Why Risk Matters | Podcast Episode #101

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.

0:28
How, hey everybody, this is Ryan Mallory with Swing Trading the Stock Market and the 101st episode. On our way to 200 already, right? Any case, let’s talk about why risk matters because no one seems to care about risk anymore, these days.

0:43
And a lot of that comes from last year, when you had your major brokerages going free on their commissions. Now why was that so interesting? It brought in a lot of new Traders into the stock market. People who have never traded before but now because they weren’t paying five dollars of trade or even your a couple of years earlier even as much as like $10 a trade, all of a sudden they’re trading for.

1:05
And it’s like freak. It’s like a free casino. It really is and you got things like Robin Hood. That’s come about and become very popular and it’s caused the seismic shift in The Brokerage industry where where there’s no entry to play anymore and that’s a good thing. It’s good that trading is available to everybody, but the people who are most at risk of making bad decisions are the ones that are capitalizing on the free, free commission’s.

1:26
So you have a market environment, that is seen a lot of overtrading people taking out credit cards people taking out credit lines to fund their Gambling addictions. And then you throw that on top of this whole coronavirus epidemic where you have people that cannot gamble on Sports anymore.

1:42
What are they all of a sudden doing their gambling on companies? That’s they’re getting their fix. Then you got blowhards like David Portnoy, who by the way, no offense. I love his Pizza reviews but he’s an idiot. He’s an idiot when it comes to the stock market. Now he looks great right now because the stock market just keeps going up, he’s going to get slaughtered when the market goes down.

1:59
What’s he going to say? Stocks only go down and the bad part, is that no offense. He’s leading a lot of people. Down a rabbit hole, whether he’s doing it intentionally or not. People are following his lead because they want to be like him, they went to act like him. The guy has hundreds of millions of dollars at his disposal worth a ton and good for him, but a lot of people who follow him, they don’t have that kind of access to money.

2:19
I would fact say none of them do and so they’re trying to jump in and follow what he’s doing with maybe a couple thousand dollars or five thousand dollars under taken risks. And that couple thousand dollars means a lot to him and it is sad thing, what’s happening? Because people do not realize the risk, that’s inherent in the stock market.

2:34
They only think stock Ox go up and then you couple that with the fed that’s very accommodating to Traders right now and they’re just constantly allowing this Market to keep going up because they’re buying corporate bonds. They’re buying everything to take the risk out of the market. They’re guaranteeing that no company gets left behind.

2:49
So everybody feels emboldened in this horrible, horrible economy to just keep buying stocks. Now, does this go on forever? Know there’s gonna be a Day of Reckoning. I don’t know what it is. I would have thought we would probably seen it by now, considering how much we balance. You got an Aztec it all time, high. As we’ve gone from looking, Like, 1929 to looking like 1999 and the sense that we’re not just talking about a day counts, we’re talking about a bubble that is heading towards an absolute disaster here.

3:15
Now, here’s the crazy. Part of all this too is that Traders today. They have this, insatiable need to get rich quick, and if you want to get rich in the stock market, you have to ignore risk. You can’t try to just get rich quick in the stock market and still manage the risk. If you try to manage the risk and get rich at the same time, you’re going to take on huge amounts of risk and therefore, you’re not even managing the risk.

3:34
And so, That’s the, that’s the other thing. It’s like one or the other either, you’re going to be a risk manager, or you’re going to just try and get rich. Now, if you just try to get rich eventually, you’re going to lose it. You’re just not going to make it. I promise you, I promise, you won’t make it. If you go into the stock market, trying to get rich, you’re not going to make it. Because you want to know something 99% of everybody who trades in the stock market, from a retail standpoint, they’re doing it to get rich.

3:56
They are, they’re wanting to hit the big one with almost every trade and guess what? They all lose. They do. Yes. Okay, you might have, somebody said, okay, I got a whole bunch of out-of-the-money calls on Tesla. And I struck it big. Okay, there’s there’s outliers, of course, just like there’s always a crazy story that you’re hearing on Wall Street, but on the whole, the people getting in to the stock market, with the sole purpose of trying to get rich, they’re going to lose it all.

4:17
Because in order to get rich quick, you have to ignore risk. You have to take incredible chances and the stock market and the thing with the stock market, you can’t be right. Every time you won’t be right every time. So risk matters to the people who don’t get into the stock market to get rich because they’re not ignoring risk, their focus is on the risk.

