When It’s Too Late To Trade | Podcast Episode #461

0:00
Hey everybody. This is Ryan Mallory with shareplanner.com’s.

0:02
Swing Trading the Stock Market. In today’s episode, we’re going to talk about whether or not it’s too late to start trading.

0:09
Also, this is going to be coming from the perspective of a 17 year old. You might think, well, that’s kind of a young age to think it’s too late to start trading, but he’s also concerned about whether or not it’s too late to begin trading at this stage of the market rally that we’re currently in.

0:24
As I always do in emails, I never used anybody’s real identity. So if you want to be included in a podcast episode, shoot me an e-mail ryan@shareplanner.com.

0:32
I make sure to keep you anonymous. I give you a good Florida redneck name instead of giving it to you, unless you have a name you want me to call you by instead.

0:38
In this case, this guy asks me to call him Cal Notton Junior.

0:44
You remember that movie Talladega Nights, Ricky Bobby’s rival there. So we’ll call him Cal and Cal writes.

0:52
Dear Ryan, my name is Cal. I am 17 years old and I am looking to get into the trading world.

0:59
I am new to your podcast but I found it to be the best of the ones that I have listened to so far. I’ve been researching for the past year and would like to start making my first trades.

1:08
Would you recommend I start on a paper account or should I trade with real money? If I were to trade with real money, is there a starting amount under $10,000 you would recommend?

1:17
What main technical indicators do you like to use? Do you have any burning advice for someone just entering into their first trades?

1:24
I read a book by William O’Neill to cut losses at 8% and to sell most of your positions at 20% gains.

1:30
Do you have a strict buy sell rule like this or is it OK to be more flexible? Is now a good time to be getting into the market to start trading or is it too volatile?

1:39
Finally, do you have a specific industry that looks promising in the new near future? Oil and gas, hopefully I sent this to the right place to be on the podcast.

1:48
If I make it, please call me Cal Nod and junior. Thanks.

1:51
Cal nod and junior. OK, those are good questions and it and it really just start off no, it’s never too late for one, you never know how long a rally is going to go on for.

1:58
We’ve been in this rally since the 2022 sell off.

2:05
You had 2023, which was an epic year 2024 shaping up to be an epic year as well. But 2024 and 2023, in both cases you had a lot of stocks or industries and stocks within those industries and industries within those sectors that really didn’t do too well. And so you you’ve had this big tech rally that took place and that’s really driven the market higher.

2:27
Really just within eight stocks.

2:29
You have Meta, you have Amazon, you have Apple, you have NVIDIA, Google, Microsoft, Tesla, and Eli Lilly.

2:39
Those are your big drivers in the market. And without those, the market would look far different than it is right now.

2:45
Those are the big players and you take three of them, Microsoft, Apple and NVIDIA, and you’re talking over $10 trillion worth of market cap just within three stocks.

2:55
That’s bigger than almost every other country in terms of GDP. So is it too late to start?

3:02
No, because market conditions are always going to be changing. Right now we’re in a bull market, we could turn into a bear market tomorrow, who knows, But that doesn’t mean that you can’t start trading now. And if we do go into a bear market, you would just accordingly.

3:14
I’ve known plenty of people who have actually started and bear markets and I think in a lot of ways it was better for them to ’cause they saw right out of the gate just how unforgiving a market can be when it’s not, you know, in that dip buying, buy every dip kind of a mode.

3:24
So I think any time is really to be time to be a good trader.

3:33
And in terms of burning advice, one of the things I would tell you is, is that most of the time what I see from from new traders, because they’re very naive when they get into it, is that they tend to get this beginner’s luck.

3:46
It’s actually quite impressive.

3:49
And I don’t necessarily have a scientific reason for why there’s beginner’s luck, but it always seems to happen.

3:56
And so one of the things that I often see happening is that they’ll, they’ll string their first 3 or 4 trades together and they’ll make some really outstanding trades and then they start believing that they’re really good at it.

4:07
So don’t believe in your early success.

4:10
If, if Cal, you know, if you’re listening to this, if you have a couple of really good trades right out of the gate, don’t all of a sudden think that you’re good at it because you’re not.

