How Long Do You Hold a Swing Trade | Podcast Episode #178

0:07
Hey, I’m Ryan Mallory and this is my Swing Trading the Stock Market podcast. I’m here to teach you how to trade in a complex ever-changing, world of Finance, learn what it means to trade, profitably and consistently managing risk, avoiding the pitfalls of trading. And most importantly, to let those winners run wild, you can succeed at the stock market and I’m ready to show you how, hey, everybody, this is Ryan.

0:31
Mallory with Swing Trading the Stock Market and good. Episode for you guys here. Today, I got an email here from a woman that’s asking about how long do you hold a swing trade for? And that’s what we’re going to discuss in this episode.

0:47
Now, of course, there’s no exact answer to that, but I can also give you some pretty good time frames to help you with, understanding how long you should be holding a winning trade. How long should you be holding a losing trade for? And we’ll get into all that. Maybe even some examples and more and for this The good Florida redneck name.

1:08
She gave it to me is Ruby Ann Ruby and solid red. Nickname sounds like a name that you get down in the Okeechobee area that’s like South Florida but like right in the middle of the state. Yeah I flew an airplane into Okeechobee one time they had like frogs the size of your head.

1:26
I kid you not and I flew in there on like a little two-seater airplane scary as anything. There was no Runway lights, it was in the middle of the night. Crazy stuff, I promise I won’t. Wasn’t drug running any case Ruby Ann right. Ryan. I don’t believe you would use this on your podcast for this simple fact that it is a very short, easy, one question email but you are wrong.

1:47
But if you do, I would love to be called Ruby, Ann or Normandy. That’s Country enough, right? Actually, I’m going to use Normandy for the next person. Anyways, I am super excited to have subscribed to the trading block, after reading your introduction email. I have just one question, how long on average are your swing trade place?

2:05
I Have gone back and looked at some of the calls. You have made the price targets. Look like they are typically ones that would take a while. Although it looks like you start scaling out prior to meeting that Target. I am also wondering just how much capital I should tie up and risk with the swings. I don’t have a huge account, only nine thousand dollars and I am used to day trade, I would really like to get into swing trading as it is less stressful and not as demanding as day trading and scalping, thanks so much for all you do.

2:31
I’ve gone from your podcast to your Twitter account patreon to trading block. Oh yeah. Yeah, have a good day. Best Ruby Ann, okay, right? Answer her email. The bourbon of choice is high, whiskey American Prairie, bourbon.

2:46
Now in the past, I have actually done another high West whiskey before it was the highest Double R. I get like a 6.6, but when I try this one, this is the high West whiskey American Prairie bourbon two different kinds, somewhat of a peppery taste.

3:01
It’s smooth. But it’s not extremely flavorful, and there’s a lot of Ride. I taste a lot of corn, a little bit of caramel I would give this a 7.0. I just don’t think I can go any higher than that. It’s a little bit of a rookie score given the flat number but 7.0 is as high as I can give, I don’t think it’s a six point nine because I feel like at that point, I’m getting into some less than desirable Whiskey’s.

3:23
I do think that this is a simple whiskey but it’s not necessarily the one that I would go. After first, I think there’s plenty of Whiskey’s out there that are very simple Bowl on, the weekdays that are enjoyable and you can probably get them keeper for this High West whiskey bourbon but let’s get back to Ruby Ann’s email.

3:41
So the whole thing about how long on average, are your swing trade plays or how long should you hold a swing trade for well. Again, A lot of times I like to take it from more of the macro perspective and then drill down to the micro level. So from the macro level, what I will tell you is more of a concept and that is I like to let my winners run and cut my loser short.

4:02
I want to let my winners run as long as possible but I want to lose very quickly. I don’t want to stay in a losing trade for very long, but I want to win slowly. I want a stock that will last me, one two, maybe even three months now. Three months swing trades are very difficult to come by why or anywhere near three months is because of earnings.

4:21
So, unless I get right in after their earnings report, and then I hold it until the next earnings report, it’s very difficult to get beyond three months for me because one of my main rules in trading is I don’t hold stocks through earnings. I think it’s a loser’s game to play. Earnings, a lot of you guys probably do it or have done it, I’ve done it before, but I can tell you from my experience trading.

4:42
Earnings is a great way to lose enormous amounts of capital instantly. And the reason why when it comes to swing trades in the duration of swing trades, why I won’t hold through an earnings announcement is because yes, a stock can go up, stock can go down from an earnings.

4:59
Maybe it stays flat, or goes up a penny or two, but that’s not the norm. It usually it’s a volatile swing. Now, the bigger the market cap, it tends to be a little bit less swings but for the very volatile plays for your mid-cap small caps and even a number of large caps, those earnings plays can be enormous.

5:21
I’ve seen them drop as much as 50% at times. Now you get some of the more reputable plays, a big swing might be 9 to 15 percent, but that’s still a huge swing. I don’t want to play that kind of a swing. I don’t want to be up 10% on the trade and all of a sudden be down that because of an earnings report.

