Stop Using Price Alerts When You Trade Stocks | Podcast Episode #43

0:07
Learn to trade stocks successfully. Learn to profit consistently. I’m Ryan Mallory, and on my weekly podcast, I’m going to teach you the ins and outs of a complex, everchanging stock market. You will learn to trade better, trade smarter, and profit bigger.

0:26
Now let’s go trade. Hey everybody, this is Ryan Mallory with my podcast Swing Trading the Stock Market. In today’s episode, I’m going to talk about why you should stop using price alerts. Now you see, there is this Undine belief that you should use price alerts to be notified when you should place an order to buy or to short a stock.

0:48
Now I’m here to tell you that price alerts will create turmoil for your portfolio. I have been trading for more than two decades and for the large part of that time I haven’t used a single price alert whatsoever, not even once, and I am better for it. I know that there are tons of people out there that will tell you otherwise, and that every day you should have your price alerts in place and ready to pounce on the stocks if triggered.

1:10
However, those price alerts usually are nothing more than false alarms that often find traders ignoring overall market conditions. For day traders and swing traders alike, the need to use price alerts have always seemed like a like a given. But have you ever really questioned for yourself whether you should be using them in the 1st place?

1:29
Ask yourself some of these questions. How do they help you? How do they add more profits to your bottom line? Have you ever thought what trading might look like if you didn’t use them? And finally ask yourself why are they necessary for your trading?

1:47
I mean, you should be able to provide tangible reasons about why these price alerts are so critical to your trading. So be honest with yourself and we’ll talk about it here. Okay. Let’s talk about why using price alerts do not help you and why you should actually avoid them at all costs.

2:03
The fear of missing out. Have you ever actually considered the impact of FOMO on your ability to trade? In essence, that is what a price alert is. It is there to make sure that you don’t miss out. And guess what happens when a price alert goes off, notifying you that the stock is at your ideal entry point.

2:20
You quickly rush to figure out how many shares to buy. You pull up an electronic ticker order while making a few mistakes and making good use of the backspace key in the process. I know because I do that all the time. In terms of having used the backspace, I don’t use the price alerts. You’re hurrying as fast as you can because you don’t want to.

2:37
That’s it. You don’t want to miss out. You see where I’m going with this? Those convenient little price alerts get you into the FOMO mode, where if you don’t get your order in as fast as possible, you just might miss out on the trade of a lifetime. Or so you think. The fear of missing out is a rampant problem among traders, and when a price alert goes off, you find yourself instantly going from being dormant in your trading to thinking about whether you should be trading its stock to instantly believing that you have to be trading a stock.

3:07
Trading in the belief that you should be acting on a trade shouldn’t go from zero to 100 mph in a moment’s notice, a price alert and whatever sound that you haven’t haven’t. Making instantly makes you believe that you need to make the trade and to do so because missing out on it would simply be too much to bear.

3:25
A top down trading strategy should guide your decision to trade or not. If you’re using a top down trading strategy that I have always argued it for, and if you follow me for any amount of time, I’ve been talking about it for years that the need for price alerts are not necessary.

3:42
Yes, I keep an active watch list, modifying it each and every day and throughout the day, making it the best that it can be with the best trading opportunities possible. But unless the market is working in my favor and just as importantly, the sectors of the stocks that I’m considering trading also working in my favor, there’s no way I’m going to actually trade any of the stocks in my watch list.

4:01
It is only when the market sector and industry conditions are working to get together will I actually trade a stock. All three components are necessary because for example, the market could be bullish in the tech sector as well. But semiconductors, which is the industry within the tech sector, may be selling off and as a result the market may continue to rise.

4:23
But your stocks that you are trading will struggle to follow if they’re in the semiconductors. Now if you followed a price alert and simply go into the stock that is in the semiconductor industry because the alert went off, you’re going to be up a Creek and be fighting a losing battle. And it’s going to be even more frustrating because the market’s going up in your stocks or not when you use my top down trading strategy.

4:44
And just as a side note, you can get this on shareplanner.com by going to the very top of the page and just clicking on free stock market trading tools. You’re going to realize that in all of its simplicity, you decrease the chances of getting into stocks that won’t cooperate with this market, and as a result, it’ll increase your likelihood of success with each individual trade that you make.

5:07
Price alerts, you see, creates an environment for the individual trader that compels them to trade regardless of market conditions. As a whole, you have to remember there’s plenty of stocks in the sea. This will come across as a little bit obvious, but its application is much more difficult. That’s because oftentimes we might track a stock for a week at a time, much like 100 tracks his game through the woods or the mountains.

5:31
But when the stocks and their price alert is triggered, it’s not the only show in town. Despite the foam of emotion and the need to trade, it’s totally OK to pass on a valid trade set up when the overall market conditions don’t warrant making a trade. Here’s the thing, there are plenty of trades to be made.

