Fun Trading Versus Boring Trading | Podcast Episode #476

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Hey everybody, this is Ryan Mallory with shareplanner.com Swing Trading the Stock Market.

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In today’s episode, we’re going to talk about fun trading versus boring trading. Now I’ve talked about boring trading and how the need to make trading boring in the past, but there’s some more elements of that concept that I want to touch upon in this particular podcast. And a lot of that comes down to comparing it against the, the mindset that a lot of traders have, especially new traders of wanting trading to be fun. Or if you’re not really taking it as serious as you want it to be, as you should be, you’re going to try to make it fun. You’re going to try to make it exciting and, and I’m thrill, right?

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But trading is not supposed to have the same feeling that you get when you go to an amusement park. Trading should be something that’s very methodical, thought out and boring. It shouldn’t be the exact opposite. And so when you’re starting to teeter into the area of of exciting trading it where it feels like a real thrill, right? There’s probably something that’s going drastically wrong in your trading.

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It shouldn’t be fun. It should be boring.

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That’s what we’re going to talk about in this podcast episode here today. Now, as long as I’ve been doing Share Planner, one of the things that I have noticed, especially people who, who sign up for the trading block and are, are new to trading, not all of them, but a handful of them is that they grow impatient very quickly with my style of trading because it feels boring to them. If it’s like they’re not getting a lot of excitement when they come into the trading block. And I do that for a reason. It, it shouldn’t be exciting. It should be something that you’re, you’re serious about and you’re, you’re here to make money. You’re here to manage your trades. You’re here to put yourself in the best position to be profitable, not just today or in the, the week ahead, but over the course of the year and the years to come.

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But a lot of them are like, OK, what are we trading? What, what, what, what are we getting into today? And they’re surprised when a lot of times I won’t get into a trade on a particular day. And sometimes I can go long stretches and they’re like, well, this is boring. I’m out and they’ll go to another one. And there’s, there’s plenty of of services out there that will trade in such a way that’s fun and exciting. But I’ve yet to come across one that’s fun and exciting and, and leaves you with any cash in your pocket at the end of the day. Usually you end up blowing right through your capital and blowing up your account and as a result, yeah, it might have been fun, it might have been a thrill ride, but the end results were were not all that great it you end up having buyer’s remorse per SE.

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So what is fun trading? What what is it that makes it fun? Well, it’s that need for a flurry of activity. You want to constantly be jumping into things swing trading in its own right is not really a fun strategy. It’s a boring strategy. I think it’s a good strategy. I think it’s a profitable strategy done correctly, but it’s boring. It’s not meant to have a flurry of activity. You can go stretches or periods of time without making a trade. It’s not like long term investing where you might go 5-6 months without making a new long term investment. Not like that at all. But you can go days, sometimes even weeks without making a trade if the market conditions are not right. And so that flurry of activity doesn’t Mesh well was swing trading.

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And so when traders who are looking for some joy and excitement, they say, well, I can’t day trade because I have a day job and I just can’t sit in front of the computer all day long. But when they when they sit in front of the computer when it comes to swing trading, when they when they had that moment where they can break away from work, they’re like, OK, what are we getting into? I need something right now. And as long as I’ve been trading that, that the need to always be making a trade in the here and now has led to disastrous results.

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Another, another area of fun trading that that I’ve noticed amongst amongst people who are looking for that thrill and that excitement is they want high beta place. They want stocks that have incredible amounts of volatility. They want stocks that are going to give them a hundred or a 200% return. And when they can’t find that, what do you think? They go into options. And I would say 99.9% of traders out there right now that are trading options have no business trading options just don’t. They don’t understand it. They don’t understand the variables that are going into it and they don’t realize how quickly their money can be taken from them when they’re trading options.

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People will say, well, I can control more shares and that’s usually the main reason I can buy more shares or I can control more shares through options than I can just buy in the equities out right with. Just change your strategy when it comes to swing trade. Maybe if you can’t buy a full share of a stock like KLAC that I think still trade somewhere like around $900 a share, then focus on different stocks. Make your screen results such that that you don’t have to worry about those kinds of trade setups. I don’t trade Berkshire Hathaway because I’m not going to trade a stock that’s trading at, you know, a hundreds of thousands of dollars a share. So when it when it comes to trading and, and those who are looking for that, that fun trade, they’re also looking into the high beta stocks.

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They’re going into options when they shouldn’t be getting into options and they’re looking for a lot of volatility. And why is that? It’s because they’re looking for the stocks with the greatest potential for gain. The difference between me and most swing traders is I’m looking at managing my risk. That’s really all I care about when it comes to trading, managing risk. Where am I going to put my stop loss? Where am I going to get out before I ever get in? Where will I know that the trade has gone against me?

