Putting it All On One Trade | Podcast Episode #496

0:00
Hey everybody, this is Ryan Mallory with shareplanner.com’s Swing Trading the Stock Market. In today’s episode, we’re going to talk about putting it all on one single individual trade. Now I know what you’re thinking. Like Ryan, it’s been like almost 4 weeks. Why have you not done a podcast?

0:15
Well, a lot has been going on in my life. My daughter got married. I got to walk her down the aisle. That was quite exciting, but beyond that, really the the the main thing that has kept me from it is I moved. I moved or uprooted the whole family moved down to another exit on 95 and that’s a lot to do that.

0:32
It takes a ton, especially when you have your own podcast in your home. You got to get another studio looking good. Yes, this is my new podcast studio that you see behind me here yes, that’s a that’s a Cramer picture behind me as well for those who are actually watching the video.

0:49
However, what moving in August in Florida, it’s a awful, awful experience and exhausting one as well. We moved ourselves probably shouldn’t have done that probably should just pay for somebody to do that, but I was trying to save some bucks and paid for it physically in the process.

1:07
It was exhausting. So I’m getting settled in not quite there. There’s a lot of honeydews that I’m doing that night and then on the weekends, but pretty much there. So all that being said, let’s get on to what we’re talking about and that is trading 100% on one individual trade.

1:28
I’ve done some of these in the past where I’ve talked about some of this. I’ve talked a lot about position sizing, but I really want to hone in on this particular question from a particular user. He says that I can use his real name, but being Florida, being redneck and moving more out into the boonies than I’ve ever lived, I’m definitely giving them a Florida redneck name here.

1:50
I mean, we got mosquitoes that are like the size of my hand that’ll attack you at night. We’re so far out in the boonies. It’s it’s great, though. I like it. It’s a lot of work, but I do enjoy it. OK, so the Florida redneck name that I’m using in this podcast episode is Delphia.

2:09
And Delphia writes, Hey Ryan, my name is Delphia. I don’t mind if you use my name on your podcast. Well, I’m giving you a order redneck name. I have two questions that I want to ask you. I am a big fan of your podcast and love the stuff that you put out.

2:24
As you can see from the title I of the e-mail, I put all my capital into one stock at a time. I have listened to you a good amount and could guess that your answer would be on This is not a good idea but I want to get your standpoint on this. Considering the fact that I am always sitting setting pretty tight stop losses and only do this on very high market cap blue chip stocks.

2:47
I don’t mind telling you. But maybe it’s better not to show the actual the cash value of it of the amount that I’m trading. And yes he does share with me what it is, but I’m not going to share what it is for whatever reason even though I’m not using his real name. And so any case, he tells me that he keeps reinvesting his gains with every single trade that he makes.

3:06
He says I’ve been doing this for about 3 months and have had a nice consistent and steady wins. I have a separate question. I’m curious as to your strategy in this respect. I have about only 1/4 of my cash in swing trading and the rest in the long term investments. Now I understand that I’ve only been doing this for a short amount of time, but from what I’ve done so far, I feel that I will get much better returns year over year doing swing trading than I will with long term investment trading, which I have had OK but not amazing results in.

3:35
My question for you is do you invest long term? If so, can you give me a percentage of the amount of money that you use for long term investing and the percentage of money that you use for swing trading? Thanks again. I would really appreciate a response. Keep up the great content.

3:51
Sincerely Delphia. Good question Delphia about going all in one. And I get that on the surface it feels like it’s not a bad approach if I’m trading very liquid blue chip stock stocks that I have a tight stop loss on stocks that maybe don’t even have a a lot of volatility, maybe it has a beta under 1, still not a good idea.

4:12
OK, so I’m not going to beat around the budget. I’m going to tell you right out of the gate going all in on one stock For me from my personal opinion on it from a swing trading standpoint, it’s not a good one. And I can point to so many stocks over the years and even some recently that have given investors a lot of problems.

4:34
If you would have gone all in on it, you would be blowing up your portfolio. One of them just recently is UNH United Health. That stock, I mean, you’re talking about a stock that was trading in the six hundreds. Now it’s trading as low as like 240. It’s back above 300, but still you’re talking about a 50% loss on that.

4:52
So if you’re going all in on that, that’s a pretty bad situation there. I remember. And, and, and some of the stuff isn’t predictable. I mean, you look at the, the, the things that are that surrounded United Healthcare and with the CEO and so forth. I mean, things that you would never imagine happening, you go and look at a stock like Alibaba.

