There are No Perfect Stock Trades | Podcast Episode #2

0:02
Hey, everyone. This is gonna be my 2nd podcast, and I’m actually really excited about, uh, continuing on with some of the, the lessons that we, we talked about last week and how it applied to the market. And if you remember last week, the market was kind of dull. I mean, the Dow was still going into that, you know, epic ramp of like 12 straight days higher.

0:22
It was in the midst of that, but it wasn’t like really crazy. You know, knock your socks off major rallies, uh, on each day. It was really just really dull, low volume, um, market rallies. In fact, I think there was, there has been like, like 10 or 11, 11-day winning streaks for the stock market, and I think this 11-day rally here was like the second weakest ever 11-day rally on record.

0:53
So. Even though we rallied for like 11 days straight, it wasn’t what you would call overly impressive considering the fact it was 11 straight days and we were only up, I think like 3.8%. I think overall it was like a 4% rally or something like that, but, um.

1:11
You know, this, this, this market with, with a little bit of the dullness, I mean, yeah, we weren’t dipping at all, and every time that we, we rallied or we sold off, we would, we would rally before the end of the day, but nonetheless, though, today was a much different day.

1:27
We had the, it wasn’t a State of the Union address, it was a joint address to Congress, I guess, because he hasn’t been the president, Donald Trump hasn’t been the president long enough. He doesn’t really have a. Reason to give a State of the Union address and really it’s just a joint address to Congress and.

1:44
He had a speech that really I think took everybody by surprise, but, you know, I, I, I know that everybody has extreme views of Donald Trump and everything, and I. When I do this podcast or when I talk about him in relationship to the market, it is not about whether I’m Republican or whether I’m for him or whether I’m against him or, or what, or whatnot.

2:05
That’s not what I trade for. I trade to make profits. I trade to build my capital. I trade to help other traders do the same. And so, my opinion of Donald Trump or any public official is really irrelevant.

2:23
When it comes to trading, the only opinion that matters is how does it relate to trading and how does it make me more profitable, so, um. Looking at the speech from that standpoint, there was nothing really wrong with the speech. I mean, nothing to, uh, rattle the markets at all.

2:39
In fact, if you followed the futures last night during the, um, speech, you would see that he wasn’t. causing any real sharp reactions in the futures markets. So that was a good sign and it stayed in positive territory the entire time.

2:55
And then obviously, we woke up to a nice solid gap higher and, and then from there we rallied like another 1520 points to finish about 32 points higher on the S&P today. So, the other thing that was significant about that rally today was it was the first time in 50 trading sessions, almost a quarter of a year.

3:15
Where the S&P. Traded within within a 1% range. So today we actually traded outside of that 1% range. We, we went well above that 1% range. That was the first time in 50 days.

3:31
That’s an all-time record. The record before that was 34 days. So we pretty much. Broke the record by like an additional 50% and uh that was that just shows you how kind of like dull this market has been.

3:49
There’s been no volatility and even with this rallying 32 points, it, it still should be said is this market can’t pull back. Nobody is willing to sell off this market for any extended duration of time and. From a profitability standpoint, that’s great from a long term standpoint.

4:10
Man, I wish we could just get a little bit of consolidation and, and, and a pullback just so that we could get some reset on some of these prices. I would be thrilled if we could get a 5% pullback, and that’s probably the most realistic, uh, expectation at this standpoint. That might be a little bit too steep, but if I really had it my way, I’d probably say let’s, let’s get like a 20% pullback.

4:31
I think that would be great. Um, it would put a lot of stocks back into a lower price range, make some of these stocks like Facebook, Netflix, Amazon, Google, Apple, uh, Tesla, um, Microsoft, GE.

4:47
Caterpillar, it would just bring a lot of these stocks back to a little bit more of a realistic area, make it to where they can start growing a little bit faster again, because once they base, you know, following a significant pullback, they’ll break out pretty hard too. But, uh, you know, that’s, that’s not here and that’s not now, so we have to trade what the market is giving us and while I would love a market to be able to short, that’s not, that’s not what we have, that’s not the cards that are being dealt and so if you’re dealt a straight, you can’t play it like it’s a flush.

