently bouncing off of that level, yes, there’s something to be said about the 20-day moving average. If I see it going above and below it all the time, I could care less about the 20-day moving average. So it’s only a matter of when there is something important going on with the moving average, whether it’s the 200, the 10, the 5, the 20, the 50, the 100, it only matters when the stock says that it matters.

14:50
Candle patterns are great. I rely on candle patterns quite a bit, but more than anything, I’m looking at support and resistance levels, whether that comes through like a bull flag pattern or a breakout level or just key price level supports and resistance. Those are really the big drivers in the market following support and resistance. Huge.

15:11
So your entries should have a lot to do with support and resistance. If you’re getting into a stock and there’s resistance right overhead, I wouldn’t do that until it clears the resistance. I was tempted today to get into a trade, but I was concerned about the S&P 500 sitting right up underneath declining resistance. I was yet to break through it. As a result, I was like, I’m not getting into that stock because if the S&P 500 starts to break down, good chance that stock’s going to break down right with it.

15:32
And that’s a hard thing to resist. It really is. When you’re seeing a stock that looks like it’s flying, to hold off because you don’t necessarily like what the S&P 500’s doing. It’s kind of a Debbie Downer, honestly. But in the end, Betty, losing streaks really stink, especially when you start to get into double digits, you’re like, what the heck is going on?

15:45
Everybody starts to get the, I should just trade opposite of what I think I should do. Everybody’s had that feeling. So you’re not alone when you’re saying to yourself, I should just do the opposite of everything that I think I should do. I’ve had that feeling multiple times. It happens. That’s part of trading. You feel like the market’s picking on you.

16:03
But think about the whole idea of stocks that have a lot of volatility. Sometimes those 3% stop losses aren’t going to work with them. Now that doesn’t mean you go and start saying, all right, fine, I’m going to use a 15% stop loss because that’s a lot more risk that you’re talking about unless it really sets up nicely. And it’s not that I don’t trade stocks that have a lot of volatility. At times I do, but boy, I’m selective about the scenarios that I get into them on. It better have a really good, clean level of risk.

16:30
I’ve passed up stocks this week because I didn’t want to take 7% or 8% stop losses because I didn’t think that the market was in a place where it justified expecting 16% to 20% rewards. If you enjoyed this podcast, I would encourage you to leave a 5-star review on whatever platform that you listen to me on. I do appreciate those. I do read your reviews and make sure to check out SwingTradeInTheStockMarket.com.

16:55
Furthermore, keep sending me your questions. I want to hear your stories. I want to hear what’s bothering you and what you’re struggling with. Just like Betty here, I do read them. I go ahead and I might have to put in a cue for a little bit, but I do get to them and I do make podcast episodes out of them. So don’t be a stranger. Send them to me and I can’t wait to make podcast episodes where you’re right at SharePlanner.com. I’ll read them.

17:17
Thank you guys and God bless. Thanks for listening to my podcast, SwingTradeInTheStockMarket. I’d like to encourage you to join me in the SharePlanner trading block where I navigate the stock market each day with traders from all around the world. With your membership, you will get a 7-day trial and access to my trading room, including alerts via text, email, and WhatsApp.

17:37
So go ahead, sign up by going to SharePlanner.com slash TradingBlock. That’s www.shareplanner.com/trading-block. And follow me on SharePlanner’s Twitter, Instagram, and Facebook where I provide unique market and trading information every day. If you have any questions, please feel free to email me at ryan@shareplanner.com.

17:58
All the best to you and I look forward to trading with you soon. Thanks for watching.