5:10
I remember, I think this was like 5-10 years ago, but the CEO of Alibaba, he just disappeared. They didn’t know if he’s alive or dead or, or whatever, but he disappeared. And I mean, obviously he’s, he’s around now, but it, it impacted the stock. And so there’s countless stocks like that.

5:25
There was one just today, CNM, it’s an industrial play, had its earnings down 28%. So earnings that, that can create a lot of problems, especially if you’re swing trading with all of your money and one trade and you’re willing to hold through earnings. That’s a bad idea. But let’s, let’s look at it from from a different perspective.

5:46
Delphia has only been trading for about 3 months. It’s working out well for them, for that person so far. But let’s say, let’s say you’re starting off an account about $10,000 and in that first year you go from 10,000 to 15,000. You made a 50% return, really good return. Next year year too, you go from 15 to 25,000, OK, even better than the first year you’re, you started at 10 the first year.

6:09
By the end of the second year, you’re at 25,000. That’s awesome. More than 100 percent, 150% return by year three. You take it from 25 to 40,000. So now you’re starting to see that compounding. And then from year 4 you’re going from 40,000 to 50,000. So now you’ve you’ve seen an increase of 400% of your original investment going from $10,000 to 5 or $50,000.

6:35
Really good work there. But then you put your money into a stock and it drops 40% on you. Maybe it was like a United Healthcare stock. Maybe it was just, you know, an oil play or, or just something that had some news that come out like a biotech stock that you weren’t expecting bad news in and you took a big hit.

6:56
You’re now down 40%. That means you’ve lost half of your profits and you’re 5 as a result of not doing proper position sizing and going all in on one trade. So think about it.

7:11
You start off in 10,000. Do you still have profits? Yes. But you went from 10,000 to 50,000. That’s 40 or $40,000 that you’ve made. You took a 40% hit on your trade. So you go up 400% and then you lose 40% on a trade and you’ve lost half of those profits because now you’re down to 30,000.

7:32
So that’s a, that’s a big, big deal right there. And there’s a good chance when you see those kinds of losses and when you see that kind of a percentage loss on an individual trade, you’re probably going to become a distance like, well, it’s too late to get out of it now. Blew right through my stop loss.

7:48
You know, in terms of, let’s say it’s an overnight event that that you know, gets way below the stop loss, There’s a good chance you’re going to cancel the stop loss and you’re looking at it just a disastrous scenario for yourself. And then what if you do ignore it and it keeps going further and further to the downside?

8:04
I mean, look at trade desk TTD. That one has had some massive, massive sell offs. And so you really want to be careful that you’re not putting all your money into one trade because there’s some unforeseeable circumstances that can arise like you and age or let’s say it was Shutterfly, that’s a stock or Boeing.

8:25
Those are stocks that can that can really wipe you out. Take a look at Tesla, for instance. I remember back in the day when Elon put a message out there saying that he thinks his stock is overvalued. Who says that?

8:42
But he did, and the stock crumbled as a result of it. Now you go into the trade, you think, OK, this is a great trade setup. What are the odds that ACEO comes out and says my stock is overvalued? But that’s what happened to Tesla. So there’s a lot of existential threats, I guess, that can take place that can impact the stock negatively.

9:03
Fortunately, I’ve been able to avoid a lot of the real big ones, but that doesn’t mean that I always will. And if I don’t avoid a big sell, if let’s say I have a stock that I take a 30% loss on, well, I’m not putting all my money into one stock. So it’s all spread out.

9:20
So I will be able to absorb that much better. But if you’re putting it all into one stock, you’re living and dying by that stock. You’re living and dying by the news that surrounds that stock. And if there’s something negative comes out about it, you’re done for. So I would say really, really try hard, especially, especially one, one other thing I would not do is try to short a stock by going all in with my entire portfolio.

9:40
Because what if they have some kind of crazy news event where they’re up 60% or even crazier? I mean, how often do we see stocks that actually go up over 100% in the pre market? Then all of a sudden you’ve lost not only your entire portfolio, but even more, more than the entire portfolio’s worth. You’re owing them money beyond what you even invested into your brokerage account.

10:00
What I want you to think about is that trading is not about the individual trade. It’s not about, you know, making sure that every trade that you have turns out to be a winner. And that’s kind of what you’re stuck trying to do when you go all in on every single trade that you make where one trade is 100% of your entire portfolio.

10:21
Instead, it’s got to be about the body of work. What Delphia is doing here is essentially doing what I talked about in one of my earliest podcast episodes, and that was trading like a serial killer. Now, what does a serial killer do? Continues to kill people, continues to kill people.

