Double Up and Double Down | Podcast Episode #416

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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.

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With shareplanner.com’s Swing Trading the Stock market and today’s podcast episode, we’re going to be talking about doubling up and doubling down.

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Probably a little bit more about the doubling up onto a trade than the doubling down. You guys definitely know how I feel about doubling down on a trade.

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I’ve talked about that at length. I’ll still mention it a little bit.

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And at the end of the podcast episode, I’ll have a little bit of a new twist to the podcast as well that I’m gonna try out.

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So let me know what you think. If you’re listening on Spotify, let me know your thoughts on it.

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But I’ll save that for the end. So today’s e-mail comes from a person because I don’t use their real name.

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So I give them a good old Florida name and this one’s gonna be Wanda. I’m gonna, I’m gonna call this person Wanda.

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My mom, she had a friend named Wanda growing up and holy cow she was, she was an interesting one. I’m not getting into that stuff, but what I am getting into is the e-mail here and Wanda writes

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hello Ryan. I appreciate you taking time to look at my question and give me your opinion.

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I enjoy and learn a lot from your broadcast and I appreciate you sharing your knowledge. I’ve been studying swing trade for several years, mostly paper trading.

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When I use real money, I keep breaking even. I have a small trading account of about $10,000.

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To lessen my risk on losing money and to be able to keep my capital in and out of trades quickly, I’ve come up with a new idea.

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I would appreciate your opinion on this. It’s a new idea for me.

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Anyways, I guess traders have used this way of money management before. Perhaps it has a name.

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If not I get and I invented this, then perhaps I’m a genius lol. Or maybe I’m just making things too complicated or I’m just being delusional.

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I don’t know. That’s why I need some opinions.

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So now he gives me an example of a trade set up that he did. He says I was looking at a chart on how Hal that’s Halliburton and came up with this man how it

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would have been a good name for this episode. Jeez any case, maybe I’ll do that for the next one.

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I saw it form, I saw how ascending forming an ascending triangle on April 20th so I made a target of $42.00.

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Hopefully more if it breaks out of the ascending triangle. So let’s say hypothetically on March 18th I bought 20 shares at $37.85 with a target of $42.00 and a

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stop at $36.30. Here’s where the new idea comes in.

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I buy an additional 50 shares on April 2nd at 3985 and put a stop in at 3935 for all 70 shares with the same target of 42.

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So if I get stopped out I will break even. If I hit the target I make a profit of $190.50.

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It’s a 6.9% profit. It’s a little light, but I am thinking that this is a way to make profit in less time, so then I can

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use my capital in more trades ASAP. Thank you for your time, Wanda.

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OK, so Wanda’s doing a couple of things right here. She is keeping the risk tight, using stop losses, planning out the trades before they get in.

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The big question becomes, is it ideal to be adding to your position like that at a target price? Now he’s got some pretty tight target prices, but his stop losses are also pretty tight Now.

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I think in doing this podcast, I’ve never seen somebody actually add to a position when it hits a target price.

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So if he gets stopped out on the initial 20 shares he gets in at 3785, he gets stopped out at 303690.

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It’s a little less than 3% if I’m just eyeballing the numbers here. And then as it gets closer to his target price, well, I guess he’s not actually trying to get add to

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his target price, he’s trying to get in pretty close to the target price. So in this case the stock price is exactly $2.00 and he’s gonna add another 50 shares to the

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position at 3985, S 20 at 378550 at 3985 with a stop loss for all 70 now at 3735.

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Now that’s getting pretty tight on the stop loss. You’re talking about a 50 Cent stop loss on a $39.85 trade price.

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So then you’re really looking at what a stop loss of 1.2%.

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Most of your stocks especially like Halliburton and your energy stocks, they can sneeze 1.2% to the downside.

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So and energy has a lot of midday swings. I look at it almost every day and there’s usually like a two or a three dollar swing in in oil

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futures and that can impact energy stocks. But my thought, and this is my approach to trading, is that as I get closer to the target price or

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when I hit the target price, I want to be reducing risk. I don’t want to be adding to it.

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And in this case, he’s letting the stock run about 5% higher before he’s adding that additional amount of shares.

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Now the initial amount of shares that he has is 20. The additional what he adds to it is another 50.

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So he’s 2 1/2 X ING his risk on the trade. That’s not an ideal scenario.

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Yes, I get the fact that he has a stop loss to where if he gets stopped out at 3935, it’s break even, but then the stop loss is too tight.

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More than likely that’s way too tight of a stop loss. I mean the stocks can move so much, especially like at the open of a trading session, it can move

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1.2% and then bounce right back up. That’s why often times I tell you be aware of the beta on the stock.

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If you’re trading the stock like SMCI which can swing 5 or 6% or GameStop like especially with what we’re seeing in this past week in GameStop or in AMC and there there can be like 5 or 10%

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fluctuations. You can’t get away with using a 1.2% stop loss.