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For the person looking for trading to be fun, they’re just looking at, oh man, this one’s going to go to the moon. This one’s going to orbit, you know, Pluto or Saturn, whatever, whatever the planet of the week is. And they’re simply looking for profits. And if you go back to my earliest podcast, what have I always said, manage the risk or actually start off, it doesn’t sound good. But when I don’t do it in order playing your trade, that’s rule #1 #2 manage your risk and #3 the profits will take care of themselves.

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But for a new trader who’s just looking for fun is like, get me into very profitable stocks. That’s that’s what they want. And yes, I said stonks. You can’t go into it with that mindset. You have to, you can’t look at it from a strictly a profit potential standpoint. And so when they go into it with that mindset, they’re looking at it from the least amount of risk. They’re not planning out their trade before they ever get in. They’re not managing their risk when they’re in the trade and they’re not letting the profits take care of themselves.

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They’re only focused on profits. And so when the trade goes against them, that’s not profitable. So what do they do? They doubled down. They try to make it more easy, in their mind at least, to get profitable again by doubling down. And then the doubling down becomes tripling down and quadrupling down because the stock keeps going against them. It’s a lot of people doing that right now with options. They that the stock moves hard against them and all of a sudden their stocks are their options are worthless. So what do they do? They roll it into another contract, into another contract. They just keep buying more contracts hoping that eventually it comes back up.

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So we’ve talked about so far the need for a flurry of activity amongst people seeking trading to be fun, seeking out trading to be fun. They’re looking for the high volatility, the high beta stocks, stocks with the greatest gain potential, with the least risk management and their trades. The other one is exposure. They cannot let a penny go uninvested in the stock market. They need to be 100% exposed, whether it’s long, short, options market, whatever. I hear a lot of times where people are saying, oh, I would love to get in the stock, but I don’t have any more capital left. Oh, I’d love to buy the stock, but I don’t have any more. Why is that? Because they’re over overexposed. They’re most of the time it is not a good time to be 100% long in your swing trading account. There’s a usually always be some cash on hand. And so when I see all these people talking about it, I don’t even have any money to buy that stock. Well, that’s probably because they’re overexposed.

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And not only they get overexposed, but then they get leveraged. And then when you know, traditional, you know, margin accounts that you get from like a Charles Schwab or Fidelity doesn’t work for them, then they start going into the prop firms and the prop firms will destroy. In fact, most of them are illegal and are are a bunch of just scams. Not all of them, but most of them and the ones that aren’t I still wouldn’t trade any time with one of those. I there’s a guy on Twitter that I follow and I strictly just watch him to just see how much he continues to blow up his account using prop firms. He looks like he works a regular day job but he keeps taking his paychecks and dumping him and there and they keep making more money with the prop firms. They will give you like 12:50 or 20 to one leverage. That’s absolutely insane. It’s bonkers. The the likelihood you can succeed using a prop firm is next to zero. They don’t lose their money, but you do. You’re always going to be the first to lose the money. If they’re actually not putting you on a simulator, making you think that you’re actually trading the market’s life, that’s another thing you got to look out for. A lot of them are just there to take your money.

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And let’s talk about market conditions. How many people have started off trading with no concept for the broader market conditions? They’re just looking for trades, just looking for trades, just looking for fun. They cannot pass up on what they perceive as being a good trade setup. Let me tell you, if the market is not working in your favor, if the market is going down and you see a, a stock that you want to buy, there’s a very good chance that that market’s going to drag that stock lower. If it, if the market itself continues to push to the downside. The, the, the market is such a heavy influence on stocks in general that if you’re not paying attention to what’s going on in the broader market, your, your chances at success as a trader drastically is reduced.

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And I’ll tell you another thing that a lot of traders will do is they’ll keep CNBC on. They, they have CNBC and they have Bloomberg and all that. They have a lot of noise going on. They’re, they’re scrolling the message boards, they’re scrolling social media. There is a lot of activity and they’re, and they’re around them, I guess is what I would say. And, and I don’t listen to these people at all. I don’t listen to any kind of like cable news network for, for stocks or investing. It’s very quiet in my, my room where I trade, but a lot of traders, they will have that on. And so you’ll get these channels that they’ll, they’ll bring people on and they’ll hype up stocks and you think to yourself, oh, I need to do it. Or they’re just even like the, the excitement in their voices when, when something’s happened in the stock market, whether it’s a panic sell off or a, a huge market rally is enough to pull in new traders. And that’s why these people go on the shows is because they know that people are watching that they can pull them off of the sidelines and get into their stock if they hype it up enough.

