The Pro’s Process - Charles Kirk

I’ve been hoping to do a series of posts asking Pro Traders about their psychological processes.  Delving a little into how it feels to them when trading.  The good and the bad.  How this has changed over time and what preparation they do mentally for performing as a trader.

One of the key features for me was that I wanted traders with experience who have been through the mill over the years and of course those who were kind enough to broach this subject publicly.  This I hope gives developing traders more to learn from.  

I’m very fortunate to have a great line up and kicking us off this week is: 

Trader: Charles E. Kirk

1) How long have you been trading?

I have been actively trading for almost 20 years

2) What style of trading / investing do you practice (technically driven, fundamental, systematic, a combination etc)?

I am a swing/day trader primarily. Technicals are used to determine entry, exit and for evaluation of risk/reward potential, while fundamentals through screening help identify high-value prospects. 

3) How do you feel when a trade goes against you?

It depends on the situation as I focus more upon the process of the trade more than I do the results. So if a trade moves against me after I’ve followed my plan and rules exactly as I should, that’s ok and expected. The result doesn’t make me feel bad or good. It is what it is.  Before every trade I make, I know and fully understand that I will be wrong lots of times and that’s ok. However, when I don’t feel very good is when my trade is unsuccessful because I’ve not followed my plan or violated my trading rules. It doesn’t happen often fortunately, but when it does, it can be quite irritating as I should have known better. 

4) How do you feel when a trade goes for you?

This also depends on the situation. If I followed my plan and rules and the trade is successful, then I’m pleased. It is always good to see the fruits of your labor and that your seeing the results you expect. However, when I haven’t followed my plan and rules and the trade is successful anyway (which can happen) I consider myself very, very lucky. The trick is to know the difference as most traders think they are responsible for every win, and never for any loss, when that’s certainly not true.

5) How have these feelings changed over your trading career?  (Can you recall how you originally used to feel and elaborate on how this has changed over time?)

When I started, I saw every trade as an opportunity to prove how smart I was. My ego and the trade were tied together. Of course, this is not a good thing as when trades move against you (as many will), you then put yourself in the position of having to defend the position instead of just owning up to the mistake and moving on. Now, if a trade moves against me, I’m out. Risk management is the most important part of trading successfully. 

6) Do you have any practices that you do away from the trading screen to help you mentally and emotionally handle trading?

Living a balanced life and getting away from the trading desk is much more important than most realize. I’ve been working on doing this more and more and my performance in the market continues to improve as a result. I now try to play golf at least twice a week and that along with hiking and other activities I enjoy has helped me maintain a much better balance and perspective. 

7) Have you always done this? 

No, as anyone will tell you - I’m a true work-a-holic and so it is very difficult for me to drag myself away and get the rest and time away as much as I need to. Prior to this year, my average work week was about 80 hours and I almost never took a day off. 

8) If not, how have you learnt to deal with the feelings that come up when trading?

Long-term perspective and experience helps. I’ve been doing this long enough that nothing surprises me anymore and more importantly, I still enjoy the challenge and find it fun to trade even when my results are not what I desire. As long as I maintain that perspective, I think I’ll be ok.

9) Can you describe a time in your trading life which really rammed home the point that so much of trading comes down to psychological factors?

I think we all learn that everything that is in our nature tends to run contrary to doing well in the markets. For example, in life, you should run away from a fire. In trading, you should run toward it. In life, you should be scared of losing money, but in trading, feelings of fear should make you more aggressive. Learning how to use your emotion this way, instead of ignoring it, is more important that most realize. I always am irritated when I read a trader tell others to be “less emotional” because 1) that’s not possible, and 2) emotions can be a powerful alley if you understand how to use them. 

10) If you could give aspiring traders one piece of advice about emotionally handling the market what would it be?

I highly recommend all traders keep track of their emotions in a trading journal. As time passes (like more than a year), you’ll learn a tremendous amount by reviewing how you were feeling at key pivotal market moments in the past. This will provide you a much better understanding and perspective of your own emotional strengths and weaknesses as they relate to the market. This will also help you draw upon these experiences when you face them again and can frequently provide you an edge over other traders facing the same situation. 

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I’d like to thank Charles Kirk for sharing about the way he tackles the market from an emotional / mental side of things and for his willingness to allow me to post this as a free resource in the hope that traders who have been in the market for less time or are thinking of entering can perhaps pick up some A-HA’s.

If you are interested in finding more out about Charles Kirk you can find him:

On twitter @TheKirkReport

Or on his website: http://www.kirkreport.com/

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Disclaimer: Embrace The Trend / Richard Chignell does not provide investment, financial or product advice.  I trade my own capital exclusively.  I eat my own cooking as should you.  If you are going to trade / invest it’s at your own risk and you must take responsibility for your actions.