Reinvesting Your Gains | Podcast Episode #472

0:00
Hey everybody, this is Ryan Mallory with shareplanner.com. Swing trade in the stock market. In today’s episode, we are going to talk about reinvesting your gains from a profitable trade. What do you do with the profits that you make when you have a really good trade? And so today’s e-mail comes from a listener of the show, first-time writer to the show.

0:21
And I’m going to give him a fake name. I give everybody a fictitious name just because I don’t want to use their real identity. I don’t want them to regret it, you know, 10 years down the road. This case, I’m going to give him a good Florida redneck name. Being that I’m from Florida, I’m going to give him the name of Judd.

0:37
Hey Ryan, first, thank you so much for your podcast. I’ve learned a ton and I feel as if I’ve turned a corner in my trading. I’m by no means very successful, but your content is much appreciated. Sometimes I wonder about how you handle your profits. I found that whenever I experience a trade and take profits, I’m too eager to reinvest the gains.

0:58
So do you use any type of strategy after booking the profits, or do you mainly just allow the gains to grow in your investable account or capital? I’m thinking about just automatically putting my gains made by any of my winning trades in the SPY or QQQ, but I’m wondering if there is a better way to handle the profits.

1:16
Thank you, sincerely, Judd. OK Judd, good question. One of the things that I like to do as well is dissect the email a little bit too, to see if there’s any clues in what they’re saying that goes beyond just the question and maybe could use a little bit of correcting.

1:34
He talks about how he’s turned a corner in his trading. I wouldn’t so much look at trading as something like, “OK, I finally arrived.” You know, let’s say the first five years you’re trading, you’re constantly losing, you’re not making any gains. Then finally you have your first positive year and you’re like, “Alright, I’ve arrived. I’ve turned the corner.”

1:51
That’s really not how you want to look at it. Take golfing, for instance—if you’re going to shoot par, that’s like 72 in most cases, right? I’m not a golfing expert, but I think there’s a lot of parallels to golfing and trading.

2:14
So you want to keep improving. You want to get closer to par. And then when you get to par, you want to get under par. Right? And the more you get under par, the better at golf you are than the average Joe. So it’s kind of like trading.

2:33
You want to see constant improvement. You want to see better execution, better profit management, better risk management, better taking gains along the way, less emotions in your trade.

2:48
You want to be driving better. You want to be approaching the greens better. You want to be getting yourself out of sand traps and the high weeds and you want to be putting better and be able to read the greens better.

3:04
And I don’t know if you’re ever really the greatest you can ever get at golfing until you’re essentially doing a hole-in-one on every single hole—and that’s never really going to happen.

3:22
And it’s like trading. You’re never going to be the master trader. You’re never going to be scoring 100% on every one of your trades, though you keep trying to push in that direction.

3:38
So you don’t want to look at whether or not you’ve turned the corner, but whether or not you’re constantly improving. Are you continuously refining your trading game? Are you doing better at risk management? Are you doing better with the emotions? Are you finding that right position size for your trading?

3:54
And then are you executing the trades, managing the trades and closing out your trades? Are you reflecting on the trades and what you could do better next time and tweaking the strategy to make sure it’s being optimized on a regular basis?

4:13
The market doesn’t care about how well you’re doing or how bad you’re doing. It’ll take from me on the next trade just like it will do with a horrible trader or a great trader.

4:29
Now to his main question—what do I do with the gains when I make a profit? Do I reinvest those gains immediately? There’s a huge tendency with a lot of traders to want to be able to reinvest their gains.

4:47
So let’s say you put $10,000 on a trade and you come away with a 20% gain. Now that $10,000 is worth $12,000. You immediately want to put that $12,000 toward something else. A lot of people don’t like sitting in cash. But I’ve got to tell you, swing trading—and just trading in general—is a lot about cash management.

5:06
You look at Warren Buffett right now—he is one of the most profitable traders of all time. And what does he have? He has the largest cash position that he’s ever had. He’s got hundreds of billions of dollars sitting in cash right now. That’s because he doesn’t have a reason to reinvest that money yet.

5:25
If he did, that money would already be reinvested. So as traders, we have to be OK with money sitting in cash. Now for me, when I have it sitting in cash and I don’t foresee it being employed right away, I’ll put it in SVWXX.

5:40
That is the Charles Schwab money market fund. It’ll pay you some interest. Usually around 4% or so. Is it a lot? No. But it’s sitting there. It’s making something while that money’s not being deployed. So I’m actually making gains with those gains just by having it in something that’s earning interest until I make my next trade.