5:16
And, um, when you have a market that’s bullish, you can’t treat it like it’s bearish, because that’s how you lose capital. And really, it’s a stupid way to, to lose capital. You will lose. Endless sums of capital, if you think that. Your opinion of the market is more important than what the market is saying.

5:37
It’s wanting to do or what what its direction is so. Don’t hold tight to those opinions. Don’t have the conviction of your opinions when it comes to trading. I know that sounds crazy because they say in life, yeah, you gotta have a conviction. You gotta go with your heart or you gotta go with your gut, or you gotta trust yourself.

5:53
No, and trading, don’t do that. Don’t do that at all. That is a really bad idea and one that will. Not will it has. It has led to the destruction of many traitors because you want to know what the conviction. Of a trader leads you to do when you think that you are going, you have to be right on this, and you have the conviction behind it, you double down on stocks, and when it doesn’t work, you triple down and then you quadruple down and then you quintuple down and you just keep putting more and more capital into it until you lose everything you have.

6:29
That’s how destruction is done. That is how. Uh, capitulation is done is by having too strong of a conviction towards the market. So opinions about Donald Trump, if you think he’s gonna wreck the market, or if you think he’s gonna be great for the market, don’t hold on to those convictions.

6:46
Just let the market tell you what it wants to tell you. If you let the market tell you what it wants to tell you, you will learn so much. You will, you will find so many more trading opportunities, and If you trade with the conviction that the market is giving you, rather than the conviction that you’re trying to give yourself, man, that, that’s powerful right there.

7:05
That, that’s how you really start to have consistent profitability when, when you think of yourself less and you think of the market more, because the market is going to always have the final say so. It’s not your gut instincts, it’s not your, uh, conviction to hold on to a stock when it’s clearly running against you, or to just.

7:25
You know, if there’s a heavy sell-off to just blindly buy the dip just because. You think you might be able to make a buck or two off of it. That’s the kind of stuff that’s going to, to ruin you, and I don’t want that for you. I really do want you to succeed. I, I, I think that trading is something that everybody can attain, that they can all be successful at.

7:44
That’s not me trying to sell you on a, uh, Uh, rah rah, you know, be whatever you want to be thing, no, it’s not that it’s just. Trading has everything to do with denying yourself, denying your ego, denying your convictions, and trading with what the market’s willing to do, OK?

8:03
What it’s willing to give you, what it’s saying the opportunities are at, and, uh, if you do that, you will be profitable. So, Uh, And another thing too that I think a lot of traders fail to see is is that. You can’t have.

8:22
Perfect trades all the time or really most of the time you’re just not going to. So I bought JPM earlier this month, and I think I bought it at something like 80 $86 or something like that. I don’t have the trade in front of me. I probably should have had that in front of me, but, uh, I don’t, but I, I think it was like $86 a share.

8:42
Let me see if I can maybe pull it up here. Um, And And the trade has done very well for me. Here it is. On February 10th, I bought it at $87.21. And at one point, I think I was having about 4% in gains or so.

9:02
It was a good trade. And then yesterday, it pulled back on me. I mean, and if you remember, the market did pull back some, I think it pulled back like 8 to 9 points yesterday. And a lot of the bank stocks started off the day in negative territory. They weren’t doing too good.

9:18
And so, I had continuously raised my stop loss and JPM probably like 3 or 4 times, and I came in today with about 4% in gains and then it sold off about 1% or so, and it took me out of my stop loss, OK.

9:35
Uh, when, when that happened, I had a little bit of a belief that, yeah, it’ll probably come back just because that’s what the market has done, but the stop losses are there to keep you out of significant trouble, to keep you from holding on to a stock longer than you should.

9:51
Now, are they perfect? Absolutely not. Stock losses aren’t, but there’s the, the most successful traders will. will be more than happy to tell you that their successful trades are not perfect trades. They’re not. And so, JPM.

