3/08/2010

The Kirk Report Strategy Session Q&A

Few weeks ago I did a  one hour strategy session at The Kirk Report.  . During the session there were lot of questions and some were answered during the session and there were many more questions. I have answered most of the remaining questions and they are below:




Time: 2/19/2010 11:59
Guest Name: gan
Comment:"thanks for the event. My method is somewhat earnings play
ep as championed by pradeep. Deviated from it
market took care of that. Now back to my own shell. thanks again."
Reply:Thanks.

Time: 2/19/2010 12:00
Guest Name: Phil
Comment:Do you have any long term growth investment recommendations?
Reply:No. I primarily look for swing trades.

Time: 2/19/2010 12:00
Guest Name: Ed_L
Comment:"What are thoughts on nuclear related stocks given Obama's change of heart and increasing price of energy (e.g. USU SHAW et. al.)"
Reply: I have no view on them. I trade only things which show up in my methods and scans.


Time: 2/19/2010 12:06
Guest Name: Nitin
Comment:Do you think Indian ADRs will continue to be momentum plays for 2010?
Reply: I do not actively track Indian market.



Time: 2/19/2010 12:09
Guest Name: Jason
Comment:"Could you describe your tools of the trade...brokers software and other tools that are most important to you."
Reply:"Brokers: Interactive Brokers, Ameritrade, and Fidelity Software: Telechart Gold, IBD Dailygraphs"



Time: 2/19/2010 12:12
Guest Name: DAN
Comment:avgc126?
Reply:Avgc126 means average of last 126 days price. It is a Telechart formula.



Time: 2/19/2010 12:17
Guest Name: NB
Comment:What would be your time indicator to exit in your EP method?
Reply:I exit on profit targets.

Time: 2/19/2010 12:19
Guest Name: Rajesh
Comment:Your methods are long only systems . Why this bullish bias ?
Reply:Because market has bullish bias. If you study the history of market there is persistent bullish bias. I do trade short side when the circumstances are right.





Time: 2/19/2010 12:22
Guest Name: Raj
Comment:"Pradeep, It appears that your technique works well for trending markets.  Is that true?  Also, when you say earnings surprises, do you short earnings surprises to the downside as well?"
Reply:There is always something trending in the market. I concentrate on top 2% stocks by momentum at any given time. There is a bigger opportunity in going long earnings surprise than shorting them.

Time: 2/19/2010 12:22
Guest Name: JW
Comment:How do you use your Iinteractive Brokers scanner to determine when to take a trade for the stock candidates you identify in your Top 25 & Breakout methods and criteria do you specify in the scanner?
Reply:I use IB scanner only in the pre market and first hour. After that I use Telechart.I look for % gainers on high volume. The scan is pre designed scan in IB.

Time: 2/19/2010 12:23
Guest Name: Mike
Comment:What is the most challenging aspect of trading for you?
Reply:There are many challenges on day to day basis. Most relate to constantly striving to improve my skills. To be constantly in tune with market and be on right side is a day to day challenge.

Time: 2/19/2010 12:25
Guest Name: Peter
Comment:"First, I really appreciate your blog and get so much out of it.  My sincerest thanks to you.
With your Market Monitor and the market breadth readings, do you chart the results and look more at the movement of the numbers or do you interpret the readings mostly by the levels they're at?  And as the progression to that questionhow do the results of your Market Monitor determine how aggressively you trade."
Reply:Thanks.Market Monitor (MM) is a overall market direction filter I use to trade my swing methods. The basic idea behind Market Monitor is to identify periods that are suitable for momentum style swing trading and to identify periods which are unfavorable. When Market Monitor is signalling good periods I am aggressive. During such periods I aggressively use margin. When Market Monitor shows high risk period, I cut size rapidly. Also depending on my Market Monitor readings I will decide what setups to take and which to avoid. For example if MM is indicating good momentum periods, I might be willing to buy a speculative stock but if it is in risky phase I will avoid such plays. Overall if MM is indicating good period for swing trading, I am extremely aggressive and would be looking to be fully on margin and look at catching lot of moves, if it is in risky period, I try and keep size and margin exposure small. 

Time: 2/19/2010 12:26
Guest Name: Veer
Comment:Often there is so much noise in the market. How do you stay focused?
Reply:"I go by my method. I don't watch CNBC, I don't read most of the market related blogs or sites. I go by my methods and my scans. There are many opinions around us but the key is to be focused on methods, that is my philosophy. I only read trading blogs which are method focused. I study their methodbut I am not interested in opinions of people on economy markets or politics. I do not know how to make money from that kind of opinions.  That is all noise. I make my money by trading few well thought out setups. Those setups have worked for me.  I am laser like focused on my setups. Everything I do from 7am in the morning till market closes is focused on my setups beyond that I don't look at anything. Every single thing I do is formatted and there is a structure I have built around it. So I have pre trading checklist, I have checklist for my setups and so on. I believe that If I do a good job of executing my setups everyday, profit is an outcome. Besides that I have no desire to advise Bernanke or Obama or anyone else as to how to do their job. Lot of noise traders face is because they focus on non trading related things and lot of it is their choice. If you decide to focus on noise there are thousands of things to distract you, if you decide to not focus on it, life is peaceful"



Time: 2/19/2010 12:26
Guest Name: Rajesh
Comment:Basically you are a breakout trader i think .Do you wait for the pull back to enter? Do you pay attention to the earlier support/resistance ?
Reply:Yes I am a breakout trader. I look for breakouts on stocks with established momentum and which are being favored by the market. If a stock or sector is in favor resistance and support does not matter. More than that the entire theory of support resistance is not supported by research. If it was true then no stock would ever rally from 52 week low and make the kind of big moves they have made in recent months. Stock after stock has started rallying from 52 week and made big moves in last one year. In fact there was more money to be made this year by buying stocks with significant overhead resistance.