5:57
And then when I need that money, I’ll take it out and put it into the market. But I don’t trade just because I have to trade. I’ve gone through that in my trading career where I always felt like I needed to be 100% long, like I always needed to be in something—and that, frankly, doesn’t work.

6:18
Yes, it creates a lot of activity. Trading is exciting. There’s always something crazy happening in the markets. But being in cash is boring. It’s always boring. There’s nothing fun about it. But it’s an essential component to trading.

6:34
Being in cash can make the difference between whether or not you’re really a successful trader. Because here’s what I would say—and I’m trying to break it down in its simplest forms—when it comes to trading…

6:50
When we’re in cash, it should be when we are the most uncertain about the market’s direction. When we are most heavily vested in the market, it should be when the market is at its most bullish, when it has its most consistent gains being continuously made, where you’re constantly adding new positions and your old positions aren’t getting you stopped out.

7:08
Yes, you’re taking partial profits along the way, but the ride-or-die position isn’t getting stopped out. So you’re able to add continuously more and more profitable positions to your portfolio.

7:28
Now on the other side of the trade, when it comes to shorting, in a heightened volatile market, it’s better to trade with less because you can get squeezed out of positions very quickly in a bear market. When you get those dead cat bounces, it’s better to trade with fewer positions so that your emotions are more easily managed in a volatile market.

7:46
Unlike bullish markets, you have to be aggressive with profit-taking in a bear market or even just in a market pullback. Because historically, the market goes back up. Yes, there are dips and crashes, but by and large, it goes back up.

8:14
So you have to keep that in mind when you’re shorting. We’re not trying to short a stock down to zero. If we can get 5–10% out of a short position, that’s great. Let’s move on to the next trade. Prep for the dead cat bounce and maybe reload those short positions once the bounce fizzles out.

8:30
But taking your positions that you just made and closed out with a good gain—don’t feel like you have to put it into something right away. A lot of that comes down to dollar watching.

8:49
And if you’ve been listening to the show for a long time, you know I hate the idea of dollar watching because dollar watching personalizes gains. And when you start personalizing gains, you’re injecting variables into the market that the market doesn’t care about.

9:10
Going back to that $10,000 example that turned into $12,000—you made a 20% return on the trade. That $2,000 suddenly becomes your rent payment, your mortgage payment, or your kid’s college tuition for the fall. It starts to become personal to you.

9:28
And that means you’re attaching emotions to those gains. That means if the next trade doesn’t work out, now you’re not just losing capital, you’re losing something emotionally significant—your daughter’s tuition, your medical bill, or credit card payoff.

9:46
That’s what that money becomes to you. So if you’re dollar watching—and I don’t dollar watch—because when I do, I attach personal feelings to that money. I focus on returns.

10:03
Yes, if I want to, I can look at the percentage that I’m up. If I’m up 20% on a $10,000 trade, I know I made $2,000. But when I’m looking at it in the account, it just does something differently. So I avoid looking at dollar gains because I don’t want to personalize them.

10:25
I don’t want them to become something I attach human emotions, needs, or desires to. When the trade’s over, the capital and the gains go back into the same bucket. They’re not separate.

10:45
You have a bucket. You have gains here. You have capital here. When you’re done with the trade, it should all go back into the bucket.

11:02
Now, I know some people will say, “Well, I’m going to take the gains and put them into a long-term account.” That’s fine. I don’t really do that. I keep everything separate. I keep everything in different accounts.

11:02
But the only thing with doing that is—what do you do during drawdowns? Even if you only have an average drawdown of two or three percent—and I don’t usually see much more than that for myself—that’s still eroding away at your capital.

11:25
And if all the profits you’re making are going into a different account, then over time your account is going to get smaller because all the profits are being taken away, but all the losses are remaining.

11:42
So I’m not a huge fan of just putting it into another account, into SPY or QQQ. That’s really like making another trade. It’s great if that’s your long-term move and you want a dollar-cost average into SPY or QQQ.

12:05
Right now though, the market has never been more overvalued—at least in my opinion—than at any other point in history. That doesn’t mean it can’t keep going higher. It could. It could go another 20–30% before there’s ever a pullback.

12:22
But I’d rather invest long term into positions where the market is coming back from a significant pullback. That’s why I haven’t really added much to my long-term positions over the past two-plus years.

