Trading With Your Expectations | Podcast Episode #446

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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

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Swing Trading the Stock Market and today’s episode we are going to talk about trading with your expectations.

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I often think it’s expectations that get us in the most trouble with our trading because when expectations don’t meet reality, that’s where you start to find some problems with one’s trading.

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So today’s e-mail comes from a long time listener. He’s got a little bit of an adrenaline fix when it comes to trading and he just can’t really shake the habit.

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So as always, I don’t use people’s real names.

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I give them a fake fictitious Florida name, ish, kind of a name because I’m from Florida, grew up redneck, so I like to kind of keep it close to home.

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So any case, today’s episode, we’ll call this guy Opie from The Andy Griffith Show. Grew up watching that show.

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I have seen every show of Andy Griffith that’s ever been made, at least in the black and whites color ones.

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I don’t really consider that Andy Griffith. That’s where it kind of lost its edge.

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But when you have Barney Fife, Andy Griffith and Opie with the black and white broadcast, that was some good stuff.

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So any case, Opie writes Hey there Ryan, long time listener of Swing Trading the Stock Market here and I’ve seemed to have a problem that I just can’t shake.

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So here’s the deal. I’m addicted to the need to win big with every trade that I take.

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Every time I enter a trade I’m convinced it’s going to be a moon shot. I’m talking rider die mentality.

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With every single stock I touch it’s like I got blinders on and I can’t see the bigger picture of what swing trading is really about.

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With every trade I take I need the reality to match my expectations, otherwise I can’t close out the trade and I end up with a lot of big losers and missed opportunities at respectable profits.

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That’s the reason for the podcast title Trading with your expectations. He says it right there.

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I need reality to match my expectations. He goes on the right.

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He says I know I’m in my head and that it’s about consistent gains over time, but my heart screaming go big or go home with every trade.

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I’m holding on to losers way too long hoping for that turn around and I’m getting greedy with my winners watching solid gains evaporate because I’m chasing that elusive home run.

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It’s messing with my overall performance and I’m starting to feel like a gambler rather than a traitor.

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How do I dial back this need for every trade to be a blockbuster? Got any tips on seeing the forest instead of obsessing over each tree?

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I figure if anyone can set me straight, it’s you. Any chance that you could tackle this on your next episode?

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I bet there are adrenaline druggies out there who could use a reality check too. Thanks for all you do.

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Your show’s the real deal. Cheers Opie.

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OK, I really do like this e-mail because I think this is something that a lot of traders struggle with and they don’t realize that they struggle with it.

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Instead, they see the results of their trading. They’re like, why am I losing so much?

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And they can’t really figure it out. It’s like, man, I go into it with the trader, this is what I expect.

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I set my target price, doesn’t hit my target price. It hits my stop loss every time.

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And it boils down to your trading with your expectations. And every day the stock market changes.

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Every new candle on a one minute chart changes the market. Every candle on a 5 minute chart changes the market.

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Every candle on a daily chart changes the market. As is the weekly, as does the monthly.

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You see where I’m going with this? The market is always changing.

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So we get into a trade a week ago and we still hold those same expectations a week later. We’re only hurting ourselves.

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It doesn’t mean you you move away from your trading plan. You have a trading plan, you follow it.

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You have a way to manage the risk. You follow that because you have that plan in place and the case that the trade doesn’t go against you because the market changes so much or the stock changes so much that it goes back and hit your stop loss.

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Using stop losses and planning your trade out ahead of time is a form of expecting the market to change.

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And so when you’re trading with your expectations and you don’t factor in the fact that the market is going to change and change on a dime, if it’s so desires, then you’re putting yourself in a huge disadvantage.

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Let me tell you about my week here that I’ve had.

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I came into the week long on SDS, which is a 2 to one inverse ETF of the S&P 500. So if the market goes down 1%, I’m going to make 2%, the market goes up 1%, I’m going to lose 2%.

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I also had SH which is a one to one inverse ETF. So if the market goes down 1%, I go up 1%.