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So what is boring trading? Well, First off, one of the things that that’s that’s boring but good is swingtradingthestockmarket.com Yes, I’m plugging, plugging my own service here. And that’s what I always do. But any case, you’re going to get all my stock market research each and every day. That’s going to include the stocks that I’m looking at the, the stock market updates because I do take the stock market conditions serious. I also take serious the mega cap stocks because they have such a huge weight on the overall market. So I’m going to do videos on those throughout the week. I’m also going to provide you with a list of stocks that I’m watching, not necessarily trading every day, but potentially looking to trade and, and, and make a move on and also my, my overall bullish and bearish list of trade setups. And at the end of each day, I do a watch list review to see which ones are working out well, which ones might be dropped from the watch list and so forth. And just go over each one of those stocks. Check that out at swing trade and stockmarket.com. It’ll take you to my share planner website where you can decide for you if that is something that that that you’d be interested in.

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OK, so that’s the first thing that’s boring. The other thing is that as a trader, you can go successful trader, you can go long stretches without making a trade and that’s not a bad thing. I’ve gone two weeks at times without making a single trade and it is boring. It’s mind numbing. I go beyond three or four days, it gets very mind numbing and boring. I hate it. I like to make trades, but I’m not going to do it if the market conditions don’t allow me to. And that’s the mindset of a boring trader versus a fund trader. Is that the fund trader? He’s going to overlook the market conditions. He’s going to say, you know what, screw it, I need to some activity. I want to make some money. I haven’t made any money in a week. That’s not a bad thing actually. If if you’re make, if you’re keeping your account, the account at the same level while the rest of the markets just completely falling off like what we’ve seen so far this month, that’s a good thing.

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You are managing the risk in your account. You’re you’re preserving your capital for when there’s a better opportunity to get long on the market. But you have to be willing to go long stretches without a trade. You also have to be because you’re taking risk management serious, you’re probably going to trade lower beta stocks. Now. I still like to trade stocks with a beta over one, and for those who don’t know what a beta is, it’s essentially how much does the stock move relative to the S&P 500 or whatever instrument that you are measuring it against for. For a beta of one, it means it’s going to on average trade exactly like the S&P 500. For beta of two, it’s going to be like 2 XI usually look for more than one. And it doesn’t mean that I won’t trade a high beta stock, but the that the trade setup has to be there. The risk management has to be present. I got to be able to manage the risk. And often times in the higher beta stocks that becomes much more difficult to do.

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So I have to avoid a lot of those. And as a result, you find yourself trading lower beta stocks than what a fund trader or a new trader would, would typically trade stocks that provide an edge. That is what I’m looking for when it comes to trading. And what do I mean by that? Well, I’m looking for stocks that have a clear cut area of risk. When I go back to plan your trade, manage the risk, let let the profits take care of themselves. That means I’m looking for an edge. And that edge is more times than not defined by how well the risk can be managed. In fact, I shouldn’t even say more times than not, it’s always defined by how well you can manage the risk. If you can’t manage the risk, you don’t have an edge. So mice trades, I have an edge on those trades and that is how I manage the risk. I let the profits take care of themselves.

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And for the boring trader, risk is all that matters. And yet it doesn’t mean that I’m not willing to take risks. Every trade that you take has an element of risk, but it’s whether or not I can manage the risk or whether I, I have a high confidence that I can manage the risk. There may be a stock that, you know, I, I have a clear cut placement for where I could put the stop loss at, but it might be Boeing. And Boeing is always a headline risk in my opinion. And that’s gone back for like 6-7 years now, ever since they’ve had all, the, all the issues with their planes. I don’t feel like I have an edge in that stock because I, I the headline risk. Even if I think that on paper I can manage the risk, the headline risk could end up taking it drastically below my stop loss before the market opens. And then I’m taking on an, an amount of risk that I’m not comfortable with. So risk is all that matters. And I view cash as a position. A boring trader views cash as a position, in fact a very, very important position.

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And my, my view of the markets is often dictated by the percentage or cash position that I have in my account. If I’m only, you know, 15% long and 85% cash, I don’t have a very strong level of confidence that the market is going substantially higher or that I’m totally certain that it’s going higher. And if I’m 80% long and 20% cash, then I’m much more confident in the market’s direction going forward then I am in it and it’s staying at, at, at as is. And the same thing goes for when I’m bearish. If I’m, you know, 33% short, you know that in, in 70 or 67% cash, that means that my, my confidence in this market is definitely not to the long side. It’s to the short side. And so cash is a huge dictator of my confidence in the market.