4:18
It’s a long journey. It’s going to be a, it’s going to be a long journey with a lot of ups and a lot of downs.

4:23
You’re going to get very frustrated and at times you’re going to want to quit. And on the flip side of that equation, what I would also say is, is that when you experience those losses and when you go through some hard times and if you make some stupid decisions, don’t think that you’re not cut out for it.

4:38
You’re going to go through some hard times. I’ve questioned myself plenty of times in the past and you’re going to do that yourself.

4:45
But just because you have a a few bad trades or you make a stupid decision doesn’t mean that you’re not going to be a good trader.

4:53
In fact, it’s the exact opposite. It would be a shame if you’re trying to be a good trader and you don’t learn from your mistakes in the past that you don’t evaluate what am I doing wrong and what can I do better.

5:00
Yes, you’ll lose money along the way and that’s going to stink.

5:07
There’s nothing, no way to really sugarcoat that whatsoever.

5:17
So again, don’t believe in your begin beginner’s luck, because there will be some of that.

5:26
More than likely there will be some of that. And don’t, don’t when, when the losing trades come, don’t just think that you’re a bad trader because you’re not. You’re learning and learning all part of the process.

5:32
So he, he also asked me Cal, he asks what would be a good starting amount under $10,000. And there’s no exact number to start with.

5:44
I would probably say at least 1000. Not that you can’t start with less, but I think it gives you a little bit more flexibility when you start off in trading.

5:52
Don’t try to get rich.

5:54
That’s, that’s not what you’re starting off to do. You’re, you’re on a journey.

5:59
Coming rich is something that you you experience down the road. I heard an interview that Denzel Washington did and he was at somebody was asking them, what would you tell people trying to be an actor? And I think it was really applicable to what we’re doing as traders.

6:09
And he says, you know, the first third of your life is about learning. The second third is about earning and then the third part of your life is about returning.

6:25
So to break that down as a trading, as a person entering into the trading field, you need to be trying to absorb as much as you can.

6:33
If the gains aren’t going your way early on, don’t be discouraged. That’s going to happen, but you want to make sure that you’re learning the whole time that you’re chronicling and writing down your experiences that you’re journaling and figuring out what am I doing right?

6:49
What am I doing wrong? How did I feel when that stock did that?

6:51
How did I feel when it went against me? You need to be chronicling that.

6:55
You need to be learning from your past mistakes and your successes. If you got lucky on a trade, how could have that have gone drastically wrong if you did something different?

7:02
One of the things that we we really mess up on is, is when we get right on the trade and, and sometimes it can just be pure luck. We want to, we want to write that off as being a skillful trade and then all of a sudden we try to do the same thing on the next trade and we lose our hide. Don’t do that.

7:22
So that first third of your trading career, you want to be doing a lot of learning. If you can make some gains along the way, that’s great.

7:28
But don’t think that you’re all of a sudden a loser or a bad trader if you if the success doesn’t come as fast as you think it should.

7:36
A lot of the more successful traders that I’ve come across in life became successful after a lot of pain and a lot of struggles, including myself.

7:46
So that’s the, that’s the first lesson that, that I, I would say, or the first part of, of becoming a good trader is the, the learning phase.

7:55
And then the earning phase is when you start to, things start to come together, when things start to make sense.

8:01
And I think that for a lot of traders, they want to skip the learning phase and go right into the earning phase or combine the two.

8:09
And it just doesn’t always work that way. And then of course, the returning phase is, is really kind of like what I’m doing right now, or at least I feel like I’m doing or I’m teaching a lot of people. I’m doing the podcast.

8:19
And I’m just, you know, trying to share as much of the experiences and the knowledge that I have. And hopefully, you know, for, for Cal’s sake that he can get to that level as to get to that level.

8:28
21 day. He asked about William O’Neill.

8:32
Now this, this is a guy, I think he’s dead and I think he died last year. Really a, a good trader.

8:37
He wrote some really good books. I think 1 was how to make money in the stock market and the other one was how to the one that I really liked was how to how to make money selling stocks short. Not sure if I got those titles exactly right, but they’re good.

