Macro Events After Hours Taking Price Below Your Stop Loss | Podcast Episode #108

0:07
Hey, I’m Ryan Mallory and this is my Swing Trading the Stock Market podcast. I’m here to teach you how to trade in a complex ever-changing, world of Finance, learn what it means to trade, profitably and consistently managing risk, avoiding the pitfalls of trading. And most importantly, to let those winners run wild, you can succeed at the stock market and I’m ready to show you how, hey, everybody, this is Ryan Mallory with Swing Trading the Stock Market.

0:32
And on this episode, I’m going to be answering a recent email that I got. It’s Great. I think it’s a good question. It’s short to the point, but I feel like there’s a lot to talk about and I’m package with this particular email. Now, once again, I’m not going to give away. The guy’s identity is named for this episode Hank.

0:50
Hank sent me an email before I get into it right now. I’ve got myself an old fashioned that I make. Now, I tell you what, I don’t do a lot of things. Good, in this world, I make really good burgers and I make really good cocktails. And I don’t make like every cocktail I make like good old Fashions, I’ve yet to have a no. That’s better than mine and I make pretty good margaritas. And then I have a drink that I’ve created for myself using a pomegranate liqueur, which is really good by the way. That’s a different episode. But anyways, it’s old-fashioned, I’m using Knob Creek, small batch, 100 proof. I tell you what, old Fashions are great, but there’s a couple of key factors with the old-fashioned.

1:25
When you make these things, you’ve got to use a big ice cube. You don’t use a big ice cube, it’s just all for waste and I go to the restaurants and they still give you like crushed ice or like, really tiny pieces of ice. Like it came from an ice maker. Not don’t do. That always Gotta Give me like a good solid piece of ice. I mean, nice Square Cube.

1:41
That’s about 2 inches. You got to you do that. It makes the whole drink completely different. It’s not going to dilute as fast and then I’m pretty heavy on the bidders to so I like putting a lot of bitters in their orange bitters the aromatic Bitters and then the big ice cube, put a little bit of simple syrup in it and then the Knob Creek 100 Proof, 50% alcohol small batch so that’s it.

2:02
That’s that’s my drink of choice while I’m doing this podcast episode tonight. Now Hank says Ryan I’ve been listening to and enjoying your podcasts over the past few months, man. I always like it when they start off like this because I get some crappy emails to from people that this is always nice when people are like my podcast and that’s probably one of the things that I’m getting the most emails about is the podcast very informative and helpful.

2:23
Thank you so much. How does one manage the risk using stop losses for swing trades against macro level events for example? You buy a stock at $100 today in the stock moves from 98 to 102 for a few days. With your stop-loss set at 95, the next evening, an event occurs that negatively impacts this stock or maybe the entire Market sector industry.

2:44
In the stock opens at $88, the following morning, missing the stop at $95. I know that having a hard stop is always going to be better than using a mental stop in the long run. Do you simply sell it? The Open Market at lower prices and accept the loss? As part of investing, or is there some other strategy in these cases?

3:02
Regards Hank now, Hank Hank raises a really good question here but Because it is one of the hardest things to deal with. When you say, buy a stock at 100, you have your stop loss set at 95. Let’s say it gets down to like $97, you’re not stopped out yet, you’re still in the game, but then the bad news, piece comes out.

3:20
And it’s opening up at ninety dollars a share, or maybe it’s worse. Maybe you held through earnings and it’s like, $80 a share. What do you do? Well for one you can’t, you can’t guard against macro level events, that makes your stop loss of relevant and opens way below it. You just can’t do nothing about it. But the one thing I do not think that, You do is you hold on hoping that it will get right back up.

3:39
Now there’s a couple of things that I like to do with mice trades when this happens for one, I never put my stop losses in As Good to cancel. I always put my stop losses in after the Market opens each and every day kind of tedious, especially if you get like, 15, 20 positions in your portfolio, then you’re putting in just a bazillion stop losses for the day and I can take some time, but usually I put my stops in within the first two to three minutes of a trading session.

