Charles Kirk, author of the widely read Kirk Report, spends a lot of time teaching others how to understand markets. he doesn’t give stock picks (that’s what the lazy retiree wants), he gives education. Here’s an interview:
Penn: What was the first big trade you remember?
Kirk: Like many traders I know, I remember the beat downs far more than the wins. The largest loss I ever had was being short a tech stock – Brocade – and getting caught in a super short squeeze near the peak of the tech bubble. I had to close the position at a significant loss (atone of the worst price points you could possibly get) because I had no other choice since 100% of my capital was allocated to that trade and I got trapped. While I knew I was right about being short, I ultimately was early and therefore wrong and failed to adhere to my stops when I should have. While very costly at the time, the lesson was worth it because it forced me to understand the importance of risk management, position sizing and trading in a way to make sure that no one position could wipe you out.
Penn: Can you think about the one or two things that made the biggest difference in developing your skill as a stock trader?
Kirk: In my opinion, nothing replaces experience in the market. While I’m a fairly good student and enjoy learning from others though books, websites, blogs, etc., I learned most of what I know about the market through the mistakes I’ve made (some of them many times). Once I seriously decided to make this a full-time career, it helped me tremendously to keep a thorough record of my trades and lessons learned which I still update and refer to quite often.
Penn: Can you walk us through a trade or two to show us how you analyze the market for opportunity and then take advantage of that opportunity when it materializes?
Kirk: While I don’t talk about trades I’ve made beyond what I share at my website, I can offer you a basic outline of how I approach most of the trades I make. The first step begins with my stocks screens, many of which I share through my stock screen machine at my website. All of these screens search for a variety of factors and criteria, but basically I screen for stocks that have a strong blend of fundamentals and technicals. From that point, I then set price targets at specific point that I think offer the best risk/reward for the trade (i.e. frequently near the bottom of trend channels, at key levels of support, moving averages, on breakouts, etc.) Once those price alerts are tagged, I then make the trade providing that my opinion of that particular stock has not changed in the mean time and it fits ok within my portfolio at the time (sometimes these alerts take weeks, if not months to hit and many never do). Although I do make other types of trades, these kinds of setups provide the bulk of my bread and butter.
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