Wednesday, April 14, 2010

The Kirk Report

The Kirk Report


Trading Percentages & Management

Posted: 14 Apr 2010 03:58 PM PDT

Trading Percentages

Q: Do you ever buy stocks other than ones passing your current screens? If so, what would be the circumstances that would lead you to make that decision?

A: Yes, I do trade stocks and other instruments that our outside of the stock screen machine. However, as you'll see by my percentage breakdown based on trades I completed in 2009, trading stocks which appear within the stock screen machine have remained a primary concentration:

  • 32% of trades made were stocks in stock screen machine

  • 30% of trades made were in ETFs

  • 14% of trades made were in other special screens (like book value screen & others I'll feature in the new screen of the week series)

  • 13% of trades made were position day trades using both ETFs & stocks

  • 11%: Emini & Forex trades

As for the second part of your question, what circumstances would lead me to trade outside of the system, it depends primarily on two main things: 1) whether I'm finding attractive setups within my screens as I'm biased toward concentrating my positions there than away from it, and 2) whether I desire more diversification & exposure than I can readily obtain through stock-only positions. However, the same technical approach I use to find and exploit attractive risk/reward setups in my stock screen machine for the most part are the same I use elsewhere.

The most significant change here much like many of you is that trading ETFs continues to grow in terms of my overall focus. In fact, over this year or next it wouldn't surprise me to find that trading ETFs are over half of the trades I make as well as far more emini trades which I've grown more fond of lately (more on that at a later time). ETFs are much easier for me than hand-holding a number of equity positions and that's especially true through earnings season! This is also why I've been working on a new ETF tool to share at the site for those of you who only limit your focus to ETFs.

Finally, as I've often talked about before, it is my opinion that what you trade is not as important as how you you manage the trades you make. Many people can build high-quality watchlists but if you don't know how to spot optimal entry points, how to scale into and out of positions, have a complete understanding of how to limit loser trades through position sizing and stop losses, etc. your success will be modest at best. Remember, it isn't what you trade that will make successful, but rather how you manage the trades you make no matter what they may be. A good trader can and should be able to take the worst watchlist ever created and still find a way to make money from it!

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