5:37
So I don’t play through earnings at all. I don’t play Apple. I don’t play Facebook, I don’t play Amazon. I won’t play Caterpillar, Bank of America. You name it. I don’t play any of them and we’re talking about swing trade. Now investing is different because if you’re going to invest you’re investing for the long-term and that requires you to go beyond a swing trade duration. I consider a swing trade up to three months and investment tends to be after that.

6:00
Obviously, I’m not going to consider an investment four months. There’s a little bit of a black hole there between four months to a year but after a year it becomes an investment especially to the IRS because that’s where your long-term capital gains start to kick in but there are swing traders that will hold beyond three months.

6:16
But I also think that they’re playing with a lot of fire there because they’re inserting a lot of risk that cannot be managed because earnings cannot be managed appropriately. Look, you can have a good earnings report and a bad reaction, you can have a bad earnings report and a good reaction.

6:33
So even if you nail the earnings correctly. You say, hey they’re going to beat earnings, they’re going to beat revenue estimates, they’re going to have good guidance, the stock may still trade lower. So you basically need to be not only right on what the earnings are going to be, but you also have to be right on the reaction.

6:52
So there’s multiple variables that you have to be right on. And let’s face it. As individual traders, we don’t have the resources or the capital to be able to talk to the CEOs to talk to their finance department. We are not calling China to find out what sweatshop out there is talking to someone about the Apple production. As individual traders, as retail traders.

7:15
We don’t have those resources. We don’t have the resources to just send somebody out into every Home Depot in America and count the number of cars that are going into the parking lot and leaving it every day and comparing it to the previous quarter. So don’t trade the earnings. That’s one of my biggest rules of trading. Of course, stop losses are huge managing the risk is huge but also part of risk is not holding a stock through earnings when you’re a swing trader.

7:36
Okay, so Ruby Ann didn’t necessarily touch upon earnings reports, but it’s important for you to know why I don’t hold a stock beyond three months in terms of swing trading because I don’t play the earnings reports, but I would say my average winning swing trade and it’s two different things. My average winning swing trade can be anywhere from a couple weeks all the way up to a couple of months that’s about the window there.

7:58
I want to hold it as long as I can because if I have capital that’s tied up in a winning trade, that’s a good thing. That means that I have a right up that’s continuing to increase in value. Now, a losing trade, I want to be out of that as soon as I possibly can, that doesn’t mean the first downtick I’m out of the trade no, what it means is that I want my stop loss to be at such a place to where I know very quickly whether or not I’m going to be right or wrong on a trade, that’s why I like to place.

8:22
My stop losses close to my entry point as possible, but I don’t want to make it so close to where if there’s this natural up and down movement in the stock that it’s going to stop me out. I want it to break some key support. So when I’m looking for a good entry price, I want it to be a good entry price relative to where I’m placing the stop loss at and that stop loss has to be placed below a key support level and I show a lot of people this kind of stuff, I show it to them, swingtradingthestockmarket.com, that’s my Patreon account, that’s associated with this podcast, check it out.

8:53
Because each and every week I’m providing you guys with my watch list to guide you in the week ahead. I’m going to send you that update for both bullish and bearish stocks. I’m also going to send you out my daily trade setups I’m watching. Also the most intriguing charts of the day, the setups I like.

9:09
And on top of that, I’m going to give you guys weekly updates on all the Fang stocks, plus Microsoft, plus Tesla and updates on the S&P 500, the Russell 2000, the NASDAQ 100, plus the indicators that I watch. You can get all of that at swingtradingthestockmarket.com.

9:26
And in the process, you’re going to support this podcast and its future growth. So check that out. And if you have any questions just let me know. Now why do I want to lose quickly? Because I don’t want to be tied up in a losing trade. One of the most recent trades that I took was in MasterCard and it stressed me out to no end and I’ll tell you why, the stock wouldn’t do anything.

9:45
I got into this stock on May 21st, which was more than a month ago. And it literally took me about three weeks for me to finally close out this trade, I don’t like having a losing trade that lasts three weeks.

10:01
I like a losing trade that lasts a week. Maybe a couple days if I’m going to be wrong on a trade, I want to know fast. But this MasterCard trade that I was in MA, I don’t have to get into the charts to tell you exactly what was going on with it. You can visualize it had a nice rising trend line. I got in on it because I thought it was testing the trendline.

10:16
It was holding the trendline and it started to bounce and I said okay this is my guy. I’m going to play this bounce. Well it just hugged that trend line forever. People in the chat room are asking Ryan what are we going to do about this MasterCard? It’s not doing anything as I agree. I don’t think it’s doing anything either, but it’s not doing anything wrong as well.

10:33
It just kind of keeps trading side of ways to slightly lower, but it’s not violating that stupid trendline. And it was irritating me because ultimately I lost one point nine percent on the trade, not a lot of money, okay? It’s not a lot in the big scheme of things. Small loss, I kept raising the stop loss but it would never stop out.

10:51
And it was bothering me because I want to be out of a losing trade as soon as possible. And here I am three weeks into it. Probably one of the longest losing trades that I’ve had over the past couple of years. I guarantee you it’s a top five, but it just simply would not breakdown and finally it did and it took me out, but that capital was tied up for three weeks in a losing trade and that bothers me.