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So it’s not as leveraged as SDSI. Had both of those, both of those were doing good coming into the week.

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Last week, Labor Day down all four days of that trading week. It was a shortened week because of Labor Day weekend.

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I was I was up. It was a great, great week of trading.

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Then comes Monday, you get a little bit of a bounce. OK, get Tuesday a little bit more of a follow through.

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OK trade. It’s working against me a little bit.

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I’ve already taken some profits on my SDS trade, so that was a good thing. And I took those back on the Friday before.

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But then Wednesday comes along and you get the CPI report to come out. It comes in hot and all of a sudden the whole market just completely flushes lower, goes right back down to the lows from Friday, almost to the lows from Friday.

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Was there anything there to suggest that the market was going to do that? No.

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Was there anything there that would suggest that the S&P 500 was going to have one of its biggest intraday reversals, actually the biggest intraday reversal since November of 2022 when that bear market ended? No, there wasn’t.

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And so it was surprising. It went against what my expectations were just that morning.

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When I tell you that candles can change on a one minute basis and change the whole outlook, it really can because on that Wednesday, the whole market changed.

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And so closer to the end of the day, I still had profits. And SDSI went ahead and closed that position out for like a 1.1% profit.

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I closed out the overall trade for almost 2%. I closed out SH for a small loss.

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I think it was .2%. It stunk.

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The whole thing stunk because what my expectations were for that trade and we’re going to have expectations.

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It’s not like you can get rid of your expectations. I know people talk about getting rid of emotions.

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You can’t even get rid of emotions. You’re not going to get rid of expectations because there’s always a baseline for what you think’s going to happen next.

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But we can’t be married to our expectations.

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We can’t say to ourselves it has to go this way because this is how I foresaw it happening. You have to be willing to change with the market.

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There’s principles in our trading and we have to be steadfast in those. But then when it comes to our expectations, we have to be willing to flow with the market.

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And that’s a hard thing for me as well, especially when it comes to market direction. I don’t like to necessarily have to go from being bearish to bullish or bullish to bearish.

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You almost feel like a hypocrite when you do. You’re like, oh gosh, weren’t you just bearish?

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Especially on Twitter, They’ll fry you for this stuff on Twitter. Weren’t you just bearish yesterday?

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You a hypocrite? Yes, in trading, I am a hypocrite and life and with my morals, I pray to God every day that I will not be a hypocrite, that I would honor God.

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But when it comes to trading, absolutely a hypocrite because I think in order to be successful and your trading, you have to be willing to change your outlook.

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When the conditions say as much, you have to go with the ebbs and flows of the market.

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On Wednesday, the market completely changed around. We’re sitting right back at all time highs now.

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When it looked like on Wednesday we were going to break down and probably test the August lows, those expectations changed wildly.

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And when those expectations change, we have to change our outlook as well. We can’t just cling to what we expected our positions to do when we originally got into them.

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So I got out of my positions, I still managed to get a profit. And one of the things that I always tell myself this is that I keep my trades in a spreadsheet and I want to know that by the end of the year when I look at my trades, when I’m looking at the breakdown, you know, if the trade ended in the negative, it’ll have a, you know, negative sign next to the number.

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You know, maybe we’ll say -3% and it’ll be red.

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If it’s a positive sign, we won’t have anything next to it. It’ll just be green and it’ll be positive.

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I want to see a lot of the greens with positives. When I look at this trade at the end of the year and I see SDS and SH, I’ll see like a very small loss on SH and I’ll see an OK gain on SDS.

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Do I really care about that?

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No, I won’t. I probably won’t even remember too much about what happened at that trade except for the fact that I went short during that period of time.

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You take so many trades over the course of the year, you’re not going to remember the thesis behind every one of those trades.

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Now, it wasn’t just too long ago, back on August 1st, I was long on SDS as well and I closed the final part of that trade out for a 13% gain.

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That was a good trade. I got out at the most optimal point that you could possibly imagine, the open of 85 when the market bottomed and went on a Ripper from there, that I necessarily think it was a bottom note.