10:10
I get stopped out of it yesterday. I get stopped out at $89.67 and then what does it do? It climbs higher the rest of the day. It actually finished yesterday in the green. So then we have the Trump speech last night, and then we wake up and what is all the banks doing?

10:27
They are rallying. In the term of Donald Trump, bigly. And uh. JPM ends up going up 3.3%. So had I not been stopped out, I would be probably looking at about 6.1% in gains.

10:44
That is a really good return for a big bank like JPM. So, Yeah, that, that, that wasn’t a perfect trade. It was a profitable trade, but it wasn’t a, and it doesn’t hurt me at all because I made profits on that trade. But it wasn’t a trade that really made me feel good when I see the following day, how not only the day before did it rally back after stopping me out, and it only went like 8 cents below my stock price or my stop loss.

11:10
So that’s also a little bit of an insult to injury. But It goes today at 3.3% and closes the day at 93.60%. I would still be holding on to it if I hadn’t gotten stopped out. I’d want to see if it could keep on running.

11:27
But there’s not, there’s not always the perfect trade. Sometimes you’ll get lucky and you’ll get out at that very top, and I guess you could call that the perfect trade, but by and large, this, your trading in the stock market is not going to be perfect. Your profits are not going to be perfect.

11:43
There’s 3 things that you have to do. And in the next podcast, I’ll probably dig into these, um, much more, but for the, for the sake of this podcast, I really wanted to dig into this JPM trade and, uh, And what it did.

12:05
The 3 elements to successful trading, and these are basically all my years of trading. These are the three things that I truly believe will make you a better trader. You have to embrace them, you have to believe them, and you will become a better one.

12:20
And they’re not hard concepts, not at all. They’re, it doesn’t take a genius, but the first one, just like I had just said, trade what you see, OK? That means you don’t think of, think what you believe the market should do or what you think that it ought to do or what you’re. Economic outlook is on the market or what your belief of Donald Trump is as president and whether he’s going to nuke the whole world or, you know, be the greatest president to ever exist, OK?

12:46
You gotta put those opinions aside. What you have to look at is. Trading what you see. What is the market telling you, OK?

13:10
The second one, manage the risk, OK? As long as I have this podcast, I am going to inundate you constantly with that, those, those 3 words, manage the risk, OK?

13:30
That is the most important thing about trading, OK? And the third one, you’ll like the 3rd 1, OK? Because by doing the first two, The third one basically is self-fulfilling. It’s called profits Will Take Care of Themselves, so. Trade what you see, manage the risk, and the profits will take care of themselves, OK?

13:48
But the profits can only take care of themselves if you trade what you see and manage the risk. And I’ll dig into these. In the weeks ahead, because I really want to spend a lot of time on each one of these elements and why I believe that these are so fundamental.

13:48
But back to the JPM trade. Had I ignored my stop loss, would it have benefited me today? Yes, it would have absolutely. I would have doubled my return on the trade. Instead of it being a 3% gain on the trade, it would have been over 6% and maybe even more if the market rallies tomorrow.

14:08
But would it have been a disciplined trade? No, it would not have been. I moved up my stop loss consistently every, every time there was an opportunity to do so. JPM had a key support level, in my opinion, that was right around the, the, uh, 89. 67 level, which is where I got stopped out at. uh, I believe that if it had broken through 8967, that it would be synonymous with possibly a bigger pullback in the stock or in the market because it was a nice short term support level.

14:43
There was no reason not to put the stop loss there, uh, but like, like anything with trading, I mean you can have outlying factors, you know, like for instance earnings.

15:07
That’s why I don’t trade earnings because I think earnings pretty much trumps anything that you see technically on the chart. If you don’t believe me, then just look at the stock chart today at PANW where they pretty much, you know, lopped off a quarter of the stock’s value because of a bad earnings report.