4:03
If I don’t have that many, it can be like, within 3040 Wounds. But a lot of people, if they have a stop loss at 95 and it opens at 90 what they’re going to do is they’re going to hope that it comes back so they can get back out at their original stop-loss. That can be a very very dangerous game because oftentimes it goes from 90, especially if it’s really bad news, I could its earnings, or if it’s like a major news event, like if you go back to last year, we had the whole trade War issue with China.

4:26
And you were constantly having these like 40, 50 point. Gap nouns. And you would be blowing through stops one that did it to me recently was bowing earlier this year. Boeing always. Bad news coming out. It seems like we’re at the time when I was trading it. I don’t even trade it anymore because I hate the fact that every time I trade it, it seems like a plane falls out of the sky or you get some kind of negative news piece, like they’re shutting down production and the stock just gets hammered.

4:49
I can’t handle that. If a stock has a lot of headline risk, I’m not going to trade it because I don’t want what Hanks describing here to happen to me. Now you can’t avoid it, entirely you go back to the beginning of 2019. I was an apple. I got stopped out because they decided to out of nowhere to guide lower on their earnings going Word.

5:06
It was a seven percent loss that I wasn’t expecting to take the way below. My stop-loss took me out of the trade. So, one of the ways that you can avoid, that is by simply not trading. These stocks, that have huge headline risk. Another industry that has a lot of headline. Risk is the biotechs? That’s why you don’t see me really trading. Very rarely, like maybe I’ll do Gilead, but for the most part, I won’t trade an individual biotech stock especially like a low dollar one word. It’s like they have one drug, it’s in the FDA approval process, the entire company’s existence hinges on They’re not, they’re going to get the approval, the approvals up in the air whether or not they’re going to get it. Yeah, I don’t want that kind of risk because if I’m wrong, it’s going to kill me now. If I’m right. Yeah, I’m going to make a lot of money, but the key to this trading is not about the prophets, it’s about the risk.

5:50
That’s why we call it risk management, not return management because we’re trying to manage the risk, man, that old Fashions, good tonight, good grief. Anyways, I could have like three of those but I know that’s not a good idea. But when, you know that there’s a lot of macro level events in one of the perfect examples was Last year with the China trade War.

6:07
That’s probably a time to. Maybe tighten the number of positions up that you’re trading. Take some profits along the way. So that if you do get hit with a macro level event, that takes your stocks all the way past your stop loss before the market even opens. Then at least, then you’re coming away with some profits on a portion of your position, which helps to offset the losses that you take on the rest of your position.

6:28
But inevitably, you’re going to get hit with a strayed that takes you below your stop-loss. Now, I have a do not trade list, Boeing, for instance is on it, I just don’t want to Read that Stock. A lot of people are training it right now. A lot of people like it. A lot of people think it’s going to make a comeback but the headline risk is too much for me. This thing has a news piece that’s coming out almost every single day and a lot of times they’re contradicting each other so it counts causes it.

6:49
To go way up and then way down, I don’t need that in my life but one thing that’s that’s help me out over the years. Particularly, if it’s a macro level event that takes me out of my stop loss. When the Market opens is sometimes, I’ll wait like a couple of minutes into the open. Now that’s not me waiting for to see whether or not I can.

7:06
Get back to my original stop-loss. Maybe I will be able to get out at my original stop loss, but that’s not the intention there. It really what I’m trying to do is is that a lot of times when you see and especially of late, you see your stock blow way, past your stop loss, and this is really more for like, your mid cap and large cap. Stocks you see a stock that goes way below your stop loss. And it’s because of a macro level event, not anything to do with that particular stock often times. You will see some short covering at the open and that short covering gives it like a little bit of a temporary boost. Maybe if it’s like opening up at night, Dollars, you’ll see it, get back up to like 90 19150, maybe even 92 and you can shave a couple percentage points off of it.

7:43
Now, you got to be quick about it because you can’t hold it for like, an hour or two or for the rest of the trading day hoping that he’ll come up. It’s almost like an efficiency when the Market opens is that and it’s not going to happen every time under I’m not even going to say, it’s going to happen going forward but for me over the past couple of years, it’s actually been a really great trick to wait for a couple minutes.