5:47
I mean tons of them. If you have to pass up on a quality trade set up when a price alert goes off, that’s it. OK, at any time I can always find a quality trade set up to be had. But it doesn’t mean that I have to take them and most of the quality trade setups out there I pass on because the conditions aren’t right for them to be trading.

6:06
I mean, today’s the first time in three days that I’ve traded because the market conditions were not right for me to be trading and there was plenty of trade setups to be had out there. There were some good quality trade sets. Something actually turned out pretty well. Others, if I had traded them, they would have resulted in me getting turned to pieces.

6:22
So here’s the thing. It isn’t hard to find a good trade setup. What is hard is knowing when to trade them. If you’re doing it simply off of a price alert, then you are setting yourself up for ultimate failure. It just doesn’t work that way. Price alerts also lead to over trading.

6:39
Take a trader that uses price alerts and one that doesn’t, using a similar trading strategy, and I can certainly assure you that the former will outpace the latter in terms of trading frequency. The need to trade the alerts when they are triggered versus only trading stocks when the conditions are ripe and taking a trade when the conditions are favorable, will always lead to a better approach to trading and fewer dollars spent on commissions.

7:05
Stocks, particularly early in a trading session, can have a false alarm triggered by a rogue price move that cannot be sustained. As a result, when you trade a stock simply because the price alert has been triggered like most do, you are simply setting yourself up so potential head fakes where you’ll lose two to three times as much on the trade then you would have if you simply waited on the market conditions to confirm the need to tip make that trade.

7:28
Now you may miss out on a trade, and a really good trade too. Not using price alerts and therefore not taking every trade that tickles your fancy will ultimately mean that you miss out on some trades that could provide you with a very quality return. That’s not the worst thing in the world. Again, it goes back to FOMO.

7:45
Fear of missing out. Yes, you may pass up on some trades that provide a great return. In fact that will happen frequently. But what your job is as a trader is to be a risk manager, not a pursuer of profits. Profits come when you manage the risk, and you manage the risk by not taking every trade in the world.

8:02
Instead, you have to be particular about when you trade and what you trade. So if the market is tanking with no end insight, that doesn’t mean that you go buy a random stock that might have been just randomly triggered by one of your price alerts. And doing so you’re putting yourself in a position where you have to fight a market that is falling and likely to get into a stock that will quickly reverse course as the market doesn’t support the move that it made earlier to trigger that price alert.

8:26
Yes, you may miss out on the trade here and there and some of them may turn out to be quite profitable, but the key key here is about trading. What gives you the highest probability of success? You see, simply trading because an alert goes off gives you the greatest chance of losing long term in the stock market.

8:42
You are far better off waiting for trades to come to you, confirmed by the analysis you do on the market as a whole in the sectors and industries as well. So let’s pull all this together, OK? This podcast certainly goes against popular belief.

8:58
Nearly everyone thinks price alerts are necessary, but I’m here to tell you that they are not. And for most traders, price alerts are more of an agent of chaos than a mechanism that will help you manage profits and trade at the right time and right place. Following a top down trading strategy instead will allow you, the trader, to trade not when the stock dictates you should trade, but when the market sector and industry initiates the reason to start trading a stock.

9:21
When that happens, you simply go through the stocks that you are watching and find the ones that not only sets up well, but also falls in line with a favorable sector and industry as well. Then you determine how you are going to manage the trade and minimize the risk going forward.

9:38
If you are wanting to learn more about swing trading, how to time your entries and your exits and and do so in a profitable manner, I would definitely encourage you to try the SharePlanner Trading Block where I’ve managed My Portfolio live and for all traders to see. And for each trade I make, I provide members with the entry price, the stop loss, the target and the why of each trade.

9:56
And I’m not doing it unless the market conditions are favorable for me to do it, in that they are lining up in order for me to succeed not only from the market side of things, but from the industry and from the sector as well. So I appreciate you guys listening to today’s podcast. Thank you and God bless.

10:16
Thanks for listening to this week’s podcast, The Swing Trading with Ryan Mallory. I’d like to encourage you to join me in the SharePlanner Trading Block where I navigate the financial markets every day with traders from around the world. With your membership, you’ll get a seven day trial, access to my trading room, and text and e-mail alerts. So go ahead and sign up by going to shareplanner.com back Trading Block.

10:37
That’s www.shareplanner.com/trading-block Trading Block and follow me at SharePlanner on Twitter and on SharePlanner’s Facebook page where I provide unique market and trading ideas every day. If you have any questions, please feel free to e-mail me ryan@shareplanner.com or call the office at 321-522-6733.

11:01
All the best to you and God bless.