8:49
You could probably find them on Amazon somewhere. He asked about the, the fact that that O’Neill said, hey, you know, try to book your profits when they get to 20% and cut your loser short, you know, before they get beyond 8% in terms of losses. And is that a good piece of advice?

9:06
I definitely don’t see any reason when it comes to swing trading, letting a, a swing trade go beyond a 8% loss.

9:12
I are certainly don’t my, my tolerance is somewhere between that 3 to 5% range. And what what’s nice about that is it’s that that range in order to pull off a 2 to one return requires about 6 to 10% on the on the profit side.

9:22
William O’Neill 20 If you can get 20% on on your winning trades on a consistent basis while only risking 8%, that’s great. Shoot, go for it.

9:36
For me, a little bit out of my risk profile just a smidge, but I really don’t want to go taking on 8% losses all the time.

9:44
So in his case, he’s looking at what, a 2 1/2 to one reward to risk ratio? That’s not bad.

9:54
I think, I think he, you can still be successful as a swing trader and tighten those risk parameters up a little bit more.

10:00
If you get 20% out of a trade, that’s great. I don’t think you necessarily have to stop at 20%.

10:05
I think there’s some trades and, and this is one of the things as a trader you have to be careful of.

10:09
As trader, you can get into a good trade and it goes up 16%. But if you have this arbitrary number in your head, like I got to go get 20% out of the stock, you might be really frustrated if that thing reverses on you before it ever gets to 20% and it goes right down, down to zero or two or three percent or or God forbid, it goes red on you and you haven’t taken any profits along the way, that that can be a a huge frustration point right there.

10:28
So I think coming up with arbitrary numbers like, OK, I’ll close out of position once it hits 20%.

10:40
It’s the same thing with target prices too. A lot of people get hung up on target prices.

10:44
I know Wall Street, they’re always talking about their target prices. Oh, this is what we have for Intel.

10:47
This is our target price. And they’ll change it as soon as the stock goes up a little bit or gets closer, then they’ll raise the the target price for it.

10:52
But I don’t necessarily think that that is the way to go.

11:02
I don’t I don’t think that that’s something that that you should aim for. I think everyday you should be doing analysis on your on your swing trades that you’re currently in.

11:11
OK. Are we running up against some heavy resistance here that we’re not breaking through?

11:14
Is the market starting to break down? I’ve saved so many trades by just being aware of what the overall markets doing that it’s starting to break down.

11:23
And maybe I don’t want to be in these trades anymore, but I really like being in those trades.

11:27
They were making me a lot of money, but the market started to turn and I could stayed in them. But if I did that, it was going to go run against me pretty bad.

11:36
And what ends up happening is that those trades, they go down quite a bit. And then had I not gotten out of out of those trades, I wouldn’t have had an opportunity to buy them back at an even lower price at an even better trades have to make money off of it then.

11:48
So you really don’t want to just say to yourself, I got to make 20% off of the trade, or even worse probably is setting the stop losses at 8%.

12:00
So as much as I like William O’Neill, I don’t remember where he actually said that in the book.

12:06
Not to say that he didn’t, but it’s been a long time since I read it, so I don’t doubt that he did say it.

12:11
But for me, I want to put a stop loss at a place where it makes sense. So if that’s 4% below where I get in and it’s a key support level and I say to myself, OK, if it breaks below this key support level, let’s say it’s a long term trend line.

12:22
If it breaks below this long term trend line, I know that this stock trade is not going in my favor, that something is wrong, that it’s not following the thesis for the reason why I got into it originally.

12:30
I don’t want to be in it. At that point.

12:39
He asks about the industries. You know what, what, what industries you perceive pretty good.

12:43
Obviously Trump just got elected for four years. And so there’s going to be a little bit of a change in the personality of the market and what what stocks people lean towards or go to.

12:55
Healthcare has been pretty good for a long time now.

12:59
Insurance companies have been pretty good, but under a Trump administration, that could certainly change.

13:04
I don’t think the healthcare stocks are going to be as good over the next four years as they were in the previous four years.

13:10
A couple of others, I think, well, I think a big question mark is going to be technology. Right now, you’re hearing about how there’s a lot of antitrust issues going on with Google where they’re trying to break up the company.