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Another thing I trade in quiet, like I’ve already said earlier, I don’t have anything on right now. Each day I’m trading in silence. It’s very it’s very nice actually. And then the times I do have something on, it’s usually something I’m streaming off of YouTube like a cafe environment or a fireplace. I like those during the winter time, not so much in the summer because it’s so hot in Florida, man. Last thing I need to do is stream a fireplace. Sometimes if it’s if I’m not looking at making any trades on the day because of how the market’s playing itself out, I might pop on a old sitcom from like the 80s or 90s, like one that I like now is Growing Pains. I found it on Amazon Prime and love that show from the 80s and 90s. I think it’s more for nostalgic purposes, but such a good show and I’ll have that on. But one thing I won’t put on, I don’t even do it anymore for FOMC days. I used to put it on there for FOMC days. Care less now, but yeah, I I don’t put it put it on at all.

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So the, the the financial news channels, I think they’re, they’re honestly they’re, they’re a bunch of garbage. They really are. I mean, the people that they bring on, they’re just pumping their own books. They’re trying to the con you into getting into them. They’re yourselves. So I turn it off. I there’s zero value from the financial news networks. And then the other thing that I think is important is to really like limit the opinions. Don’t, don’t look at opinions from people that you don’t even know who the heck they are. Like it’s when you have a stock that’s going against you, one of the easy things to do is to go on X or to go on StockTwits and see what people are saying. But you don’t even know a lot of these people. Most of them, you won’t know and they’ll put opinions out there. Like, am I supposed to be taking this one serious? I mean, make sure that if you’re going to let people put opinions in your head or put thoughts in your head, make sure there are people that you trust. Make sure there are people that you feel comfortable with following and make sure that they’re actually doing something, a substance and not just like trying to yellow their money away on the stock market.

18:52

And you take that all that I’ve said so far, fund trading versus boring trading. And you look at the month of March, right? Fund trading is very painful trading. Ultimately, boring trading is very rewarding trading. Like I’m up on the month of March, markets down. And why is that? Because I tried even more so than a bullish market. I tried to make my trading as boring as as possible. The volatility was sky rocketing. When the volatility goes up, I want to make my trading also boring as possible. I don’t want in volatile markets for my trading to have any kind of glimmer of excitement. I want it to be boring. I want it to be mind numbing. Because when you do that, you’re going to put yourself in a much better position to let the volatility do the heavy lifting without having to take on a huge amount of exposure to the market. You reduce your exposure to the markets, let the volatility do the heavy lifting for you. I’ve made it boring, but I’ve made it profitable. Fun trading is painful trading, boring trading is profitable and rewarding trading.

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And So what we have to remember when it comes to the, the, the stock market, when it comes to how we approach it. If we’re looking for that, that excitement for that thrill, for that feeling that like you’re, you’re at it like a carnival and you have all these sounds and all those excitements and all these, these thrills that are taking place. If that’s the the environment that you’re creating for your trading, it is absolutely a bad track that you’re on and you’re more than likely going to blow up your account. Trading has to be boring, especially when it comes to swing trading. Now day trading, yeah, there’s, there’s more excitement to day trading, but I would say that there is far less profitable traders when it comes to day trading. And then there is the swing trading. Why? Because it’s it’s a little bit too fun. And so even the the best day traders probably find ways to make it extremely, extremely boring for them.

20:53

If you enjoyed this podcast episode, I would encourage you to leave me a five star review on whatever platform you’re listening to me on. And also I would encourage you to make sure that you are sending me in your questions and I would, I would love to use your questions on the show. Whatever is bothering you, whatever is troubling you, send it to me ryan@shareplanner.com. I’m the only person that will read it. I won’t use your real name in the podcast episode. And make sure to check out Swing Trade in the-stockmarket.com. Thank you guys. God bless.

21:21

Thanks for listening to my podcast, Swing Trading the Stock Market.

21:26

I’d like to encourage you to join me in the Share Planner Trading Block where I navigate the stock market each day with traders from around the world. With your membership, you will get a seven day trial and access to my trading room including alerts via text, e-mail and WhatsApp.

21:40

So go ahead, sign up by going to shareplanner.com/trading Block. That’s www.shareplanner.com/trading-block and follow me on Share Planners Twitter, Instagram and Facebook where I provide unique market and trading information every day. You have any questions, please feel free to e-mail me at ryan@shareplanner.com.

22:01

All the best to you and I look forward to trading with you soon.