10:38
Why? Because he hasn’t been caught yet. When is the serial killer usually stop killing people? When he gets caught. And so that’s kind of the, the mentality of a lot of traders is that they’re going to keep doing that because they haven’t been, they haven’t seen their portfolio blow up by doing it yet. But then when their portfolio blows up, they’ll probably stop doing it at that point.

10:57
But what I want you to do is not have to experience that because when you go that direction, it can be detrimental, detrimental to the portfolio. And just like in the example I give, you take a make major loss, you’re wiping out years and years of worth of profits and and you have a credible run, you can wipe out a huge chunk of that profits, if not all of them, depending on how bad the loss actually is.

11:22
So remember, trading is about a body of work. You’re going to have a lot of losing trades, You’re going to have a lot of winning trades. The difference is this how well you let the winning trades run and how how quickly you cut the losing trades short, getting out of those losing trades before they have any opportunity to do damage following your trading plan.

11:39
It’s about the body of work just as much in the losing trades as it is in the winning trades. Stock picking is important. When you put all your money on one particular trade, your stock picking becomes extremely, extremely important. But really, when you’re managing the risk, when you’re considering position sizes and everything else, it’s more about the body of work.

12:02
And that’s what I want to keep hammering home to you is how important the body of work is and that it’s not about 1 trade. It’s about many, many trades, hundreds and thousands of trades over many years that you’re going to be making. And So what you want to do is go from one trade to the next, manage the risk, taking partial profits, planning out your trades, staying disciplined and not letting 1 trade define you.

12:27
And so we’re always trying to strike a big in our trading. But really what we want to make sure is that it’s not one trade that makes the difference. Because usually when it’s one trade that makes the difference, it’s usually a big losing trade. And before I tell you more about what I think Delphia might be doing wrong here, let me first take a moment to tell you about the self-made Trader.

12:47
The self-made Trader is my life’s work. It’s a training course that I’ve put together over the over a period of four years, detailing everything you need to know about swing trading that I’ve learned from my 30 years of experience. And I’ve put this into a very easy to understand course covering the beginning concepts, the trading psychology, setting yourself up for success, and then getting into more advanced trading strategies.

13:07
I take you from the very beginning all the way through the more complex strategies that I use when it comes to trading, from managing risk to booking profits, to determining your entries to how do I scan for stocks, how do I build my watch list and everything in between. It’s a really, really cool training course.

13:24
I hope that you can check that out. You can go to shareplanner.com, click on Trading Academy, and then you’ll be taken to the self-made Trader course where you can see for yourself if it’s something that can work for you. Any case, the next thing that I would say about Delphia, and I’m not trying to attack Delphia, I think that Delphia sounds like a pretty good person really trying to figure things out well as it pertains to trading.

13:50
But I would probably say that Delphia has a little bit of greed here too because some success early on and you’re trying to maximize that success. Best way to do it in a beginning traders mind is to put it all on one particular trade.

14:06
But like I said, that can easily blow up in your face. It’s like trading like a serial killer. And one thing you want to remember too is that mistakes happen. Mistakes will happen in your trading. There’s been times in my trading where I thought I closed out a trade and I probably did everything except hit the send button.

14:24
And then a week later I’m like, why is that trade in there now? It didn’t destroy me, actually made more money by not realizing I didn’t close it out. But those kinds of mistakes can happen. I haven’t had it really work against me or really, you know, kick me in the tail for doing that.

14:41
But mistakes happen. Mistakes can happen where you don’t realize it, but instead of buying 100 shares of something, you accidentally bought 1000 shares of something. So maybe maybe Delfea here is putting it all in one trade but doesn’t realize it that by accident put it all on one trade plus goes in the margin goes into, you know, 200% leverage.

15:03
Mistakes happen. And so you want to make sure that that when you’re trading, that if you do make one of those mistakes that it’s not life changing. And it can very easily be life changing when you’re putting it all on the line with every single trade that you make.

15:19
And sometimes too, and, and I really make sure that in my own trading, I don’t do this, but it sometimes traders forget about particular events. One that a lot of traders might forget about is earnings. And that is a horrible one to forget about. There was one that I was just in not too long ago, CNM it’s industrial play.

15:39
I got a good start to the trade. I took a third off the table and then I just kind of stall it out and then back on at the beginning of this month it it dropped enough to where I got out of it hit hit my stop loss. I’m out of the trade, no big deal. Made a small profit off of it.

15:55
Fast forward a week, the stock has earnings and it’s falling apart. Somebody asked me is like, hey, Ryan, I still have CNM, didn’t realize it. You know, I forgot all about it and then they had earnings today. What should I do? I don’t know because that’s wasn’t really part of my trading trading plan.

