Trading A Bubble Stock Market – How You Can Still Profit | Podcast Episode #7

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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 in and out of a complex ever-changing stock market. You will learn to trade better trait, smarter and profit bigger.

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Now let’s go trade. Hey everyone, this is Ryan Mallory, with SharePlanner’s, Swing Trading the Stock Market. This is the number seventh. I believe it is the seventh podcast that I’ve done so far and it’s going pretty good.

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I just wrapped up a three part series called trade, what, you think, manage the risk, and let the prophets take care of themselves. The first episode, simply talk about following what you’re seeing on the charts and not letting your personal bias, or your personal opinion, Phil, Through on your decision-making.

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The second podcast had to do with managing the risk and you see when we get into trading, we tend to get into train because we want to make money, right? We want to take the money that we have, the capital that we have and make it bigger. We want it to be more.

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Nobody really gets in the training because they have this desire to manage risk. In fact, most of the time when we get into trade and we like to ignore the fact that there is risk in the stock market in that. Simply because of the fact that we buy a stock it’s destined to go up and that’s simply not the case.

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So the second one is about managing the risk and then the third one kind of wraps up the first two and then essentially says that if you do the first two things trade, what you see, manage the risk, then the profits will take care of themselves and it’s very true.

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That is how I’ve made my career and trading is bye. Letting the prophets take care of themselves. So I encourage you guys to definitely check out that three part series pockets and all the other episodes to before them because they’re all pretty good. They all run about 20 to 22 minutes or so and just, just a really solid educational podcast on trading and what it takes to be successful and the stock market.

2:18
So, With that said, what today is we’re going to talk about today is dealing with Market, tops dealing with the fact that when the stock market is getting extremely high like into nosebleed territory, how are we supposed to trade our?

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We just simply supposed to be buying stocks at new, all-time highs each and every day. Or do we just sit it out or do we start shorting the market and so I’m going to tackle that and go over each one for you. So, When we look at the stock market and its current shape and form, we got a market that since 2009 has tripled the bottom of the S&P. 500 was 666.

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I kid you not and since then, it’s rallied and rally rally, and now we’re at 2400. So what do we what are we supposed to do with that? What what are we supposed to do? Just keep buying stocks. I mean it seems counterintuitive now granted, over the last seven, eight years, the whole saying of just buy the dip or some people say just by the bleep and dip be tfd or B.

3:29
TD Has been the norm. It’s what people joke about now. It’s what people. Rely on that. No matter the sell-off that we get on it. One day or two day, or multiple databases, just buy the dip, it’ll play out, you’ll be okay.

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And hindsight, those theories were great going forward. The history of the stock market is Unwritten. So the whole concept of just buying the dip regardless, if you know, we’re dipping a few points below all-time highs or we’re in the midst of a sell-off.

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The The issue with buying the dip is that it’s assuming that what happened yesterday and the day before is going to be the case again so that you can ignore risk because that is the basis of buy. The dip is throw caution to the wind. Don’t worry about the fact that the stock market selling off, it’ll bail you out just by more, just buy more and that’s a horrible way to play the market.

4:30
Hindsight it’s profitable going forward, you do not have a clue if that’s going to continue to be the case. And Most Traders will say, Well, when the market starts to sell, if I’ll get out and I’ll stop doing it, I’ll stop doing it when buying the dip doesn’t work anymore and that sounds great in theory.

4:47
Once again, the problem is that you tend to not know something’s not working anymore until you lost all your profits. And then we can’t take the fact that okay if we spend the last few years making all these prophets and then all of a sudden the to buy, the dip three doesn’t work anymore and now and then we find it without that we’ve pretty much lost.

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All those profits from the past years. From an ego standpoint. We cannot bring ourselves to sell. So our stocks, we will not allow ourselves to close out or traits and that’s where Traders get themselves into trouble because you have to be willing to go ahead and admit when you’re wrong and move on and the sooner that you met your that you’re wrong, the better off, you’re going to be, but when you’re deploying a mindset of buy the dip through a caution to the wind and just, you know, by every pull off, pull back at the market gives you, you’re putting yourself in a position to ultimately, blow all the prophets that you’ve made in previous years.

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Previous month’s previous week’s and To find yourself Ultra frustrated. And then more than likely, you’re going to take a net loss over that over that long time. Period. And that’s not good either. Because essentially just waste your time and paint the market to teach you a, you know, unfortunate lesson that if you don’t manage the risk all along, regardless of what the people are doing around you, regardless of what the stock stock market is letting people get away with.

6:19
If you don’t manage the risk, it’s eventually going to come back and bite you. It’s going to bite you like it. Did for He’s back in 2011, in the, something that, that summer there when the market was just selling off, and on, and really bad, it’s going to burn. You like it did Traders and NASDAQ and then in the NASDAQ, when everybody said it’s different, this time, the stock market’s different, it’s going to keep on going.

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And instead, the.com, bubble blew up and people lost fortunes. That’s where people were jumping off of buildings because it was so bad. So, Manage the risk. It’s not exciting. I get that and there’s times where you get stopped out of trades or you, you do what’s best in your according to the knowledge that, you know, at the moment.

7:03
And then you close out a trade because you don’t feel like that you have a good positive Edge to be, trading it anymore and then the next day, it goes and rallies 5%. I just had that the other day I closed out AAL Market pulled back in and on an intraday basis pop me out of American Airlines and the Stay they get upgraded.

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Yeah, it’s up 4% and then rallies another, you know, a couple percent thereafter. And so I could have doubled my profits, but what was the right course of action, right? We’ll course of action was managing the risk. So with us being at this Market top, what do we do?

