Swing Trading A Small Account | Podcast Episode #418

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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 shareplanner.com’s Swing Trading the Stock Market.

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In today’s episode, we’re going to be talking about swing trading with a small account. How does one get started?

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Especially if they don’t have a lot to work with here? So today’s e-mail comes from a guy we’re going to give him a good old Florida redneck name that he picked out a Bocephus Bocephus.

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I’ve never actually met a Bocephus. I’ve met some Bo’s but never a Bocephus. I feel like the Bocephuses out there are probably a legend in their own right, but I don’t use their real names because I want to keep their identities safe from future persecution if that was to arise.

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And I use Florida Redneck names because I’m from Florida. I live in Florida and I feel like I relate to pretty much everything that most people find shocking about what goes on in Florida. See, that’s pretty relatable. Yeah, that’s a that’s a ordinary day.

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So any case, Bocephus writes, Hey Ryan, I love your podcast. I spend a lot of time driving and being able to utilize commuting as a opportunity to learn. I have not started swing trading yet as I am in the process of switching careers and having a more set schedule. I currently work as a teacher and server so I am working most trading hours.

1:50
I do some low risk investing and saving through the Acorns app. I have saved up just over $1000 that I will be starting with. One question that I have in regards to your criteria for a stock to trade. Do you have a preferred stock price range, volume and shares outstanding?

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Do you look at these or are there anything else that you also look at? I think a lot of beginning traders like myself always struggle with finding stocks or knowing what criteria to put in our Screener with having limited capital. I realize that may affect my criteria as well.

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Thank you for all of your great content. Sincerely, Bocephus.

2:24
OK, Bocephus, that’s a good question. And what I would start off by saying is you you talked about that you you don’t have a set schedule at this time, definitely not the time to be trading. Just as you said, you’re you’re a server and you, you you work as a teacher, my wife works as a teacher. So I can definitely relate to that.

2:41
However, if there’s uncertainty in your schedule, usually not good to try to trade around that because there can be a lot of things that happen in the stock market that if you’re not prepared for it and your schedule is is kind of in flux, it can create a lot of hardship for you. And trying to get in or get out of a trade, it can create a lot more emotion as well.

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We love to keep the emotion out of trading because emotions is usually makes the worst decisions. When you feel the emotions coming on, that’s usually when you’re going to make a bad decision.

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So by minimizing the emotions, by minimizing the emotions that come from uncertainty, from a schedule that’s not set, that can be in flux, that’s something we want to avoid.

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And Congrats to saving up $1000. That’s a lot.

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I think some people might look down on that. I don’t.

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I think that’s a lot to save up and it’s awesome in a in a world on the trading block. I’m always posting different charts to economic charts and they’re one of them. That’s always interesting to me is how much people are blowing through their savings right now. So when you’re going the opposite direction, that’s a good thing.

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I also think back to sometimes I’ll I’ll be like, hey, I made a penny or two on this trade and people’s like, oh, that ain’t much. I was like, yeah, but you wanna know what I bet you Warren Buffett on his worst day, which is he could trade his losses for that penny or two.

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So never think about your gains or the amount of money that you’re trading with as being some kind of like something to look down on.

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It’s not. In fact, saving $1000 is a huge step because it’s much easier to save your next $1000 than it was to make that last $1000.

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And it’s the same thing. It’ll be really hard to make your first 10,000, but after you make your first 10,000, your next 10,000 is much easier.

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And then you go on to 100,000. That’s gonna be much harder to make than your second 100,000 and then your millions and stuff like that.

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So keep that in mind.

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That’s a huge milestone. There’s something you should be very proud of.

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And when it comes to trading, I always tell people, especially when they’re trading, not to get caught up in the dollars.

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Because what they’ll often do as a trader is that they will say, oh, I’ve only made a couple bucks off this trade.

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I need to trade bigger. I need to trade more.

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I need no, you’re in the perfect spot right now to minimize your dollar losses, to not be taking huge hits that could affect you for the rest of your life while you’re learning to trade.

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You can come back from a bad trade, a bad decision when you’re trading with low dollars and when you’re just learning to swing trade, that’s the time to be doing that.

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And so don’t get caught up in how much money you make. Just get caught up in how are you managing the trade?

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Are you managing the trades effectively and doing the right thing? Are you following your trading plan?

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Are you setting a plan in place before you ever get into the trade?

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But don’t get caught up in whether or not, oh, I only put $100 on this trade and I made $0.50.

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God, come it good. You did good.

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You made a half percent on the trade. You could have taken a loss on it.

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That’s good. There’s plenty of times where I just walk away with a quarter of a percent or a half percent.