16:12
But that’s the kind of mistakes that you can make as traders and you’re going to make mistakes as traders. We’re humans, we’re prone to making mistakes and that’s why position sizing is so absolutely critical and part of good position sizing knows exactly where your risk tolerances are and knowing that going 100% long on a particular trade sets you up for disaster.

16:38
Now the other question, yeah, is, is that, you know, hey, maybe I shouldn’t be doing long term trading. Maybe I should just put all my money in the swing trading. So not only going all in on our trades, but we’re putting all of our capital on one particular trading strategy or approach. I do do long term investing to answer this question and I’ll tell you this is that there’s years where long term investing is incredible versus the returns that I get in swing trading and vice versa.

17:01
You take 2022 where the market was selling off. I was taking pretty good hits on my long term investing, but my swing trading, I was short the market in 2022. So I was able to offset the long the losses in my long term portfolio and I was making some really nice gains in my swing trade.

17:16
And then this long term portfolio was actually setting itself for many years to come of really good high quality gains because the market was selling off so much. I was able to get into stocks like Robin Hood and DraftKings, Microsoft and Amazon and Meta and and all these other companies like Home Depot and Advanced Micro Devices, just really good stocks that had taken an absolute beating that ended up flourishing in the years that followed.

17:42
But while I was having to wait for those opportunities, my swing trading was being was able to capitalize on the bearishness that was prevailing in the market at the time. And then you go into like 2324, my swing training was really good. But holy cow, the balance that the market took and, and how quickly some of those gains compounded as a result of being able to get in during between June and October of 2022.

18:05
And then seeing those games play out in 23 and 24 was absolutely astonishing. And so while my swing trading was really good, my long term investing was even better because of the kind of period that we’re in now. Delphia has only been trading for three months. And so it’s very difficult to say, although the long term investing isn’t going to really be your thing when you really haven’t seen much of the market.

18:26
In fact, over the last three months it’s been trending higher, but it hasn’t been trending aggressively higher. Your long term gains are going to come when the market is selling off and it’s worst periods of time. That’s where I made most of my gains from long term investing is by getting long at the the bleakest and darkest moments in the in the history of the stock market.

18:46
And that’s always hard to do. It’s never fun when I’m doing it. I doubt myself when I’m doing it, but I always know it’s the right thing. So keep in mind from a trading standpoint versus long term investment standpoint that you don’t want to just go and put all your money on the one particular strategy.

19:05
And when you’ve only been trading and investing for about 3 months, you don’t have enough of a sample size to be able to make that determination. And swing trading in general, you don’t have enough of a sample size to say I should be going all in on every one of my trades because eventually, like the the serial killer, that’s going to come back to bite you.

19:26
Finally, the the last question is how much do you have in swing trading versus long term? A lot of it depends. I mean, when that’s kind of like the typical economist answer, right? It depends, but it really does. Because if there’s a big run in one particular or a handful of stocks in my long term portfolio, that’ll make the the long term portfolio much bigger relative to the swing trading portfolio.

19:45
And vice versa. If we’re in a like an environment like 2022, that portfolio is going to shrink some and I while I will have cash on hand, there will still be some base positions that I’m holding on to that’ll be shrinking in size as the market’s pulling back, which makes my swing trading bigger than my long term account, relatively speaking.

20:03
But in general, I would say it’s probably split about 5050. Most of the time I don’t, I don’t really keep too much more in my swing trading relative to my long term and vice versa. And that’s going to do it for this podcast episode. If you have any questions, please keep sending me.

20:21
your emails, ryan@shareplanner.com I’m the only one that reads them and if you send me a question, more than likely I’m going to make an episode out of it. So please send them in to me. Tell me your stories. Tell me your background. I want to hear all about it. Makes for a great listening for the readers. And I promise I won’t use your name.

20:37
And also make sure to check out the self-made Trader and whatever platform you’re listening to me on, leave a five star review. I always appreciate those That helps me to grow the audience and then increase its reach and I enjoy hearing so do that for me.

20:53
Thank you guys and God bless. Thanks for listening to my podcast, Swing Trading the Stock Market. 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. With your membership, you will get a seven day trial and access to my trading room, including alerts via text, e-mail and WhatsApp.

21:14
So go ahead, sign up by going to shareplanner.com/trading Block. That’s www.shareplanner.com/trading-block and follow me on Shareplanners, Twitter, Instagram and Facebook where I provide unique market and trading information every day. You have any questions, please feel free to e-mail me at ryan@shareplanner.com.

21:34
All the best to you and I look forward to trading with you soon.