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I said to myself, guess what? I got 13% on this final leg of the trade.

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I’m going to go ahead and take those profits. You get a gap down of 200% on the S&P 500.

10:01
What are you expecting from there? A total market crash.

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How often do you see a market crash? We start to think of 1987.

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Well, that was back in 1987, which for a lot of people, they weren’t even born yet. When that happened, I was alive.

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I was seven years old. I still hadn’t started trading yet.

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You laugh at me saying I haven’t hadn’t started trading yet at 7:00 years old. I actually started trading at 11 years old.

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I didn’t really know what I was doing, but my dad got me involved in it. So it was four years before I ever started trading or investing.

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So if you would have told me at the beginning of this past week, Ryan, you’re long on SDS, you’re long on SH, You clearly have a bearish bias towards this market going forward.

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And I would say yes, I do. I think the markets going lower and then Monday rolls around, you’re getting, OK, this is a dead cat balance Tuesday, it’s still a dead cat balance Wednesday, flush it lower in the morning.

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You’re like, see, told you I should have held on. I knew what I was doing. This conforms with exactly what I thought was supposed to happen.

10:58
So you’re feeling good. Maybe you go across the street and and get yourself a Sammy to eat for lunch and then you come back and what the heck is happening?

11:03
OK, it’s up 30 points off the lows.

11:07
How how much higher is it really going to go? We had a bad CPI report, then it’s up 50 points, then it’s up 100 points.

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Some point you got to go ahead and say, you know what, this is not working. I had a line in the sand where I said OK, if it crosses this level, I know it’s not working.

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It did it and went ahead and closed out the position. If you would have told me that I would be long on multiple positions on individual stocks by the end of the week when I started the week off, actually, let’s just go back to Wednesday, Wednesday morning, you would have told me I’d be long on multiple positions.

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I wouldn’t be short anymore or bearish on the market. I would told you that you’re crazy.

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I said there’s no chance. Now do I necessarily think that it’s impossible for that to happen?

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No. I’ve been trading long enough to where I’ve seen how fast expectations can change.

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But if you were to ask me my opinion, would I be surprised by that? I would say yes.

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I would be surprised. I didn’t get my desired returns on SDS and SH.

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Now when I look at my statements at the end of the year, when I look at the trades that I took over the course of the year, well, I really care that much.

12:00
No, but in the moment, and this is what I think that Opie’s dealing with here and the moment he’s worked up about it, he’s wrapped up and having those expectations meet the reality.

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And the reality is not providing that for them. And so then instead of getting out, when you’re seeing the conditions change in the market, you’re staying in and saying, I’m going to white knuckle this and I’m going to hold on and hope that it goes back down.

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And then you see all of a sudden those gains that you could have still left with, you could have gone out for gains that didn’t necessarily meet your expectations, but they were still good gains all of a sudden turn to losses.

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I mean, guys, that’s, that’s a crying shame when that happens.

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It doesn’t mean that it can’t happen to us as traders. It’s happened to me before.

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But by and large, I tried my very best to avoid that. I think there’s often times 4 reasons why we can’t handle the reality differing from our expectations.

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The first one is, is that we’re in love with the stock that we’re trading.

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Think about some of the stocks out there, NVIDIA, Apple, Microsoft, people are in love with those stocks.

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It’s made them a lot of money over the years. Oh, I’m not selling NVIDIA.

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You know how much that things made me. It’s got way more to go.

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And that’s only a stock that’s been performing well over the last few years. Go back to Apple, guys.

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Do you know how much of a fan base Apple has? I mean, there’s people that’s been holding on to that for over 20 years.

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It’s made a lot of money. That stock was to drop 50% over the course of the next year.

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And I’m not saying that it’s going to, but if it did, most of them would not get out of it because they’re married to the stock.

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Kind of like a marriage, right? Obviously, if you’re married to the stock, but let’s equate it to a real marriage.

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You know, my wife, if she gets sick, I’m not going to go, you know, abandoned her and go find myself somebody else.

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Absolutely not. I’m sticking with her.