4:35
That’s what they’re doing their Risk Managers. And these people who are getting rich, what are they doing with her chasing, everything else? That the crowds chasing? If Disney’s up one day, they’re chasing Disney. If American Airlines is up one day, that’s what they’re getting into. If it’s Tesla, they’re chasing into Tesla. If it’s a Nicola and KLA, they’re chasing and KLA G and u.s. they’re jumping into G and u.s. the stuff that you’re seeing like, the Robin Hood Traders today, trading, it’s absurd and most of them were getting burnt.

5:02
There’s a plenty of documentation out there. You have people blowing their Off over bad trades, you get people losing over eight hundred and sixty thousand dollars of money in the stock market using credit lines and using second mortgages to fund their gambling addictions. Why? Because risk does not matter to them.

5:19
They only look at it from, I need to make money in the stock market. And then when they lose, they see, the stock market is still being their savior to getting out of their hole. Gosh, I mean, guys, this stuff makes this stuff makes my head explode because I’ve never been in a training environment.

5:35
In the last 20 years that is so oblivious to risk. The only other time that was like, this was 1999 and I was a teenager in high school trading and I had taken like 5,000 dollars and made, like, 50,000 60,000 dollars out of it. No joke. That’s how I got my start in the stock market.

5:51
The lady next door. That raised my mom when she passed away in 1991. She was like a grandma to me. She left. Everybody five thousand dollars. I was 11 years old. It was all meant to go to her College. My dad was pretty much, just let me put it in the stock market. He Me and everything taught me was how it all worked with shares or what buying and selling meant bid/ask, all that good stuff.

6:12
It shaped my entire career. Obviously, that’s what I do for a living and now I’m teaching people how to do it further for themselves but I took that money, five thousand dollars turned it into fifty sixty thousand dollars was like some kind of like Prodigy at trading or a genius. No, not at all. What happened was I was the beneficiary of a very flawed market.com man, stocks going up to Infinity.

6:31
Now you can say, the difference is, is oh, well, apple is worth x amount of dollars. Dollars. They you actually make Revenue. They actually have profits same with Amazon and Netflix and Facebook and Google and Microsoft is true, but the valuations are through the roof. Take Square SQ through the roof, evaluations.

6:47
You’re still seeing these Monumental Rises and the price of their shares, guys. That’s not a good thing when you’re seeing stocks like Amazon, go up 20 and 30% in a matter of days or weeks. That’s not a good thing guys. There’s so much chasing going on in this market and Why is that?

7:06
It’s because it’s the same thing. I keep saying, in this podcast episode, people were only focused on the profits. They think they can make, they’re not worried about the risk. And as a result, they’re setting themselves up for massive failure, down the road, and I’ll get to that in a little bit as to why.

7:23
So they chase these crowd plays, but here’s the crazy thing, not everybody’s going to get rich in the stock market. So you want to separate yourself from the pack and look like this genius. Traitor, yet, you’re trading. What everybody is trading? That’s just trying to get rich in the stock market. That doesn’t make you unique that makes you a follower. Don’t a large majority of people will not be profitable in the stock market’s.

7:38
Just a fact of life, they’re going to lose these Robin Hood Traders. It’s going to be a, you’re going to hear so many sad songs about Robin Hood Traders. There’s probably going to be regulations that come out of it. I would not be surprised. You thought the pattern day trader rule was bad? Wait until the Robin Hood Bros, blow themselves up on the stock market and the kind of regulations that come out of it from there because I guarantee the government’s always going to think there’s a solution and they’re going to think that regulation is the answer.

8:04
I talked about How you don’t want to follow it, just everything that the crowds play and because all you’re doing, is just hoping that you’re not the last person to get in at the top. And there’s no other idiots that you can sell to at a higher price. And I’m not calling people idiots per se, I’m just saying it’s a popular phrase saying that you hope there’s another idiot that’s willing to pay a higher price than you did.

8:23
That’s just how the stock market works. When you get into these crazy momentum plays. You’re probably saying well, Ryan, if everybody takes risk serious, won’t that basically make it to where you’re just trading with the crowd. The crowd takes risks. There’s no no it’s not. You want to know why? Because Because the crowd will never take risks, serious always. I’m hoping for and these podcast episodes is to make sense to just a couple of people listening, like, you know what? This Ryan guy, he may be on to something here. You just can’t go into the stock market and just be completely oblivious to risk. I get them every day, guys, I get messages every day, I sit down, I talk to them my friends and they completely blow me off. They like yeah, that makes that makes a lot of sense, makes a ton of sense, and then they go back and keep doing the same thing.