Time: 2/19/2010 12:26
Guest Name: Jason
Comment:Do you find any particular period of the day lends itself to better setup the conditions that allow you to enter a trade based on your scans?
Reply:Different time frames offer different setups. Earnings plays show up pre market or in first one hour. Breakouts become apparent later. I enter most of my trades before 3:15 pm.



Time: 2/19/2010 12:28
Guest Name: Tyler
Comment:Do you ever consider trading in foreign markets?
Reply:That is something I am working on currently. I am developing a automated trading software along with few other stockbee members to trade many other market using a momentum based system.

Time: 2/19/2010 12:28
Guest Name: Naif Baidoon
Comment:It appears that with your trading style you will have a high percentage of wins but a lower profit percentage. Is that correct and is that your objective in your trading method?
Reply:Yes. But also there are some trades where I bet big because they have very good catalyst. Such big trades contribute to large profits in any given year. For example last year for some period of time I was 75% to 150% invested in one big idea like AMZN, STEC, or GMCR, Or KIRK so those trades made a big difference



Time: 2/19/2010 12:30
Guest Name: Bill T
Comment:"Pradeepdo you utilize any of the IB tools for timing your entries or exits?"
Reply:I use IB real time scanner.

Time: 2/19/2010 12:33
Guest Name: Dharm
Comment:"So you scan IBD list for your trading, Do you trade outside IBD list ?"
Reply:I no more trade the IBD list. I have developed a new way to scan and find breakouts that eliminate the need for IBD list. It basically gets similar stocks to IBD list but does not need IBD 100 or 200.


Time: 2/19/2010 12:33
Guest Name: Alex
Comment:After booking a partial profit and quickly  moving your stop to break even- is break even the same as your entry point?
Reply:Yes. 

Time: 2/19/2010 12:36
Guest Name: Rachel
Comment:What would you say is one of the most important lessons you've learned so far in your career?
Reply:"Markets cannot be controlled, but your methods can be. If I do good job of controlling every element of my method I do not need to worry about market. "

Time: 2/19/2010 12:40
Guest Name: andy
Comment:"you give examples of coming out on top of good earning surprises.  but earning surprises often go the other way or produce no real effect.  how do you avoid these types of episodic eventsespecially when you're betting big?"
Reply:There are several criteria’s besides earnings surprise that I use first to decide which earnings trade I will enter. If I am wrong I know in few minutes or hours and is out of those trades. After trading this particular setup for more than 10 years there are many things which help me decide which one to bet big and which one to avoid.But some things work and somethings don't work that is what trading is all about.

Time: 2/19/2010 12:47
Guest Name: Sam
Comment:Can you name some best traders who influenced your trading and your trading methodologies?
Reply:"I got many of my ideas from reading William Oneils book. Besides that I have studied in great depth methods of traders like Dan Zanger, Gil Morales, Mark Minervini, and Mark Boucher."



Time: 2/19/2010 12:48
Guest Name: Nitin
Comment:are there any sectors or areas you avoid even if they fit into your method otherwise?
Reply:Biotech. I have had some big heart breaks on that sector so try and avoid going big on biotech breakouts.


Time: 2/19/2010 12:49
Guest Name: mark
Comment:"do you use any options in your trading. If you do or don't
what are your reasons?"
Reply:I do not use options actively. I trade where I have an edge. I have not spent as much time studying options as I have studying other things which I trade. 

Time: 2/19/2010 12:49
Guest Name: Jason
Comment:Do you only trade to the long side?
Reply:Mostly trade on long side. I try and make enough killings on long side so that I can spend bearish periods going on holidays and doing other things.


Time: 2/19/2010 12:50
Guest Name: Raj
Comment:Not sure if my previous question went through.  How do earning breakout methods work in non-trending markets?
Reply:Earnings breakout method works in any market condition provided there is a stock with blowout earnings surprise. Even during bearish phases some stocks have earnings breakout. What is critical to understand is some stocks have their earnings cycle in full flow during bear market and such stocks if they have significant earnings surprise still go up during bearish period. Obviously the 2008 was different period because it was once in a generation bear market. 

Time: 2/19/2010 12:51
Guest Name: Jason
Comment:"Do you ever trade ETFsspecifically the 2x and 3x leveraged ETFs?"
Reply:No. I primarily look for swing trades on stocks.

Time: 2/19/2010 12:52
Guest Name: Salvador
Comment:Do you ever enter situations where is there a negative post-earnings reaction where you believe the trade will soon go the other way (up)?
Reply:Sometimes that happens but I am out of such trades in minutes or days.Good earnings trade work within minutes of entry. Otherwise they are suspect. 

Time: 2/19/2010 12:52
Guest Name: Naif Baidoon
Comment:What percent of the time are you stopped out of a trade?
Reply:40 to 45% of the times trades I enter do not work, but they do not necessarily hit my stop. Many times I am out of trade before a trade hits stop, if I see a trade not working after my entry, I quickly get out. I have learned one thing well and that is too cut losses quickly if a trade does not work as intended. So trades actually hitting stops is low. 

Time: 2/19/2010 12:52
Guest Name: Rajesh
Comment:"Pradeep, Do you trade Indian markets?"
Reply:no

Time: 2/19/2010 12:53
Guest Name: sever
Comment:Do you post your trading decisions during the day?
Reply:Yes every trade I take a buy or sell alert is posted real time.

Time: 2/19/2010 12:55
Guest Name: Rajesh
Comment:What is your strategy for market corrections and bear phase? Do you have some methods or do you stay out?
Reply:Stay out and selectively look for shorts.







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