Trading Against Your Expectations | Podcast Episode #112

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, trace 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.

0:30
Mallory with Swing Trading the Stock Market and we got an email here to go over today. Today, I like this guy like the name that he chose for himself. Some of you guys are actually doing some of the heavy lifting for me by actually telling me what name you would like for me to use on the podcast. I actually appreciate that because sometimes I’m like Googling, you know, read nicknames or just crazy names in general, this guy did the heavy lifting for me.

0:53
So I appreciate that and so this guy’s name is going to be Homer. This is what he asked for. I like Homer like The Simpsons, I thought it was a good show Back in the Day. Funny thing, I wasn’t allowed to watch The Simpsons growing up. It was The bad show back in the day compared to what you see on TV today.

1:09
I mean I think it’s kind of like you can raise a three-year-old on The Simpsons today but anyways though bourbon a choice man. I’ve never tried this one before. It’s called two stars. Kentucky Straight Bourbon whiskey, Jefferson County Louisville, Kentucky. It is 43 percent alcohol, 86 proof.

1:28
Distilled an aged and bottled by cleaning Springs Distilling, Company and Louisville. Kentucky, never tried it, man. Now, if you guys remember from Last week’s episode. I tried that Corkscrew. That peanut butter quirks. No. Peanut butter screwball is what it was called, man. Let me tell you. That was the most disgusting stuff.

1:43
Now, somebody left a comment on one of the podcast platforms and I can’t remember which one it was like, oh, you got to get it very cold before you try it. Well, I don’t do that with any my Bourbons. You can’t just like chill a bourbon. That’s not how it really works. I mean, you put an ice cube in it and you can have it on the Rocks, but but no, I don’t think you actually like, chill it up front.

2:00
Maybe I’m Wrong. That maybe there’s some of you guys out there, does it? That’s fine, but I don’t do it. Is this two stars? I got high hopes for it. Somebody told me that was pretty good. Actually, is my brother that told me. Yeah, I think you’re gonna like this this, to start singing might be one of the better ones that you’ve tried of late. So, let’s hope it is so cheers to that.

2:17
Yeah, it’s not bad. I mean, I’m using a big ice cube on it. I wasn’t ready to go need on it tonight. I just wasn’t in the mood for that any case. So no, it’s not too bad. It will get probably diluted a little bit more as I do this podcast. But overall, it’s pretty good. Pretty good bourbon. It’s like it’s like really nice and smooth has a little bit of a bite to it after you swallow after After, you know, few seconds past, you feel it.

2:37
Go down the pipes a little bit there. I know when I talk about bourbon, I’m not talking as if I’m like some kind of expert in the field. I’m just telling you how it tastes. I think it tastes pretty good, two stars. Not too bad. I like it. All right, so let’s go ahead and get into this email.

2:53
He says, good morning Ryan. Thank you for your reply, to my email and SharePoint or you actually sent me an email, asking me. I guess he went through the contact me form, where he asks, hey, where do I actually send my email to I just told, you know, ryan@shareplanner.com. Can send it to there and you’ll get get it straight to me.

3:08
And I’ll look at it and decide whether or not to put it on are Muslim. I do so, please refer to me as Homer on the episode, if I can request my codename, he actually says it’s so nice. That he’s one of those little smiley face things. But not like with like the parentheses but with a p. So it looks like it’s like the sideways smiley face. But sticking my tongue out, one of those guys I Auto download all your episodes disguise off to a great start and I enjoy your content even better delivery in attitude. I’m glad you like the delivering the Dude, I feel like I can let loose a lot more on the podcast and I can’t on any other platform.

3:40
He says, I get tired of hearing market reviews from most channels prefer to hear about strategy with a mindset and I agree. I think sometimes the market reviews, I don’t know how people do it on a podcast quite honestly. I mean I talked about mostly Evergreen things and when I talk about Evergreen it’s like stuff that you can listen to 10 years from now and it’s still relevant.

3:57
But I mean during the height of the pandemic and stuff, I did focus a little bit more on the market reviews because I think that was such a pressing matter on the mine. I don’t know if anybody Have the capacity at the time to think about strategy. So I try to do a little bit more back then but overall the podcast, tries to focus more towards strategy and mindset, he says I look forward to continuing my learning from you in the future.

4:17
Here’s the situation. I’m in to LCA for four thousand US Dollars, and it’s a long-term swing trade until merger day. LCA is laying Katie Holdings and dadgummit. If I didn’t have to pull up my, my charting platform to be able to find that out. I’ve never traded it before laying Katie.