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I don’t care. In fact, I don’t even look at what it means from a dollar standpoint, ’cause I don’t care about the dollars.

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I care about how I’m managing trades.

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So some questions that you’re going to want to ask yourself when you’re starting off trading, what will be my position sizes That’s going to be different for everybody from mine.

5:47
It’s about 12%. I feel comfortable with that.

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Now. There’s there’s times where I’ve changed that.

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For most of my life it’s been about 10%. I’m at 12% right now and I’m fine with that.

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But for some, it might be 5%, some it might be 20%. If you start getting too big, you take a loss.

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It’s going to be far too impactful to your portfolio.

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How much can I handle, especially if I have like 3 or 4 positions going on at once and I’m taking losses on all of them.

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The next question you want to be thinking about is the share price of the stock. What range are you going to be trading?

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For me, it’s more about what I won’t trade. I won’t trade anything below $10 a share.

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That’s the low end. That’s what I consider myself the most about.

6:30
If it’s like a $1200 stock, sure, I’ll trade that. I don’t care.

6:33
I usually like to trade below 1000. But I mean, if NVIDIA for instance, was setting up and it was trading over 1000 at some point and it was bull flagging what I traded, yeah, I would trade that.

6:40
I have no problem trading that.

6:45
But what I’m not going to really be trading is like Berkshire Hathaway where it’s trading, you know, thousands upon thousands of dollars per share.

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I don’t even know what it is now. It’s like 30 something, 60 something.

6:53
I I don’t really know, but I’m not going to trade it. I just that’s not really something you can trade very well, but for a person who is starting with $1000 account, probably not the best idea to trade a $500 stock or a $400.00 stock.

7:03
In fact, if it was me starting off with $1000 stock, I would probably be looking no further than like $100 a share.

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That would be the Max share price I would go with.

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And then at that point you’re really not looking at a ton of shares, so maybe even cut it further than that maybe.

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I would only be looking at like $70.00.

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That way at least you know if I get in and it’s like a 14% position size, I can get in.

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If the stock starts to move in my favor, I can go ahead and cut half the position and let the other half ride.

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Again, we’re not getting caught up and how much money we’re making.

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Commissions are free.

7:40
We’re trying to become a good trader so that when one does add to the portfolio, they’re in a good situation.

7:45
Another good situation is to sign up for swingtradingthestockmarket.com.

7:50
Now what is that you say?

7:50
You can go to swingtradeinthe-stockmarket.com.

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It’ll actually take you to my SharePlanner site and there you can see all the different product offerings we have.

7:56
The one I like to highlight on the show is all my stock market research.

8:00
That’s going to be my stock market updates.

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I’m going to also provide updates on all the big tech stocks.

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Plus every day I’m going to provide a daily watch list and then a review of that watch list in the afternoon.

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So not only am I doing the daily watch list showing you the different trade setups and I’m watching, I’m also reviewing that later in the afternoon to give you my thoughts on each one of them.

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Plus, at the beginning of each week, I have a master bullish and bearish watch list that I put together, just kind of like a master set of stocks that I’m following from both bullish and bearish standpoints.

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So check that out.

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swingtradingthestockmarket.com and you support the show in the process.

8:33
OK.

8:33
So we’ve talked about what will be one’s position sizes.

8:37
We’ve talked about the share price.

8:37
The other thing that you have to ask yourself is what will partial profits and losses look like?

8:47
Now we talked a little bit about that with the share price, meaning that you can’t just say I’m gonna trade, you know, 10% of My Portfolio on a on a given stock or or let’s say 14% of your portfolio on a given stock and then go buy a $200 stock.

8:56
You’re gonna be blowing through your position sizes dramatically.

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So you have to be cognizant of your position sizes relative to your account size plus what that means from a share price standpoint.

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And so ideally, you want more than one share when you’re trading of a stock.

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And that’s important because you can take partial profits along the way.

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Also, you can take partial losses along the way.

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When the stock’s not behaving like it should be, you can take partial losses to see if it can actually come back and recover.

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The fourth thing that I would say, and I think a lot of people today, not, not back in the day, I wouldn’t say 1520 years ago, people even really thought about it much, but now everybody’s getting into the options market.

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I think there’s a huge influx of people that are open to gambling like never before.

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I you see it a lot with sports, now you’re seeing it with the legalization of gambling and the stock market Post.

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COVID has become a breeding ground for gamblers to come and start trying to make bets on companies as well via options.

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Now the problem with options is that there’s a lot of variables that go into that premium price and it’s very easy to lose a lot of money trading options.