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I’m married to that woman. But you know what?

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I’m not married to my stocks, and neither should you be. I love my wife so much, but I don’t love my stocks and that’s what we have to make sure that we’re not doing.

14:04
But one thing you should make sure that you’re doing is going to swingtradingthestockmarket.com.

14:10
That’ll take you to my SharePlanner site. You’re going to see different plans and everything that you can sign up for.

14:19
But one that I would really encourage you to check out and it goes alongside of this podcast is the swing trading the stock market.

14:25
Whether you’re going to get all my stock market research each and every day that’s going to include my daily watch list, the stocks that I’m looking to potentially trade.

14:34
Also, you’re going to get watchlist reviews on those stocks each day in video format. Plus you’re going to get mega cap updates and video format as well as with stock market updates throughout the week.

14:40
And at the beginning of each week, you’re going to get my list of bullish and bear stocks that I that I’ll be working to curate trade setups from.

14:47
So it’s a really good deal. It supports the podcast and I’d be very much thankful if you were able to sign up for that.

14:52
So check that out. swingtradingthestockmarket.com Now number two.

14:57
Well, First off, we talked about people are in love with their stock. These are reasons why people have a hard time with realities and expectations in their trading #2 is

15:06
that they’re in love with their ego. They need to be right.

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They can’t afford to be wrong. And I think this is probably one of the main problems that Opie’s having here is, is that he’s, he’s got a little bit of an infatuation with his trading ego that he needs to sue over that trading ego when times don’t go his way.

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And you don’t want that to be the case because egos will result in your capital getting wiped out. And I think that is why so many people have a hard time flipping from bullish to bearish or bearish to bullish because they have these expectations.

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They don’t want to feel stupid like, oh gosh, I was just bullish yesterday.

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Now I got to be bearish. You see it all the time on Twitter and the market’s going down.

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And they might have said a week earlier, it’s like, oh, I think the market’s going to be pulling back or crashing or whatever, you know, that they’re calling for.

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They’ll tweet about it, tweet about it, tweet about it. And then when it starts to go back up against them, they don’t say anything at all.

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I saw it this past week. There’s just one woman that I’ve, I’ve seen her call and I’ve been telling my clients to, to sell all your equities or, you know, get bearish on the market or I think that the market’s going to pull back.

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And when the market was going down, you know, Labor Day week and also when the market started dropping on Wednesday morning, reiterating those same things.

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Then Thursday and Friday, you don’t hear a word. So why is that?

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Well, she doesn’t want to go back on her ego. She doesn’t want to have to act like she just flipped.

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I don’t think there’s a problem in flipping guys. What?

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What? In the end, what are we trading for our ego?

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Is there a return that we get on our ego for being right? No, there’s not a return on your ego for being right.

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There’s only a return for being on the right side of the trade #3 they’re in love with the story. I see this with Sofi stock.

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Stock symbol Sofi. Holy cow.

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I don’t want to say that the people, a lot of them are delusional, but you see the financials at all time highs.

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Sofi is still like in the $6 to $8 range over the course of the past couple of years and they still act like it’s a phenomenal suck.

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Oh, just wait till next earnings report. If you don’t believe me, go to my YouTube channel and watch some of the Sofi shorts that I’ve done.

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There was one I did, I think it was November of 2022 where I call it like Sofi stock is trash and these people that commented on it totally delusional, but check it out.

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It’s it’s kind of entertaining because I go back and I, I go back and forth with them because in the end they don’t realize when they’re commenting on your video telling you that you’re, you’re, you know, a clown or whatever, that they’re only helping you promote your videos in the process because that shows engagement.

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So I’m fine with them if they want to call me, that doesn’t hurt me because I’m not trading because of my ego.

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I don’t need them to validate everything I’m saying. And then the fourth thing is, is that causes people to trade with their expectations is that they’re

18:00
a combination of the three. They might have, you know, an infatuation with the stock and infatuation with the story.