11:13
But the worst thing that you can do is have these like really big stop losses, like 10 to 20 percent large. And then all of a sudden you’re stuck in this trade for two to three months. When you could have taken that same capital and put it in a winning trade, it’s so important to avoid long-term losing trades, or just swing trades that take far too long. That’s why I hate hearing about traders who fail to use a stop loss.

11:31
And then all of a sudden, the stock blows through what could have been an ideal stop-loss area, but they didn’t use a stop loss. And now they’re back holding for the long term.

11:47
It’s bad enough that you’re losing a lot of money on the trade, but it’s also bad that your capital is tied up in a losing trade that you can’t move on to the next trade. That’s your opportunity cost. I studied economics in college one of the best things that I learned about wasn’t supply and demand it was opportunity cost not even quite get it.

12:05
Seemed like a stupid concept at first, it probably wasn’t until after I got out of college and traded stocks more heavily that I understood the opportunity cost. The opportunity cost is the next best thing that you could be doing. Whether it’s an activity that you’re doing. There’s an opportunity cost to that. Every activity or action that you take, there’s an opportunity cost and there’s an opportunity cost when it comes to the stock market.

12:27
The opportunity cost in a losing trade is the fact that you could be in a winning trade, but you’re stuck in a losing trade. So your duration in losing trades needs to be quick. You need to get out of losing trades as fast as possible. And yes, I do scale out of my winning trades because I want to capture profits along the way if I’m going to be in a trade for a while, if I’m in it for like a couple weeks or even a week, I want to make sure that that money to some degree is turning out some profits for me.

12:53
The worst thing I can do is be in a stock for two weeks. I’m up 10 percent on the trade and all of a sudden they have a bad news event or something that really rocks the stock. And I’m down 5% on the stock and that doesn’t really happen. But it could, all it takes is one bad headline.

13:08
So, when I’m up on a stock I’m learning to scale out a little bit, and the other question that Ruby Ann asks is, how much capital should she tie up in the swing trades? She only has a nine thousand dollar account. So does that mean she should use all nine thousand dollars on one swing trade? I wouldn’t think so, but I’m not Ruby Ann either.

13:24
What I always tell people is that look we’re in a world now today, and it’s great. It’s a commission-free environment. When I was trading back in the day in 2000, they were charging like 20 bucks to get into a trade, 20 bucks. You really had to be right on your trades.

13:41
You could not afford to be wrong because it was twenty bucks to get in, twenty bucks to get out. And now, we are in a world and I never thought I would ever even see the day I never thought when I was trading ten years ago, we would see a day where trading was commission-free, but here we are. And so we have so much opportunity now to grow as traders because we’re not hampered by all the extra cost that hits us.

14:01
Yes, there is IRS, there is all that stuff, but just from a simple trading standpoint, we can trade small accounts and be successful. I would look beyond the fact that you’re trading nine thousand dollars. Don’t look at the fact that you’re only trading nine thousand dollars. Look at the fact that you have an account, that you have a portfolio. How much, percentage-wise, are you willing to allocate to each trade?

14:23
Maybe it’s 20%, maybe it’s only 10%. If it’s 20% and you’re comfortable with it, there you go. You have about $1,800 that you’re putting on each trade and you can win with that. If you make 10% on the trade, guess what you made $180, and that’s a good thing. It’s not about the dollars, okay?

14:40
It’s about successfully managing your account, successfully managing trades managing trades from cradle to grave, making sure that you’re scaling out. Yes, if you’re only getting into a trade that has like ten shares, you can take half the shares off the table on your initial profit-taking measure and then let the rest of it run wild and then eventually close it out because you raised that stop loss and it finally took out that stop loss, maybe 15 to 20 percent higher.

15:04
But you got to make sure that you are managing your portfolio to the same degree that you would manage it if it was a $100,000 account or a million-dollar account. Nine thousand dollars is a lot of money, so don’t squander it. Don’t look at it as a small portfolio, look at it as hey, this is my portfolio. This is what I’ve been given. Maybe I’ll have more money in the future that I can add to it.

15:20
But for now it’s nine thousand dollars, I am going to manage it just like it was a million dollar portfolio because if you don’t take the nine thousand dollars seriously, you’re doomed to lose it. Okay? Take it very, very serious.

15:38
If you enjoyed this episode, I encourage you to make sure that you’re subscribed to it. But please send me your questions. I love these questions, especially the ones that like Ruby Ann just sent me. She has an earnest, sincere question. She gave it to me. I was excited and enthusiastic about answering.

15:55
It was a question that we could all relate to. Send them to me at ryan@shareplanner.com. Also, make sure to leave me some five-star reviews because guys, there’s people that want to see me fail. Also, I appreciate you guys and your support for this podcast, it means the world to me, it really does.

16:10
I brag about you guys all the time and I’m just amazed by how much you guys have embraced me on this podcast over the years and you need to do that going forward. Make sure to leave a good review. Thank you guys. God bless.

16:26
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16:48
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