15:26
Um, and before that, it actually been a pretty bullish chart. But, uh, I moved it up to the right place in the chart to stop loss, that is, and it got triggered yesterday.

15:26
But going forward, that lack of discipline will come back to haunt you on other trades because for every one of those JPMs out there, there’s going to be something that’s going to sell a big, big, big, and if you ignore your stock losses and don’t take it early when you can, you’re going to suffer the consequences because not all stocks come back.

15:45
Not all stocks, um. Just look at Chipotle. That stock is in the cellar ever since the. You know, food was killing people episode that that was going on there.

16:00
You don’t, you don’t want to get caught in those situations. You don’t want to get stuck in a GoPro. You don’t want to get stuck in a Fitbit or a Twitter and just, you know, have ignored your stock losses when the stock was much higher and find yourself now in a stock that can’t go anywhere and you’re down 50, 60% on it because that can happen and you don’t think it can happen to, to, to JPM then just look at what some of the, uh, Stocks have done of late in some of these other companies um.

16:27
Look at Deutsche Bank. I mean, this, this is a company that kind of like JPM. Nobody thought anything like that could, you know, ever happen, but yeah, back in 2015, this stock was trading at $35 and it’s been as low as $12 over the past year or 3, yeah, $12 over the, over the past year.

16:45
So that is a stock that has lost 2/3 of its value. It’s trading at $20 but it’s still, you know, way off of its all-time high. So that’s why you have to pay attention to these stock losses because.

17:12
I might have um. Missed out on a 3% gain by taking my stop loss on additional 3% gain by taking my stop loss on JPM, but there’s going to be a trade down the road that because I took my stop loss on it, I avoided a 50 or 60% selloff over time.

17:27
And, uh, that is huge. I mean, I can’t, that, that’s the diff that’s one of the biggest differences between a profitable trader. And a non-profitable trader is that the profitable trader consistently takes his losses and makes them stay small.

17:54
He doesn’t take big losses, or she doesn’t take big losses. And that’s what’s one thing I pride myself in. You look at my losses for February, I had some, I had some really good gains. I had gains like 6% in, uh, uh, FLEX and 7% in Baidu, and, you know, so those were some, there were some, some good trades and February, but then my losses were like 0.4, 1.6, 0.5, uh, 2.1, 0.7, 1.9, and 0.9.

18:10
And so I’ve always managed to keep my stock, stocks pretty tight and my risk management even tighter. And so that when I do take a loss, they’re, they’re, they’re small losses and they don’t affect the overall value of the portfolio. And that’s what I’m trying to. Get with at JPM yet.

18:29
It, it sucks that I got stopped out yesterday, and then it only turns around and goes back higher, but, but there’s not going to be perfect trades in the stock market, and we always get hung up on the fact that if we buy in at $100 and, and we sell it at $110 it’s a lot of people will let it ruin their day, the fact that that stock went up to $111.

18:48
But what did we do with JPM? We made a consistent, we made a profit on it, and we keep doing that over time and stock after stock after stock. Those are consistent profits, and, uh, who cares if we didn’t get the 6% in JPM because at the end of the year there’s just going to be a plethora of consistent gains that’s going to add up to one big gain in our portfolio.

19:11
In the grand scheme of things, the 3% in JPM isn’t going to make that much of a difference, but what will make a difference is avoiding these big pitfalls, these big losses by ignoring our stops and by just thinking that, ah. I can ignore it this once. I have not ignored a stop loss. And ages, maybe in the last. 56, no, gosh, no, it’s probably been over a decade since I ignored a stop bus.

19:31
I just don’t do it. You can’t do it. And, uh, If you do, it’s gonna be the end of you, because if you do it once, it’s gonna be easy to do it twice and to do it 3 times. I don’t, I take my stops every time, you have to. So, that’s my word of encouragement to you with trading going into tomorrow.

19:31
Maybe we sell off, maybe we keep this Trump rally going. Either way, let’s manage the risk, OK? Great talking with you. I hope you learned something from it and, uh, let’s get going with this trading tomorrow.