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And they’re trying to, you know, stroke their ego as well. But the number fifth point that I want to make here, and this is what I really think that you should

18:14
be focused on is be in love with the process. Be in love with changing with the ebbs and flows of the market, recognizing when there’s a change in the trend of the market.

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When I look at a chart and I’m short the market and I’m saying OK, there is nothing I can do to justify being short here any longer.

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Probably a good reason to close out the trade now.

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Now that I’m bullish and you can think I’m a hypocrite, I don’t care. Just because I was bearish on Wednesday, I’m fine with being bullish today, doesn’t mean I might not be bearish on Monday.

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Why is that?

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Cause things could change again. Maybe there’s an event over the weekend that takes place that takes me out of my long positions.

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That’s very much possible. And as traders we have to be open to that kind of an adjustment.

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I’m already looking at where would I need to get bearish again to get bearish. So I give you guys these five points, you know, being in love with the stock or with your ego or

19:07
with the with the story. I would equate it to being an announcer for a football team.

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If I was Acbs sports announcer and I was doing all the games on CBS every Sunday, you know, maybe some weeks it’s Buffalo, maybe some weeks it’s The Jets or the Redskins.

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I guess they’re not the Redskins anymore. They’re commanders.

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Maybe it’s the 49ers. Whoever it might be, I would not be that great of an announcer if I’m still looking through everything, being a fan of the Miami Dolphins, which I am.

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It’s hard being a Miami Dolphins fan, but here I am, my mid 40s being way too passionate about the Dolphins still and I swear every year I’m not going to care.

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This year I’m not going to care and then it ruins evenings. But anyways, imagine me being on CBS and trying to do a game between The Jets and the Dolphins.

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My bias would completely show through on my commentating and guess what?

19:59
Nobody would like it either. They would be annoyed by it.

20:02
In the preseason with the Miami Dolphins, they usually play the Jaguars in the Tampa Bay Buccaneers. They didn’t play the Jaguars this year in the preseason because they were playing in the first game of the season.

20:09
So that wouldn’t have made sense.

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But usually it’s them because they’re local teams. Well, in the area that I’m in, they always have Jaguar and Buccaneer announcers for both each of those games.

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And it’s annoying because, you know, I’m wanting to hear about the Dolphin players and so forth.

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You know, like, what rookies are, you know, shining and training camp. But instead the announcers just focus on Tampa and they focus on Jaguars.

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And you’re not getting anything that’s fair and rational. Instead, what I’m really longing for is somebody like Joe Buck to be in the the booth who really doesn’t care who wins or loses, literally does not have a team that he cheers for or cares about, but he will do some of the best play by play commentary out there because he doesn’t have a bias.

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So you like what he’s saying. You believe what he’s saying more.

20:52
And that’s how it needs to be in our trading. We can’t have that fandom for being bullish or being long or being obsessed with Sofi or GameStop.

21:05
We have to be unbiased in our trading. Remember, expectations versus reality.

21:09
They, they rarely match up. I don’t expect them to match up.

21:12
I talk about target prices. So many traders are obsessed with target prices, but target prices are really only good for determining, you know, is there a good reward risk ratio to this trade that you’re going into?

21:18
Do I necessarily think that I’m going to get out right on the penny of what my target price is?

21:26
No, Very rarely do I do, but it’s really more for planning purposes. Once I’m in the trade, I need to adjust my thinking.

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I need to be willing to adjust to the circumstances. I hope this podcast helped you guys.

21:39
If you enjoyed it, make sure to leave me a five star review on whatever platform that you’re listening to on.

21:44
That means a lot to me and definitely helps out this podcast too to expand its reach. If you have any questions, make sure to reach out to me ryan@shareplanner.com.

21:52
I’m the only person that reads these emails. I I read them and I try to make a podcast almost out of every one of them.

21:57
So keep sending me your questions, even if you’ve written the show before, I still like to hear back from you.

22:01
I like to hear how you’re how you’re doing in your trading. We can make podcast episode out of that as well.

22:06
And make sure to check out swingtradingthestockmarket.com. Thank you guys and God bless.

22:12
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22:20
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22:28
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22:34
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22:45
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