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That’s why you’re not going to see me trade those stocks is because there’s too much volatility in them.

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So Wanda here has to be very careful about not using a tight stop loss just because Wanda wants to end sure that she gets out at a break even price that adding the fifty additional shares doesn’t

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break her. Now my approach to trading and I’m not saying that my approach to trading is at all the end all be

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all approach to trading. It’s not there’s many different ways to profitability in the stock market.

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The way I trade is just one of them and it and it suits me. It suits my objectives as a trader.

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So what I do is my entry price. When I get into a stock, I’m 100%, in not 100% of My Portfolio, but whatever I have determined my

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position size to be in. Typically it’s around 12%.

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I get in with a 12% position. I’m not adding to it at all if it goes down, if it goes up, I’m not adding to it.

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It is a full position when I get into it. Now what happens thereafter is where I start to reduce risk.

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Let’s say the stop loss that I’m using is like 4% to the downside. And let’s say at the end of the day it initially breaks out and then it starts to pull back and I’m

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starting to look at a head fake here and we’re down like 1 1/2% below the breakout level. And that stinks.

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But what am I looking to possibly do reduce my risk? Just because the tray setup is not working out initially as I expected to now, that doesn’t mean

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that it can’t make AU turn and go back up the next day. It does do that, and that’s why I’m only taking like a third off the table.

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And if it goes back up, that’s great. I’ll ride the 2/3 of a position as high as it wants to go.

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If it continues to go down, I’ll probably trim the risk even more. If it goes up, let’s say I’m up like 4 or 5%.

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That might be a good opportunity for me to trim a little bit off of the position there, to book some gains, to reduce my risk by taking some of the capital off the table, but also by booking some of

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the profits, which really drastically increases the chances that I’m going to come away with a decent profit on the trade.

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And it makes it much harder for that trade to go from being in the green to red, because I’ve already taken some of those profits off now oftentimes, and I had one just this past week with CSXI,

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got into CSX AT34-O four, and three days later I closed 1/3 of CSX out at 3441 for only 1.1% profit. It wasn’t doing that well.

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It was up on the trade, but it you could tell that there was a little bit of a struggle. And so I closed out 1/3 of that trade.

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I took some risk off 1.1%. Not really my ideal area to want to take some risk off, but the market was also trading on extremely

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low volume. I felt like it was appropriate to do that, especially coming into a week where there was a lot of

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volatility with the the CPI and PPI coming up and then four days later I’m closing out the other 2/3 of the position at 34 O 8.

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Now remember I got in at 34 O 4, closing the last two thirds out of 34 O eight. It started breaking down, broke the short term trend line.

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I’m out of the trade, so sometimes you can get into a trade and it doesn’t really play out. There’s really a lack of momentum there that you thought might have been or perceived there to be in

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the beginning when you got into the trade. And then it kind of goes away.

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The market just gets really light volume where the market starts to turn lower and so you have to make adjustments to your trades.

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It’s always about moves and counter moves.

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Overall in the trade though, I made like .45 percent, .44%.

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Actually, if I’m being exact, which isn’t a ton, it’s slightly better than break even.

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But I still added like 3/10 of a percent to the trade simply because I got 1/3 out at 1.1% and the other one I got out at .1% or break even.

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So it still kept me in in the profits. It wasn’t much, but it’s better than a loss.

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I can tell you that I’ll take a penny over a loss any day, but that’s the case there where taking risk off the table benefits me and I usually do that with all my trades, not necessarily, you know,

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at one point 1%. I like to do it a little bit higher than that.

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If the market’s a little bit sketchy, a little bit unpredictable, I might not be looking to take profits off the table at 5 or 4%.

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I might be looking to take it off at 3%, where if the market’s starting to get very overbought, I’ll take it at a lower price.

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But usually what I’m at least looking at on that initial trade is like a one to one return on my trade.

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So usually that’s in the three to 4% range.

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And then as the trade improves, I’ll try to take more off the table or take another third off when the AND.

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And then I’ll have 2/3 total off the table when the stock is at like a 2 to one for what I risk versus what the current reward is.

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And then I’ll let the winner run wild. The rest or the final third but at Target prices.

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Or if you’re adding like what Wanda’s doing here at 3985 after you’re already $2.00 up or six, 6% or so based off of what this guy’s calculations were.

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If you would have gotten in originally, you would have had an extra 5.2%.

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You’d be up 11% on the trade on that second lottery, those 50 shares, remember that’s like 2 1/2 times your original amount instead of 5% if it’s to hit the target price of 42 like you forecasted.

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So what I’m trying to say here is that second lot you’re leaving money on the table Now.

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One of the things that kind of gives me a little bit of concern is how he closes out this e-mail.