13:18
Is that going to, you know, go into a second Trump administration possible?

13:26
And then if that’s the case, are they going to go after some of the other companies? I’m not sure yet.

13:30
But I do think that there could be, you know, some targets on those, on those people or on the companies in a peaceful way.

13:39
I’m not talking about anything bad. I’m just saying that people are going to be looking at them another couple of of sectors that would look at it.

13:47
And one of the things I would say too about sectors that you want to make sure of is that what it looks like now in the long term could be much different in the short term.

13:52
For instance, last couple years tech has been great long term skyrocketing.

14:02
It’s going to the moon as they say on Wall Street Bets. But in the short term, it’s been pulling back some.

14:07
So you want to keep perspectives on, OK, what’s the time frame that we’re dealing with?

14:14
You have another one. For instance, you look at healthcare has been really bad over the course of the of the past couple months.

14:25
Short term or long term, it’s been doing pretty well. So it doesn’t really do much for me to say, well, this is going to be hot because it could be in a short term pullback and you want to be able to recognize that by not getting into a trade because it could pull back 10% before it ultimately goes up another 100%.

14:45
So a lot of that comes down to is just using technical analysis and and just reading the charts and seeing what they’re doing.

14:50
Like for instance, financials at this moment is breaking out. It was consolidating for a week now it’s breaking out.

14:57
A week from now, it could be pulling back and I would be getting out of my financial stocks that I had gotten into in terms of indicators, because this was another question that he had.

15:07
He asked what kind of indicators do you use? But before I tell you about this, make sure to check out shareplanner.com.

15:13
There’s, there’s a lot of really good offerings there that you can check out. You can go to swingtradeinthe-stockmarket.com, which will also, which is the name of this podcast.

15:20
It’ll also take you to shareplanner.com’s offerings there. But you can get all my stock market research each and every day.

15:26
That’s going to be including videos just like this one here where I’m talking to you. But I’m going to be using the charts.

15:31
I’m going to be giving you my watch list on a daily basis, the stocks that I’m looking at potentially trading, as well as my master bullish and bearish watch list at the beginning of each week.

15:38
I’m sending you videos every day.

15:40
I’m going to be reviewing the watch list. On top of that, I’m also going to be doing a lot of stock market updates.

15:50
I’m going to also be going over all of the mega cap stocks that I was talking about earlier. I’d go through those charts, you know, multiple times each week, send it out to you via video format.

16:00
Really awesome stuff.

16:02
I would highly recommend you guys check it out. And in the process you’re supporting this podcast.

16:06
There’s also a lot of really good training courses out there too. I have, I’ve, I’ve come up with three of them now and highly recommend you guys check those out.

16:14
So in terms of a new trader, the one thing I would probably tell a new trader is don’t use indicators.

16:22
Don’t use them at all. I don’t think that they’re really good in terms of your development.

16:27
It’s very easy to get lazy on indicators and not rely on price analysis. You’re like, oh, you know, the Mac DS curving back upwards.

16:33
It’s going to buy. Well, everybody in their mom’s looking at the Mac DS, everybody in their mom’s looking at RSI.

16:39
Is there a place for it? Yes, but it should be done in conjunction with technical analysis using price and volume.

16:45
Because the better you get it just looking at price and volume, the better you’ll be. Everything else is the derivative of price and volume.

16:50
So focus on the price and volume aspect of trading. Learn the candlesticks, learn the patterns.

16:56
Don’t rely so much on the indicators. The less you can rely on indicators, the better off you’re going to be.

17:03
We’ve talked a lot about here. Oh, we got another one part of this that he asked Carol asked a ton of questions here, but for paper.

17:09
Trading, you know, when, when should when should he start trading with real money? Well, for for one, at 17, you’re not necessarily in a rush to have to start trading with paper or with real money, but I would definitely make sure that before you go to real money that you have the mechanics of trading down.

17:28
Now paper trading is great for that. You can learn, you know about the limit orders, the market orders.

17:34
Make sure that you have those down. Make sure you understand what it means to fill out a ticket or, or an order form to to be able to purchase stocks.

17:40
You want to make sure you’re comfortable with the software that you’re using.