8:02
That’s another reason why I don’t put my stop losses in until after the Market opens. Ends and then the stock Rises just a little bit. You have some short covering or you have some dip buyers that are coming in to try to take advantage of the weakness. You can kind of ride that backup before to possibly takes another dip lower. Because so many times, I’ve gotten out in those first few minutes of trading, and then the rest of the day, it’s selling off.

8:22
But that was like the only moment of the trading session that it was really seeing any kind of buying hay before I get any further into this Pockets. Can you guys do me a huge favor? Can you guys leave a review of what you think of this podcast for me? That would be a huge favor for me because Like my YouTube channel, like my website, continuously trying to grow this channel, trying to grow this podcast, and I want to see it continue to expand and reach more and more people.

8:45
So if you could go to the Apple podcast app and leave a review, whether it, you want to leave some text to, that would be great. I would be thoroughly appreciative of that. So if you can just do that, that would be great or whatever platform you’re listening to. If they have something that lets you leave a review, I would be very thankful towards you for doing that.

9:06
But back to these stop losses. Because, yes, it’s always good to have a hard stop loss because if you’re using a mental stop-loss, I can’t talked about and this email what happens is that your stop-loss is triggered. You’re going to tell yourself let’s see if it really goes through that. Stop loss or if it’s going to bounce right back up and sometimes it does bounce back up but a lot of times it goes right through that stop loss and keep selling off and the further it goes down, you’re going to be like Oh I’m just going to wait to see if it bounces up now.

9:32
Oh boy, I’m really not. Now I got to wait for it to bounce back up and so it’s like the Slippery slope that you get yourself into and you’re just constantly waiting for it to bounce back but maybe it doesn’t balance for like another five or ten percent and then you’re stuck into this trade that you’re taking a huge loss on. But in terms of waking up in the macro event, takes you way below your stop loss.

9:50
Yeah, you sometimes will have that two to five minute period there, where the stock will try to pop back up. May not even be that much. It might be like a half percent one percent, maybe two or three percent, but more times than not it won’t even last. So you got to kind of be aggressive about taking the prophets there. Another Take that some people use and I’m not against it.

10:07
I think there’s more risk to doing it, is letting the price action settle in for the first 15 minutes of trading and then putting your new stop loss below the 15-minute lows of the day. Now, there’s a little bit of a issue with me and that when you do that, you take on a whole lot of risk of this thing.

10:24
Drop another five, six, maybe ten or fifteen percent, depending on how bad the news is. If that happens, well, yes, you’re creating a new stop loss, but it might be a whole lot lower than if you would have just just taking your medicine within the first couple minutes of trading. So while that can prove to be a good technique at times, and the reason why you can be a good technique, is that I’ve seen more times than not in the first 10-15 minutes of trading.

10:47
Sometimes, the first 30 minutes of trading where the stock will put in a bottom and rallied back higher the rest of the day. So if that’s going to happen with that particular stock, and it’s a macro level event that’s causing the stock to go down and not like a miss durning’s or, you know, dilution of shares or some kind of earnings warning, then yet you have a potential for Put in a bottom and just rally back up the rest of the day.

11:08
So that’s another technique to use there as well. But overall I like to go ahead and just wait a couple of minutes at the market open, as I’m putting in my stop losses to see if that stock is going to bounce a little bit for me at the open. So I can go ahead and at least get out at a higher price than what I expected to get out at.

11:23
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11:45
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12:01
You also get my updated watch list twice a week, so check that out. YouTube Comms / are planar. Click on the join button and choose the plan that you want. Thank you guys. If you guys have any questions, feel free to email me. I still want to get your emails. Keep sending me your emails. If I get so many of them that I have to do, like five podcasts a week, I’ll do it, I’ll do it.

12:20
I’ll make a podcast out of every. One of them doesn’t mean that I won’t get behind a little bit on them, but I will do it. Because if there’s that much of a demand for me to answer your questions, I will do everything possible and that includes doing up to five podcasts a week to answer them.

12:35
Um so yeah, keep sending them my way, great questions. This was a great question from Hank today. Thank you for sending that to me was a very helpful question that I know a lot of Traders wonder about. So thank you for sending me that email Hank. Thank you guys, God bless, thanks for listening to my podcast.

12:53
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13:09
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