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He says I’m thinking this way to make a profit in less time so that then I can use my capital and more trades ASAP.

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The ASAP thing, Well, first of all, that kind of triggers me from the corporate America days, man, when I was polishing a chair with my butt.

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And I’m thinking to myself, we should not be in a rush to get into our trades. We shouldn’t be.

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I mean, yes, there’s circumstances where like, OK, the markets are prime right now. For me to be adding more exposure to the long side, I need to have my setups in place.

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I need to know what I’m getting long on, but there shouldn’t be a need to trade.

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You’ve heard of, like video games, one of the video games that I used to play growing up.

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Gosh, this is dating myself. It was like the original Need for Speed game.

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And what does more speed do when you’re driving?

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It increases the risk, it increases the potential that you’re gonna get in a car accident.

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It’s going to decrease your ability to react to unforeseen circumstances on the road.

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And it’s the same thing with when you’re, when you have the need to trade, they can make a video game maybe for that.

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But if you’re talking about the need to trade and you got to deploy that capital, Well, the more capital that you deploy and uncertainties or when the market conditions don’t warrant it, the more

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likely that you’re going to take on some big losses.

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Because when all your trades are down 3% and you’re only 10% exposed to the market, that’s a much smaller loss and a much more digestible loss than you being fully capitalized and the market and the

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market drops 3%, then all of a sudden that’s a big loss.

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And in his case, it’s the difference of like a $300.00 loss on his whole portfolio versus a $30 loss.

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So I would tell you this too, when you double down on a stock, you risk missing out on good trades.

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So if you get into a stock at $100 a share, you have a stop loss. I’m going to make this really easy.

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I’m no by no means saying that these are the kind of parameters that I use on my trade. I’m just making it simple math here.

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Let’s say you put your stop loss at $80 and you’re saying to yourself, if it goes down to 90, I will double my exposure on the trade.

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I’m only going to put 50% of my trade in at first. If it goes down to 90, I’ll add the other 50% there I’ll have a lower entry price and if it goes

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back up, I’ll make a good reward. And that’s true.

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You would make a good reward because you’d have a lower entry price.

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But if you’re looking for good trade setups that aren’t going to do that, which here’s the thing,

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when I get into a trade, I’m not looking for it to go down initially. I want it to go up and I want it to go up every day that I’m in a trade.

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I mean that ideally, I mean of course there’s pull backs and and all that stuff in between.

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But I’m talking about in a perfect world, I want the stock to go up from the very moment that I buy it and to never pull back and to let it run as long as I possibly can.

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That’s the ideal trade.

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So going up, going into the trade thinking that I’m gonna, you know, have the stock go all the way down halfway between my entry price and my stop loss, and then I’m gonna reload there.

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If that’s the case, why not just take a full position down there and not not get in at all?

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So when you’re doubling down, there’s the chance that if you’re a good trader or if you if you come up with some pretty good trade setups, the stocks might break out and never look back.

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And then you’re only trading with a half position all the time.

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And if you’re doubling up on trades after the fact, after they’re well into the green, well, you’re going to be getting smaller rewards as a result because you’re waiting to put the lion’s share of

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your shares. No pun intended.

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I guess you’re looking to add those additional shares much later in the game, which is going to reduce the reward that you make on those.

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So doubling down, you miss out on good rewards because you might only be trading with half the shares or maybe even a third.

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Sometimes people like go third, third, third, all the way down and then they hope that it rides back up.

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So you could be trading with a very small position when you’re doubling down, missing out on a on a really good trade with a full position.

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And on doubling up, you’re just going to be getting smaller rewards on a good position.

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So that’s why I prefer to put my entire position size right in, right out of the gates.

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Last thing I’ll say, not a huge fan of whatever reason why he’s waiting $2.00 to do that.

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I don’t like arbitrary things in the market.

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If it was like a secondary breakout, that could be more understandable than just doing.

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After it jumps $2.00, I’m gonna add.

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Because then you’re trying to put personal expectations on the market where that number means nothing to the market. 303785 or 39 or let’s say in this case it’s 3985 means nothing to the market.

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Why reload there, Right.

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There should be a reason it should be breaking out.

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It should be doing something important there to if this is the kind of route that you want to go down Again, I don’t like doubling up as much as I don’t like doubling down.

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But if you were to do it, it should be because it’s something secondary is happening, like a secondary breakout or it’s bouncing off of a rising trend line.

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Something like that.

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All right, So what am I doing here? What is the addition to the podcast?

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So you might remember, oh wait, before I forget. I keep forgetting to do this swingtradingthestockmarket.com.

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That was not intentional either. swingtradingthestockmarket.com.