17:44
So for that, for that very reason, taking time to do paper trading is a good thing.

17:53
Now you can make up make as many mistakes as you want. You could just put in a flurry of orders you want when your paper training, because it’s just paper, it’s Monopoly money.

17:58
You don’t have to worry about it impacting you. Now it’s harder to practice with with real money because if you mess up, you’re losing money as a result of that.

18:06
So it’s better to to make those mistakes like putting in the orders correctly, making sure you can do that.

18:13
And if you make a mistake on it, it’s paper money.

18:16
But when you do that with real money, that can be a lot of lot bigger issue.

18:27
You know, you can you can play around with conditional orders and see what really works for you, what what drives for you and just see what the impact is as well.

18:35
Now the fields aren’t going to be like if you’re trading with real money because you’re not really actually buying shares.

18:42
You can’t really move the market at all with paper money because it’s not connected to reality.

18:51
And then the other thing too is, is that it, it spares you from making mistakes as a 17 year old. I know when I was a 17 year old, I didn’t realize how brutal that the world could be.

18:57
And it is a brutal place. The world’s awful, you know, And I mean, I don’t know too many people that thinks, you know, the world’s a great place, but there’s pockets of good places.

19:06
And of course, but in general, the world’s a very difficult and brutal place.

19:16
And so as a 17 year old, a lot of times you don’t, you haven’t learned that yet. You know, you think that there is, you know, redos or you know, unlike the case, my son, he’s 16 and you know, he does bad on the test.

19:19
He’s asking his teacher for extra credit.

19:25
You can’t ask the teacher or the, or the market for extra credit. You have to just deal with the consequences.

19:31
So stay in the paper trading for a while to learn it, to make sure that you have a good understanding of it.

19:37
Watch how bad a losing trade can go against you. And at least you’re just losing paper money in that case.

19:46
Now, the, the, when you start trading with real money, the difference there is, is that the, the mistakes become real.

19:52
There’s no forgiveness. And so you’re going to learn a lot about the psychology of trading.

19:59
You’re going to learn a lot about your emotions. I’ve said this many times before, but there’s, there was never a better teacher understanding how I viewed money except through the stock market.

20:05
Because in the stock market you lose money and sometimes it feels very unfair.

20:14
And sometimes it is unfair, but you’re going to learn how your views, you’re going to learn a lot about your views of money and, and how it impacts you.

20:22
So with paper trading, you’ll learn the functionality of trading. You’ll learn a lot about, you know, the different orders and just how the process works.

20:29
Then when you put the money in there, it’s like playing poker, right?

20:35
If you’re just playing a friendly game and there’s no money at stake, you don’t care if you win or lose. You put 5 bucks on the table and everybody suddenly becomes serious about playing poker.

20:44
Just a matter of fact, they want to, you’re playing with five other guys. You want to make sure you take that $25 from from those five guys and you walk away with your own $5.

20:49
And, and is it, is it necessarily life changing money?

20:54
Absolutely not. But when you’re playing poker, it doesn’t matter if you’re playing with pennies, you’re still taking it serious.

21:04
So take as much time as possible, you know, as a 17 year old to, to learn the system, to to learn about trading.

21:06
Make sure you stay in that learning phase. Make sure you’re constantly reflecting on the things that you’ve done right, the things that you’ve done wrong.

21:12
We’ve covered a lot. We’ve covered a whole lot in this podcast.

21:17
Holy cow. But remember, it’s not too, too late to start trading it, even if we’re in the, the bottom of the ninth inning with two strikes and, and the, the, the, you know, the next game or, you know, the, the next thing that happened is a bear market.

21:25
We’re at the tail end of this bull market. It’s still not too late to start trading because conditions are always going to be changing in the market.

21:42
So the ability to be able to learn from the different circumstances is going to go a long ways and how well you fare as a trader.

21:48
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21:57
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22:04
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22:08
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22:13
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22:15
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22:21
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22:27
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22:34
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22:41
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22:43
Thank you guys, and God bless. Thanks for listening to my podcast, Swing Trading the Stock Market.

22:49
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22:57
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23:03
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23:14
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23:24
All the best to you and I look forward to trading with you soon.