4:32
Pretty sure. I haven’t the price history that I have for, don’t Goes back to 2019 of June. It’s one of those spacs. And if you don’t know what a SP AC is, it’s one of those things I keep seeing popping up. I’ve never invested in them or traded on them before, but I guess it’s called a special purpose acquisition company.

4:49
I’m seeing a lot of memes on them lately where they’re making jokes about them. I’m not too knowledgeable in the area of spacs. If you were to type it into Google, you would get it Investopedia. Definition that says, it is a company with no commercial operations as form strictly to raise Capital through an initial public offering IPO for the purpose of acquiring, an existing company known as a blank check companies spacs have been around for decades so it’s not like it’s a new thing they’ve been around.

5:16
I just think they’re becoming a lot more popular these days. It sounds a little bit gimmicky to me in terms of like the overall Concept in the sense that people aren’t necessarily trying to create a company to create a good business product or anything. They’re just trying to acquire another company right by raising a bunch of capital.

5:31
I guess it’s kind of like, what a straighter is do, right? But except we’re using our Unless you’re a hedge fund. But for us retail Traders, at least we’re using our Capital to acquire shares in another company. So maybe we’re all the same right? By the way, as this drink continues to loot, it’s not bad.

5:48
It’s taken on some different flavors. So I like it. I mean, as Ice Cube continues to dilute that is so any case, he’s an LCA wants to hold on to it long term until the merger day. Not sure if it’s about your feelings on spacs, I’m kind of indifferent to him, I don’t know. You know, whether they’re good or bad.

6:05
I’m looking at the chart on LCA. It’s gone as high as 17 twice. Now, When it’s pulled back, all the way to 12, ever since it popped from, I’m guessing that’s the merger news, right? But on your way until merger data actually close out the trade, it’s already a winning trade but the plan was always to hold until the pop on merger day due to the nature of spacs back whatever they call them.

6:22
Is that the correct name again I’m not I’m not very knowledgeable and spacs and that’s the thing about this podcast I’m not going to act like I’m an expert in all things. I’m kind of an expert in trading but this is interesting. The people people can probably learn from this and I’m trying To learn from this email to historically, we should have a nice pop on the day of the ticker change to Golden nuggets online.

6:41
Golden Nugget online. Is that like a really good chicken 10d? Or is that a something? Something different? Because if it’s chicken tenders, I’m all-in, if they’re merging with a company that’s making chicken tend. He’s I’m all their guys. I’m really struggling with formulating a specific plan to maximize The Profit potential on the big day because it’s a SP AC.

6:59
We can’t really use the historical chart data to estimate the volatility, on the day of the pop, my Concern is to get stopped out on murder day because it’s too tight. Okay? That that’s a legitimate concern because news can can really do some crazy things.

7:27
So how does one calculate on average, how to give a position of breathing room so that you don’t stop out and keep adjusting the safety, net as it climbs while getting the highest odds to hit the true downturn on the trade after the record daily. Hi. I have heard of using three bearish candles 10, pip cushion, by the way, calculating Pips is confusing. I don’t calculate pit. Oops and I’ll get into stops here in a second but also obviously the time frame, the chart is being viewed will be very important as well.

7:43
I appreciate your insight into this matter. Sincerely, Homer, don’t. All right, so there’s a lot to unpack. Your essentially, what, what homers asking here is this, how do I maximize The Profit potential while also guarding the risk? He wants to basically squeeze this thing for as much profit as there is.

8:01
Now, I hate to be the Debbie Downer but there’s no way to know If you’re going to maximize The Profit potential, if that was the case, it already priced into the stock, everybody would know it. Everybody would take full advantage of it. The problem is, you don’t know until after the fact, what it actually did.

8:17
Once the merger day happen, if you’re expecting a big pop on the merger day, that’s great. But to the extent nobody really knows. And if there’s a lot of people that are already bought in expecting that Pop, there’s a possibility that it could so on the news because ultimately, the market does whatever it wants, it doesn’t care about you or me or anybody else.

8:34
So what I have to Tweet out of this email is the fact that it’s SP AC. It’s for me, it’s a chart. He’s trying to mix the trading in with some fundamental stuff. Big news events he’s wanted to maximize the gains now he’s already up on it if I’m guessing maybe he was in it before the news came out.

8:50
So he’s got some decent gains there. Maybe he got in on that, dip back in early August. I’m guessing here. Okay, but he says, he’s already up well on the tray, that’s good. But you can’t, in my opinion you can’t sacrifice the gains that you already have. Or risk, the gains that they already have, especially if they’re sizable for the possibility of future gains completely.