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That is my service that goes alongside of this podcast. If you like what I have to say and you want to see more about my trading, go to shareplanner.com or

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go to swingtradeinthe-stockmarket.com. swingtradingthestockmarket.com routes you back to the landing page, but it’s where you can get

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all my stock market information each day. That’s going to include my daily watch list, updates on my daily watch list.

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I do videos on the watch list in the afternoon to see how they’re doing and all that. Plus, I’m going to send you stock market updates throughout the week and updates on all the big tech

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stocks. And then each week, the beginning of each week, I’m going to be sending you my bullish and bearish

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master watch list. So check that out.

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swingtradingthestockmarket.com. Think you’ll really like it?

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You can find the links for it in the the podcast notes. So, OK, all right, sorry for that cliffhanger there, but I had to get it in.

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I always feel bad if I don’t get it in. So what’s the new addition?

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If you remember back a while ago, maybe 100 episodes or so, I used to do whiskey reviews and I haven’t done those in a long time.

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For one, I was getting quite the collection of whiskey, and I just didn’t know what to do with it. Now some people think that’s a that’s a first world problem right there, but it it really, it’s like

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it’s everywhere, OK? And I won’t be able to drink all this in my lifetime, I can tell you that.

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So what I thought I’d do is I love old fashions. I probably love old fashions more than I love just straight bourbon.

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And so I’ve got a lot of different bourbons now to experiment with. And so I want to find what is the perfect bourbon to go with my perfect Old Fashioned recipe.

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Now my Old Fashioned recipe is 6 dashes of Angostura bitters. However you say that, two dashes of orange bitters, you know you can get those things out, Total

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wine, Publix or whatever, you know, supermarket you go to. And then I do 3/8 of an ounce of simple syrup.

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I use like non bleached sugar, so it’s a little bit on the brown side, which kind of matches the the color of the bourbon.

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And then I put my bourbon in a choice which is usually Evan Williams bottled and bond. It’s cheap.

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It’s like $30.00 for a full handle. It’ll last you forever.

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And then I put, you know, some of these like dirty. I put a dirty cherry in there.

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You can you pretty much use any dirty cherries you want. But I put a dirty cherry in there and then I use a navel orange.

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I get a good slice of the skin of a navel orange and I express it over the old fashioned and then I wipe the rim with it.

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I do what they call an air stir where I just like kind of stir the air above the ice cube. And also the ice cube needs to be a big ice cube like fit.

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Most take up most of the space in the cup. That’s important too, and the ones that you can get like filtered ice cubes where it’s completely

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crystal clear. I love those things.

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There’s a way to go. So with all that being said, I told you my recipe and everything.

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What am I putting in to the Old Fashioned here? Well, I’ve made one here and it is the Maker’s Mark Frenched Oak 46.

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I got this a while ago at Costco. It’s 110 proof.

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I don’t think they carry it regularly, but I just saw it and I tried it one time. It’s cask strength and like I said 110.3 proof.

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And holy cow, guys, you talk about a good sip. This might be one of the best old fashions that I ever had.

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So I’m gonna grade these things. And I hate starting off with such a good one.

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So my Evan Williams bottled and bond that I use. I love using the 100 proofs.

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This one’s 110. But Evan Williams one, I give that one.

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You know what? I’m gonna make it kind of like the benchmark.

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OK? If it’s better than Evan Williams, it’ll be better than a 75.

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If it’s below the Evan Williams one, then it’s, you know, it’ll be below that. So 7.5 is the benchmark.

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That’s Evan Williams bought on a bond. It’s cheap.

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It’s affordable, it’s great. This year I would give an 8, three, that good, one of the best old fashions I’ve ever had.

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And there there’s a part of me that says maybe I should give it like a nine or a nine and a half because it’s really good.

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But it’s like the first one. And I just, I got a lot of other ones that I think might be better.

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And so I’m gonna make some good old fashions here. I’m.

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I’m gonna use some like Colonel Taylor. I’ll use Buffalo Trace.

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I’ll do some Eagle Rare Old Fashioned. I know some of you guys are probably cringing, but we gotta we gotta find what the best one is and

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we’ll do that. So first one, Maker’s Mark 46.

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Bill’s Recipe Cash Strength 110.3. Proof 8.3.

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If you enjoyed this podcast episode, and I hope you do, make sure to leave me a five star review and keep sending me your questions, your thoughts.

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What is bothering you as a trader? What do you need help with?

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shoot me an email ryan@sharelanner.com and better chance than not? Far Better chance than not that it’ll be a podcast episode, so I always hide your identity and check

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out Swing Trading the-stockmarket.com Thank you and God bless.

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Thanks for listening to my podcast Swing Trading the Stock Market.

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I’d like to encourage you to join me in the Share Planner Trading Block where I navigate the stock market each day with traders from around the world.

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If you have any questions, please feel free to e-mail me at ryan@shareplanner.com.

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