Monday, March 23, 2009

The Kirk Report

The Kirk Report

Your Trading Edge

Posted: 23 Mar 2009 09:41 AM PDT

Your Trading Edge
Over the weekend I was interviewed by Your Trading Edge magazine. I'm not sure when the Q&A will be published, but here's a short clip of a few questions we covered in the interview:

Q:  One of the challenges of trading full-time is lack of regular income. How do you handle the constant uncertainty?

A:  It is true that as a trader you make 90% of your money in 10% of your time. To level off the inconsistent income and the periods of under performance which we all experience, the key is to have a large safety blanket. I've often encouraged other traders to approach the market from a position of financial strength versus need. In other words, you must have a extremely strong financial position which means 1) absolutely no debt, 2) you live well below your means, 3) you develop alternate streams of income, & 4) you have a large savings fund (not attached to the market) that will cover at least 1-year of living expenses if not more. This four-part approach will help you overcome inconsistent rewards and periods of severe under performance when, not if they occur. Frankly, there's simply nothing worse than being forced to grind out trades in poor conditions to pay the monthly mortgage.

Q:  What would you say are the most important considerations for those thinking of going full-time?

A:  First of all, don't do it for the money or because you don't like to work hard. Because of my website, I come into contact with many people who see trading as a way to get rich without doing a lot of work. That's simply not possible no matter how smart or skilled you may be or what trading strategy you discover and/or develop. Trading successfully requires diligence, dedication and determination and it is not a career for the lazy or get-rich easy crowd.

Second, the key is whether you really enjoy the trading process and challenging yourself on a daily basis. This is not a career for those who don't enjoy research, statistics, objective critical thinking, and testing/evaluation.

Third, you have maintain and currently live a balanced life. This career is always going to test you and bring out the worst in you. The market will create doubts about yourself and your skills and will frustrate and humble you in every way imaginable. A wise person once said that the market is an expensive place to find out who you really are and that's true. Trading will not make an unsuccessful or unbalanced live more successful or balanced. Sad but true, many people can't handle the emotions of it all as everything you are hard-wired as a human being and those emotions will tend to work against you in trading full-time.

Fourth, before making the transition to full-time you must have already proven that your track record shows you should hire yourself as a trader. Many people think that a full-time effort will make a losing part-time strategy more successful. While more work often produces better luck in the market, the truth is that doing this full-time is not going to produce any different results than a part-time effort unless you've already developed a foundation of strong skills and knowledge. The question all traders must ask themselves simply is that "based on your track record up to now, would you hire you to trade your money in the future?"

Finally, you must have a strong support structure. The support and faith through thick or thin from your spouse, family and friends is not to be underestimated. I know I wouldn't have made it here without a strong family support structure. Trading is challenging enough.

Kirks

Q:  One tactic you're well known for is running lots of fundamental stock screens using data available to everyone. How do you turn widely known information into a trading edge?

A:  I use stock screening to narrow my focus to a small number of stocks in an objective and consistent manner. The screens, especially when they are working extremely well and in attractive market conditions, eliminate all of the noise and allow me to concentrate on finding low risk/high reward trading setups within the small group of stocks. My stock screen machine, which I share with members at The Kirk Report, provides me with a narrow target list that have characteristics that the market tends to reward more than the rest. While I'm a firm believer that how you manage a trade is more important than what you trade, it does provide me with a trading edge to concentrate my time and energy on stocks which my screens highlight instead of chasing hot trends, stock picks of others, and general market hype.

Q:  One of the unique things on your blog is the comprehensive links. Do you use that extensive reading to form an overall market views?

A:  My trading approach requires me to have a firm understanding of the market's fundamentals, technicals, and sentiment. The links I provide are clearly helpful along all three.

My goal with the links I share is to provide information and resources my readers will find helpful in their own approaches as well as to have a working understanding of why the market has been performing in a specific way because of the overall sentiment. Unlike many other blogs which try to convince a reader what to think, my goal here is to teach others how to think and evaluate news and opinions in an objective manner so they can trade more successfully. To accomplish this I frequently share contrasting points of view (in fact opinions I personally disagree with) so that other traders can understand the other side of the trade. If you're like me, I learn more from those who disagree with my views than those who agree with them and this is one of the key ingredients to the success of those who take time to read the links I share at my website.

* When the full interview is published I'll let you know.

The New Toxic Asset Program

Posted: 23 Mar 2009 05:54 AM PDT

G-Man
Good morning. Premarket futures are significantly higher and point to a strong open following strength in overseas markets and details regarding the Treasury's new toxic asset program. The program plans to create a series of public-private investments funds to buy up to $1000 billion in legacy loans and securities and the government is taking on much of the risk and offering subsidies to encourage participation from the private sector.

In other headlines, traders are focusing on bullish comments from Mark Mobius, news that Suncor Energy will acquire Petro-Canada, and government seizure of more credit unions and small banks.

Premarket gainers: CETV, PCZ, CNB, LYG, AEG, AIG, FNM, FRE, ABK, ING, BCS, C, HBAN, BAC, GCI, FITB, HIG, KEY, GNW, RF, PRU, CPHD, USB, BX, DB, WFC, MS, LM, COF, TRA, ACH, RTP, DRYS, UAUA, SSL, WAG, & CNQR.

Premarket losers: FAZ, CAR, EDZ, FCH, SKF, TYP, FXP, ERY, DPK, RRZ, HPY, TZA, SRS, GRT, SEF, BGZ, UNTD, GT, ODP, SMN, & CY.

Today's focus will be on Geithner's plan and whether it will work. At 10:AM we also have a report on existing home sales.

Technically, look for S&P 803 to provide some resistance and potential future support if taken out this morning and S&P 740 on the downside if that effort fails. We're still well into overbought territory right now and testing a key trend line resistance on any upside move:

S&P 500: Long-Term View

Let's make it a great week!

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