9:11
So if you’re unsure or if you’re a little bit nervous, that’s where maybe take a little bit off, the table is a good thing because, you know, okay, if this thing goes from 15 back down to 12 or 2011 again, and then I don’t get the pop that I want out of the trade. That’s okay.

9:27
At least. I know that I walked away with some partial profits, that were pretty sizable. And I still came away with some smaller profits later on, clearly it’s got this Range gots going from about 11:43 over the last couple months, that’s a very volatile range. It’s going straight up straight down, street, right back up.

9:43
And now it’s pulling back a little bit from 17 to 15, but I’ve talked about this some of my YouTube videos to of late. A lot of people are caught up on. What is Apple doing? What is Tesla doing like oh man Apple’s up 35% since they announced their stock split Tesla is up some ungodly 76 percent or so I believe and everybody’s focused on that but you don’t have to hit the 70%.

10:05
In the 40% trades or the 35% trades to be successful in the stock market. And I think a lot of times when we get hung up on like LCA right, as I got to hold it till murdered a, you’re putting an expectation on the stock market of what it has to do for you. Without considering the fact, maybe the stock market isn’t going to do for you.

10:23
What you think it should do for you. And again, I don’t have a lot of experience dealing with trades that are in the middle of a merger once they get acquired or once there’s a merger going on, I usually stay out of it for the most part, I know. A company that I used to work for Harris. Corporation merged with L-3 Communications.

10:39
And this was like, decades ago that I work for them. But anyways, they merge together and they didn’t do too bad after they merge. So, but yeah, I’m not really targeting stocks that are going through mergers or being acquired but I can’t follow a chart and tell you. This LCA is volatile, it’s going all over the place here.

10:57
So you have to manage the risk. Even if you plan on holding through merger day but you have to put in a contingency plan for what if it doesn’t follow Our plan because right now you’re telling the market what it has to do. And Homer is saying, hey look, I want to hold it this long, and I want to take advantage of the pop and not only do I want to take advantage of the pup, but I want to get it out that the very top.

11:16
You can’t really do that. It’s not really possible to get out of the top of any stock. And when you take that strategy, if I got to get in at the bottom and I gotta get out at the top. Well what that ends up happening is you end up taking big losses because right now, you have all these people piling into Apple.

11:32
They want to get in and they want to ride this, you know, fomo A wave all the way up to as high as it’s ever going to get and then get out. I’ve already got people saying, well, this is a trade for the next 10 years. I’m going to hold it. Well, that’s a horrible entry price to be getting in. After it’s just made a 35% move and like less than a month on a two trillion dollar stock maybe wait for a pullback that.

11:49
I mean, I got a long-term account and on my long term accounts, I’m waiting for pullbacks right now. I’m not trying to get into Apple at this price or Tesla at its price. You wait for pullbacks, that’s what you got to do, Buy Low, sell High kind of goes out the window once people get caught up in full mode. There’s no patience at this point.

12:05
Too fearful of missing out. There’s people calling me texting me. Every day is like I got to get into this. I got to get into this but you don’t have to because you know what’s crazy, you get those stocks that are going sky-high and that’s where all the media and hype is being focused at that stocks all over the place that are going straight up as well.

12:21
Taken video, for example, probably more bullish than Apple has ever been. Nvidia has gone from a Louis sub, 200 back in March to $552. I mean, if this thing just keeps going up, but yet nobody talks about Nvidia. Yeah, everybody talks about Apple and Tesla but Nvidia is crazy right now and I don’t think you should get an Nvidia either.

12:40
I think you got to wait for a pullback on that and it’ll be pullbacks in these stocks guys. If it goes up to 700 and pulls back to 500 on Apple, at least you’re getting in on a pullback here, right? You don’t have to go through the anguish of the stock pool and back, and you wondering whether or not you need to get out for a loss and just chalk it up as another loss.

12:57
Know, you’re getting in on the pullback rather than having to endure the pullback. So, back to Homer here, he’s into lcas got four. Thousand dollars. It’s a long-term swing until merger day for me. Personally, as it always pertains to the stock market. I’ve managed the risk and I let the market do what it wants within those parameters.

13:16
Now, setting, stop losses, using Pips. I’ve never done that before or using three bearish candles. I don’t necessarily think that’s that’s the way to go, because you can have three very small bearish candles. And it stock doesn’t really go anywhere downward. I mean, you’ve seen that in the broader markets, and you get these, like, three-day pullbacks and thing doesn’t even go anywhere.

13:35
R. So, I don’t think you want to just do that. That’s kind of like using a trailing stop loss. I don’t think those are good either, but what you want to do is look for key levels of support. Now what makes it hard for something like LCA is that there is key support levels on there, but they’re not very close to current price action.