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And if you don’t have a solid foundation of trading equities, it’s going to be very difficult for you to have any success trading options.

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In fact, I wouldn’t say I’ve met anybody that’s been good at options that wasn’t first good with equities.

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So avoid trading options, especially with a small account because it more than likely you’ll blow right through it and become good at equities before you test the waters with options.

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So that’s my thoughts on some of the things that you want to be asking yourself as a new trader starting with a small account.

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The next question is, is what Bocephus asked.

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And he was asking in regards to the criteria for choosing a stock.

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Do you have a preferred range that I choose?

10:31
Well, I kind of gave that one already.

10:36
I always trade above $10 a share and I’m not gonna go like trade Berkshire Hathaway.

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But for some people, depending on the size accounts, you might have to lower the top end of that range quite a bit.

10:47
Well, before I get to the volume, let’s go back to the share price. Because one of the things too, that I think is very dangerous for beginning traders is because they are trading a small account. They want to trade stocks that have extremely small share prices.

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Like they’ll get into the penny stocks or they’ll get into like the two or the $3 stocks. Let me tell you, yes, it feels good to have a ton of shares when you’re trading.

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It feels like that you got it a strong interest in that stock. But in the end, the lower you go on the spectrum when it comes to price, the lower you go, the smaller the share price.

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The more volatility, more unpredictability, the more you open yourself up to being shocked by a major news event that takes the stock down to nothing.

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When I first started trading, yeah, I did get into some of these penny stocks.

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I I think I’ve talked about it some on previous episodes, but I remember having like billions of shares of some of these stocks that were trading at fractions of a penny was like .0000007 cents per share and you would have just tons and tons of shares.

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You thought that you might be the only person that’s even trading it by that many shares.

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But all of them I lost. I mean I there might have been one or two that I made like 3% on and the rest I lost like 8090, a 100% on those trades.

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So the point in all of this is, is the lower you go, the more likely you’re going to lose significantly on those trades.

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So I think regardless if you’re starting out and trading or not, not going down into the single digits is is a good thing.

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It keeps you away from some some really bad stocks.

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Now there’s ETS and stuff like that that can that can change the equation some a little bit in that regard.

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But by and large, stocks that are trading under $10 can just be a real bad trap for new traders. I won’t even trade them.

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I just think that they’re that bad.

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And I know that’s not popular. A lot of people see the gains ’cause they’re they’re usually the ones that are popping like 4050% in a given day.

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And they’re like, OK, I got to get in on this action.

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But when they get in on the action, they’re buying the shares from the people who had already been in the action long before, and they’re liquidating their position to you.

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And you’re the sucker that’s giving them their capital, their exit out of that trade.

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So don’t be that sucker.

12:53
So on volume, I prefer at least about a half million shares to be traded comfortably.

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For me, I like to see at least 1,000,000 shares traded on a stock.

13:01
Now that doesn’t mean just because you might be trading with $1000 that you can have a much lower parameter.

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I think no matter the portfolio size, volume does matter because you don’t want to be stuck in a trade that’s not got action that doesn’t have.

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For instance, if you go on the five minute chart and you’re just seeing a bunch of dashes, that is way too a liquid of a stock.

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There should not be any dashes on a 5 minute chart.

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And by dashes, I mean essentially there’s no trading activity over a 5 minute period.

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Or if there is, it’s very small.

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You’re talking like a couple 100 shares or something.

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That’s not stuff that you want to get caught up in because it’s very, very difficult to have any confidence in the trade.

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It’s very easy to manipulate those stocks as well.

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So no matter the portfolio size, you want to see a decent amount of volume.

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For me, it’s at least a half million shares per day comfortably.

13:41
I like to see about 1,000,000.

13:45
Now in terms of shares outstanding, I don’t care about that too much.

13:45
I think maybe what Bocephus is talking about here is market cap.

13:51
I do care about market cap.

13:51
Now for market cap, I’m not interested in anything that’s I’ll trade some small caps.

13:51
I’m definitely not trading micro caps, but usually when I start to get into small caps I’m probably gonna learn more towards like IWM, but I have no problem trading like mid and large caps.

14:00
Essentially, I’m probably not gonna trade much below a billion dollar market cap.

14:10
If it’s trading over a billion dollar market cap, I usually don’t have too much problem with that.

14:10
One of the other things that people get caught up in is needing to know all the background on a particular stock.

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I’m a technical trader, so I don’t think that the background of a company is all that important.

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Yes, I’m interested in what sector they’re in, what industry they’re in, market caps and stuff.

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But primarily I’m interested in the technicals.