12:42
I got into names like Robinhood in 2022, and it’s up something like 500%. But I haven’t added to it since. I’ve actually taken profits and raised cash.

13:10
If there’s another pullback, I’d want to buy more—whether it’s Robinhood, DraftKings, or SPY and QQQ. I have long-term positions in those names, but I haven’t added to them in years.

13:31
If we get a 20–30% pullback, then those ETFs become more attractive because entries matter—a lot—on long-term positions. Even more so in some ways than they do with swing trades.

13:43
Let’s say SPY is trading at $100 a share. You buy in, and then we go through a recession and it drops to $50. You’ve got no capital left to allocate. You missed the opportunity.

13:59
Then when it bounces back to $100, you haven’t lost anything—but you haven’t gained anything either. Had you waited for the pullback and bought in at $50, then when it returns to $100, you’re already up 100%.

14:20
That’s why timing your entry really matters. And if SPY goes to $200 in ten years, you’re up 100% from your $100 entry, but 300% if you got in at $50.

14:52
That’s a huge difference. Waiting for the better opportunity can make a big impact. And right now, SPY is trading just 3% from its all-time highs. That’s not a significant pullback.

15:31
So if you want to invest your swing trading gains into long-term ETFs like SPY or QQQ, I still think it makes sense to wait for a better opportunity.

15:47
And speaking of better opportunities, check out swingtradingthestockmarket.com. Yes, this is the part where I plug the service because it helps support the show.

16:05
You can trade with me daily in my Discord, or just get my stock market research each and every day. There are different plans you can choose from. You’ll get my daily watchlists, both bullish and bearish setups.

16:23
You’ll also get a master list of trade setups I use, a review of each day’s watchlist, and video updates on major tech stocks and market analysis.

16:39
So check that out at swingtradingthestockmarket.com or go to shareplanner.com—either way, it supports the show.

17:06
Back to our discussion—ideally, if I had it my way, I’d love to be 200% long all the time. That would satisfy my need for action and excitement.

17:22
But it would be a poor strategy. It would lead to significant losses. It’s not something I could sustain emotionally, and honestly, my wife wouldn’t like me much.

17:39
Because emotionally, I’d be wrecked. That’s why your trading has to match your lifestyle.

17:57
If you want to trade futures overnight but you’re raising a kid during the day, that might not be the best match. You’ll be tired, make bad decisions, and not be present as a parent.

18:14
Your trading needs to be conducive to your lifestyle. For me, trading 200% long all the time would leave me high-strung and miserable.

18:30
My kids would try to avoid me. You have to manage your trading emotionally—and responsibly.

18:46
Just because you want to put all your money to work doesn’t mean you should. What you want and what you should do are two different things.

19:06
If I could, I’d be 500–600% long—digging coins out of the couch cushions to invest. But that would lead to disaster.

19:26
Instead, I manage risk. If I’m not ready for a trade, I’ll put the money into a money market account that earns interest—maybe around 4%.

19:44
That’s still earning while I wait. And right now, we’re in a horrendous market for trading—it’s been that way since November.

20:02
We’ve got gap downs, fake runs, huge selloffs, and no real direction. Lots of action, no follow-through.

20:19
So what should your strategy be after booking profits? One, move on. Don’t dwell on the gains. Don’t feel pressure to immediately reinvest.

20:35
Continue your strategy. I use a top-down trading approach. If the market, sectors, and industries aren’t aligned, I don’t trade.

20:52
I focus on making the right next decision—not just making the next trade. That might mean sitting in cash or closing a position.

21:12
Sometimes the right decision isn’t entering a new position—it’s doing nothing. Trading is a lot about waiting.

21:29
That’s why I always recommend having a sidekick—something else you enjoy. For me, if I didn’t have SharePlanner, I’d probably do woodworking.

21:49
I’m not good at it, but I love watching YouTube channels about woodworking. It’s something I’d like to learn in retirement.

22:07
So remember, it’s not about what you want to do with your money. It’s about what the right next decision is.

22:25
And when you have a really good trade, don’t just feel like you’ve got to invest it somewhere. If nothing else, put it in a money market fund until the right opportunity comes along.

22:42
If you enjoyed this episode, please like and subscribe on YouTube. Leave a five-star review on Spotify or Apple—it means the world to me.

23:00
Let me know in the comments: What do you do with profits after a great trade? Do you sit in cash? Reinvest? Go short? I want to hear from you.

23:16
Thanks again, and God bless.

23:35
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.

23:57
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23:57
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