13:50
So, the key to a good stop loss is there a support level nearby that you can place your stop loss below to where if that support level is violated, you know, something has gone grossly wrong on the stock, and that you need to go ahead and get out of it. That’s what I do on my stop losses. So Times, I may be in a trade and the stop loss is only by 2% away, from being hit, or in other cases.

14:10
It may be like 7% away but it all depends on where is the support levels at? And so using like, bearish candles or Pips or or anything else, really doesn’t work as well as just really looking for that line in the sand. On a stock chart, that tells you, if it crosses below this level, I need to get out.

14:27
But I think to trying to squeeze out every dime out of a trade is not the best way either. Congrats on having some good profits on the trait. That’s awesome. It’s a winning trade for you, manage those winnings first and foremost, don’t let those things evaporate into thin air, and if you get stopped out in this trade, doesn’t go exactly like you hoped.

14:45
And that happens to me all the time. Then you just take your money and you put it into a new trade, you find that next opportunity. And if that next stock becomes profitable, you keep raising the stop losses on that two key levels, that tells you, if the stock goes, Goes wrong, you get out and then after you get out of that trade, you move onto another trade and you just consistently make good trades and you do that by managing the risk.

15:05
But the big thing is you don’t want to put these expectations of what the market has to do, or what the stock has to do for you. Because oftentimes, the stock is not going to do what you want it to do. So any case, not an expert in the spacs OR specs or whatever these people are calling them, I don’t know much about those things.

15:20
Okay. And I’m not really educated in that area. So, if I sound like a complete Dunst, when I’m talking about those things, forgive me. Not, I’m not claiming to be an expert on him. Not an expert on Acquisitions mergers or anything like that. Never worked in the MMA field, but pretty good with these charts and I do hope that what I said was helpful and that the trade continues to work out.

15:41
Well for you, I hope I hope that your trade goes right according to plan. I just what I like to tell people is be cognizant of what it might do that, you’re not expecting it to do. I was an eBay recently and it wasn’t this nice upward Trend. I had taken a little bit of prophets out along the way.

15:57
So I’m I’m doing fine on the tray, but then it had like this really bad day. There’s just one straight down, I’m not sure why. There was no real news driving the stock lower but it just went down. The market, went up. This thing just didn’t want to cooperate. I got stopped out. I raised my stop-loss.

16:12
I got stopped out it continued to go down after I got stopped out that stock actually thought was going to go much higher than what it did. I actually thought I’d probably be selling it, you know, well above the 60s, maybe even 70 dollars, that it was just going to, you know, continue breaking out. It was this beautiful bull flag pattern.

16:31
Fell apart, and that’s a perfect example of a good trade. That didn’t go, according to plan and when I say according to plan, it didn’t go to according to the expectations that I had for the stock, I thought it was going to go much higher, I still manage the risk manage the prophets came away with a good game on the trade, but still is it was a different outcome than what I was expecting and you got to expect that in the market, you gotta expect the stock market not to do what you’re expecting it to do.

16:50
So while we’re in good times right now, and it feels like the stock market’s easy know that at some point in the future, the markets going to do something that you’re not expecting it to do. It’s going to create a trend or a new direction that you’re not expecting it to take. What if the stock market starts to tank before your merger day on LCA and it pulls that whole stock down will even if it gets a pop on the merger day?

17:10
Is it going to be enough to offset the loss in profits that you took by being determined to wait out until murdered a and hopes that you could bend the market to your will? I don’t think so is any case that’s going to do it for today?

17:27
If you have any questions, feel free to email me, please do me a favor whatever. Platform, you’re listening to this on, if it’s Apple, iTunes or another podcast app, make sure to leave me a good review. I would really really appreciate that. A lot of you guys have already done that that means the world to me because it does take a lot of time and effort to put these things together.

17:49
And when you guys can leave me a review, it really keeps motivating me to continue to just turn these things out and it helps me to know how you guys feel to. Of course, I wanted to be five star reviews, who doesn’t want to be five star reviews. So hopefully, I’ve been able to earn that in your book. Make sure to keep sending me your or emails. I like working with you guys. I like talking to you guys. Keep sending them and we’ll figure out the stock market together. One episode at a time.

18:05
Thank you. And God bless. Thanks for listening to my podcast. Swing trading the stock market. I 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 with your membership, you will get a 7 day trial and access to my trading room including alerts via text email and WhatsApp.

18:24
So go ahead, sign up by going to shareplanner.com trading block, 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 you have any questions, please feel free to email me at ryan@shareplanner.com all the best to you and I look forward to trading with you soon.