9:02
So you think that, I really think the people that the majority People are going to listen to me on this podcast. No, they’re not. They’re probably one. They’re going to probably be offended at all. You called me a Robin Hood, bro? Again, oh, you just called me an idiot. I didn’t call you an idiot but no offense but if you keep buying some of these stocks like Tesla at fourteen hundred dollars, you’re an idiot.

9:20
I’m just telling you man, wait, for a freaking pull back. All you’re going to do is be a bad quarter from. There’s pull back, you’re gonna Panic sell because it’s going to go down and then you’re going to be jumping on your like, oh, what did I do? And then you’re going to watch it, go back up again, it’s like, oh, I shouldn’t have sold guys. It’s like Classic Market. Behavior for from retail Traders, the majority of the Robin Hood Traders have no clue what they’re doing, 95 percent of them, absolutely no clue.

9:44
And so, in this podcast, I know there’s a lot of Robin Hood Traders. I’m just hoping that some of you guys will listen to me for five people. This this podcast right now currently gets about 30,000, listens every month, I’m hoping, five, or six of you guys will listen, because most people will never take risks series, there are going to be so hung up about getting rich, and they can’t get past.

10:01
That just a sad, sad fact of trading, guys, let me, let me tell What happens? Okay, let’s say a Robin Hood. Trader has a thousand dollars in his account and he gets into a trade, let’s say he bought Tesla at $700, okay? When it was back at seven hundred dollars a share, a couple months ago and it goes back up to fourteen hundred dollars, like it just hit recently, he sells out at 1400, he just doubled his money, that’s great, but then he gets in the gnu.

10:28
S at $10 now he’s got two thousand dollars, he puts it all on gnu. As he’s like, man, I make another 100 percent like I did on Tesla. This thing’s going to be worth four thousand dollars. My account. What does he do? He sees GN U s– go from ten dollars down the two dollars, he loses 80%, holy cow.

10:45
What is he now, he didn’t, he didn’t lose all the 100% technically right from from teza, ah, but he did, he actually lost a lot of his Capital because now he only has four hundred dollars in his account because he put two thousand dollars on GN U s–, watch it go down, 80% down to two dollars and now he’s got four hundred dollars left in his account.

11:02
So he made a hundred percent on Tesla, he lost 80% Angie and us. And now he’s stuck with $400 from a starting Capital position of 1,000. So what is he down? Like 60%, it’s kind of a sad State of Affairs. Don’t you think we? Can you want to know something Traders, do that? That’s what they do. They get caught up on the potential riches that the stock market has to offer. They blow off risk because if you want to get rich fast in the stock market, you better take on a lot of risk.

11:18
So what’s the application to all of this stuff? You got stocks like Square squ. Got stocks like Tesla TSLA, you got fu. Movie, you got G and US stocks that people just love to Chase. Chase Chase Chase and they get into it. They hope they’re not the last person to get out before. It takes a downturn, they make a few bucks, they’re excited. But why are you people getting into these stocks at these prices? Why when SQ was just trading a 30, 40 bucks, a share a few months ago or people now say, and it’s a great buy at a hundred and thirty dollars a share because they’re just hoping that he just keeps going hired.

12:00
They buy into the idea, that stocks only go up and they’re showing zero. Regard for the risk at hand. So yeah, they’re going to lose their money. It may not be today. May not be tomorrow. They may get lucky a few more times but they’re going to lose it guarantee it. So let’s wrap this up main point here.

12:17
If you want to get rich instantly in the stock market, guess what you got to do? You got to ignore risk. If you find yourself saying, I got a double or triple my money, or I need to make twenty percent on every one of my trades or fifty percent on every one of my trades. And you’re not really considering the fact that, you know what people do have losing trades, you’re trying to get rich.

12:33
You don’t care about the risk. Always I’m that you’re going to be wrong on every one of your trades and when you’re right you just got lucky. And you want to know something? Could be much better off in the long run. That’s going to do it for today. If you guys have any questions, feel free to email me ryan@shareplanner.com God bless.

12:50
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13:05
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13:21
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.