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Well for one, if you’re going to continue to buy at the all-time highs and it’s not look, I’m not going to fault you. If you’re doing it, you surely can’t short the market here because the market has yet, to show any signs that’s wanting to pull back. It’s going to kind of Of flats kind of kind of boring, but it’s kind of still pushing higher.

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So if you’re buying a new all-time highs, you’re finding trade setups that you can take. That gives you a credible way of managing the risk on the trade, where you can keep the risks small but you have a good chance at a, you know, nice sized, nice size profits.

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I mean, if you’re looking to trade, for instance, Facebook, Okay, more than likely unless it’s an earnings or a big news event, you’re not going to make like 10 percent offer, you know. Look over the next two to three weeks. So if you say I’m going to trade Facebook with a 6% stop loss and I think I’m going to make, I don’t know.

8:29
I’m going to get a 2 2 to 1 return for it. I’m going to make twelve percent off of it. Okay. More. There’s a very good chance over the next few weeks. You’re not going to get 12% out of Facebook. It’s just not growing like that anymore. So I mean it could, I’m not saying that it can’t, but it’s just if you’re looking for a risk-reward, you got to kind of look at what the Inc, the stock has been up late, what?

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It’s past history, as what kind of beta that has with the market, because the market is not going to go 12 percent over the next two weeks. So it’s going to have to do something beyond the market at, you know, stretch itself beyond the market. And if you’re you know, playing Facebook with a 6% stop-loss, you’re not really putting yourself into a position to benefit from a favorable risk-reward.

9:15
I mean if you’re going to trade Facebook, you’re better off doing it with like a 1 or 2% stop-loss, you know, and find that very good definable Edge and time. You’re trading entry such that, you know, you can keep the risk small while giving yourself a nice chance to profit to the upside.

9:32
So, yes, I think, I think that you can continue to buy the market here at these levels. It’s it’s, it’s kind of nerve-wracking. I get that, we’re all expecting the shoe to drop. When is this Market going to sell off?

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You know, maybe it’s going to happen if we ever go, you know, take over Korea and try to overthrow that government there, or it’s going to happen, you know, with something that happened in regards to the Trump Administration and the hyperventilating that’s going on in the Press with with All of the.

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Claims about working with the Russians or whatever you know. And so we’ve seen some things where the market is sensitive to that but nothing you know really come about cause Concern for the stock market.

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So, What you have to do is, you have to keep trading with stop losses, okay? Yes. There’s going to be a time where this Market does pull back, and it’s in this incredibly historic run here, where there’s never been a 5% stop Lawson. And, and a very long or a 5%, pull back in a very long time.

10:39
It’s like in the top 10 for long stretches, you know, seen today. But You can’t short stocks do. That’s the problem made it. And when I say that, I’m not saying that you can’t get. I’m not saying that you can’t get behind a particular stunt that you think provides a favorable risk-reward to the downside.

11:03
That’s breaking some support and to get short there. I think you can do that. Oh, I am trying to say is that you want to Get into a, you don’t want to get too many short positions. You don’t want to be heavily short, you don’t want to be 100% short in a market that still Cohen up.

11:24
Now if you think that okay, markets been trading sideways, it’s really not showing any kind of Direction, one way, or the other, the maybe you go 60% long 40 percent short or maybe you go 30% long, 20% short, and fifty percent cash.

11:40
I mean, these are all things that you could do. So I’m not saying that you have to rule out shorting stocks altogether. Always, I’m just trying to say is that you might want to keep the long bias going right now, as long as the markets willing to keep pushing higher. So the other option is to Simply, you know, be more net neutral and I kind of just touched on that.

12:01
But you can be, you can be neutral. You can have equal amounts of Long’s equal amount of Shores and then try to close out the losers as they become losers and let the winners keep running by increasing your stop losses along the way. And then the third option and this is the one I have already said, don’t do is shorten the market.

12:19
I definitely don’t think you. You want to do that? I don’t think it’s a good idea. I think it’s something that will hurt you in the long run because the markets not trending lower yet. I mean that’s the problem and we just keep pushing hired a new Highs at Dallas, making new all-time highs the S&P, 500 is making new all-time highs.

12:38
And when there are Corrections and the market, it’s not in the market as a whole, it’s like rotations. It’s from one sector to the next. So, recently, we saw a rotation out of tech and, and that caused the NASDAQ pull back quite, you know, some not a ton but enough to where made a lot of triggers and comfortable, and that’s what we’re seeing.

13:00
We’re seeing some of that will see rotation out of financials and then we’ll see them back into financials and out of tech back into Tech or out of Industrials back into it or out of defense and back into defense. So we got a lot of that going on, too. so, This is going to be a little bit short of a podcast than than usual, but I just wanted to wrap it up by saying that in the stock market it is okay to keep, you know, going to the long side.

13:24
But you want to keep one eye on the risk. You want to make sure that if the market does turn down that you’re not blindly buying the dip and that you’re not finally adding more position simply because you think the market has to go up and you to follow your your risk.

13:44
And mitigation plans, your stop losses and make sure that that at the stock market does decide to roll over that. You had the flexibility in the wherewithal to start adding short positions as necessary that you can so that you can pull profit off of a pullback.

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So that’s going to be it for today. I appreciate you listening. As always, subscribe to the podcast so you can get it through iTunes or SoundCloud.

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So you have nothing to lose. Definitely give it a shot. And if you have any questions, feel free to email me, ryan@shareplanner.com take care. And God bless. Thanks for listening to this week’s podcast That Swing trading with Ryan Mallory. I’d like to encourage you to join me.

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