14:34
I don’t really care much about their PE ratio.

14:40
I don’t care about their cash flow or their liabilities or assets.

14:40
I do care if there’s headline risk on a stock.

14:46
If I’m seeing stocks that are constantly gapping down, I’m gonna avoid those stocks.

14:46
Or if they have like surprise earnings that come out where they’re not like sticking to a schedule or they have leaked earnings.

14:51
Yeah, I’m, I’m probably going to avoid that.

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But the big thing here, especially for new traders, is avoiding the pitfalls that come with trading low dollar stocks.

15:04
And in terms of adding additional parameters, I think one of the best things that you can do as a new trader is to look at many charts as you can.

15:09
I think to have some of the parameters that I just talked about in place is important.

15:09
But also looking at as many charts as you can that fit within those broad parameters is important because it’s giving you more of a diverse view of the stock market.

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You’re not just getting like pigeon holed into like one type of chart and then when you see other charts, you don’t even know what the heck is going on there.

15:24
You want to see as much as you can get a broad understanding.

15:24
I like to look still to this day, I like to look at hundreds of thousands of charts every week on a given day.

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I’m at least looking at over 1000 charts.

15:34
Now I’m not saying that needs to be the case for everybody.

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This is all I do.

15:38
I look at charts, but I think starting off, you need to kind of have that same mentality where until you really know what you’re looking for, I could give you parameters right now that you could put into a screen.

15:47
It doesn’t necessarily mean that that’s going to be something that works for you as a trader.

15:51
So what you want to do is get a better understanding of what works for you and what doesn’t work for you.

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And one of the best ways to do that is by seeing a whole lot of charts to get familiar with these charts, to see how all of them can be different, how so many of them can have similarities as well.

16:05
But to get exposure to as many charts as possible, I mean, I’m talking like you want to get good start looking at 10,000 charts over the course of the next year, you’ll have a much better understanding of what these charts look like, the ebbs and flows of them as well.

16:14
Much of screening comes down to looking at chart after chart after chart and then having a method for tracking the charts that are ideal to you.

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The ones that stand out to you, the ones that have promise for being able to manage the stocks in your watch list and then to to find the ones that you’re looking to trade from your watch list.

16:31
If you enjoyed this podcast episode, I would encourage you two leave me a five star review on whatever platform you’re listening to me on.

16:39
Plus check out swingtradingthestockmarket.com and don’t forget to write the show.

16:44
Now what I like to do at the end of these shows nowadays I used to do the the whiskeys and this is my third episode now talking about how to find the perfect bourbon for what I think is the perfect old fashioned recipe.

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I’ve talked about the old fashioned recipes and some of my previous ones.

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You can go back a couple and and find it right there, but for this episode we’re talking about Kirkland Single Barrel Reserve.

17:06
Pretty good stuff. Chucky straight bourbon whiskey.

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You don’t see that Kirkland’s a lot so don’t go run in there thinking that they’re gonna have just cases of it.

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They don’t. They just like randomly pop up.

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But but when they do they’re really good deals.

17:15
I mean some of Kirkland and and it’s not just like 750 milliliters usually it’s like a full liter and you can get some really, really good deals there.

17:22
So I like Kirkland’s Single Barrel.

17:27
I think it’s pretty good drinking it just straight up.

17:27
But as and I’m trying it right now from an old fashioned standpoint I don’t think that it does the job.

17:36
I would not put this in another old fashioned mind ever again.

17:40
And so far the Maker’s Mark that I did on the very first episode I gave that a 8.3 that was like a French or it was Asian French oak barrels.

17:48
That was wonderful.

17:48
The single barrel though this one is 120 proof that’s 60% but it comes off as like almost like too candyish, like way too candyish.

17:56
And I’m already putting simple syrup in it, and it was shocking to me that it didn’t have more of a punch to it, but it almost just tasted syrupy to me when I put it into my Old Fashioned recipe.

18:01
So I think if I was to do this again, I would probably not put simple syrup into it and just let the sweetness from the bourbon take over.

18:12
But overall, I would probably give this like a 7.0 on a scale of zero to 10 Seven .0 for Kirkland’s Single Barrel Kentucky Bourbon Whiskey and my Old Fashioned.

18:20
Thank you guys.

18:25
God bless.

18:25
Thanks for listening to my podcast Swing Trading the Stock Market.

18:30
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 around the world.

18:38
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18:44
So go ahead, sign up by going to shareplanner.com/trading Block.

18:44
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.

18:56
If you have any questions, please feel free to e-mail me at ryan@shareplanner.com.

19:05
All the best to you and I look forward to trading with you soon.