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TraderInterviews.com: Hi. This is Tim Bourquin from TraderInterviews.com. Thanks for joining me today. We're going to be talking with Ken Calhoun and I've known Ken for quite a number of years through the Trader's Expo's and through his websites. He's a fantastic trader and has taken some of that knowledge and put it out there to helping other traders as well. So, if you don't have a mentor, even if you got a mentor and you're looking for some other help in this industry, Ken is definitely a guy you want to talk to. So, Ken, thanks very much for joining me on the phone today.
Ken Calhoun: Oh, well, I'm glad to be here, Tim. Great to be with you and all of our listeners out there.
TraderInterviews.com: Well, you've been trading for a long time, so you've seen a lot of traders come and go, and you've trained traders and you do trading yourself. In fact, right before we got on the phone here, you were talking about a trade you were in. What kind of trader are you? Do you day trade, swing trade, what?
Ken Calhoun: Primarily, day trade, but one of the new strategies that I've developed since I like to start everything off as a small share, swing trade, and then scale up. And that gets me over the hump of worrying about whether or not I'm putting on 500 or 1,000 shares right from the get-go and then have an immediate stop-out, instead. If I start with small shares and trade a much wider variety of stocks and then scale into those on day trading breakouts in real time or maybe up to, you know, a thousand to 3,000 shares live. It's a really good strategy. But primarily, I'm a stock day trader. That's what I do.
TraderInterviews.com: All right. And do you have a group of stocks that you would like to pull from to trade each day or do you trade anything?
Ken Calhoun: Well, I trade anything that moves. I pull up the gain on most lists, on both the listed and NASDAQ markets and I've got a portfolio listed here of several hundred stocks that I follow. And I'm currently in my active trading account, in just over 320 positions, most small-share trades are really good ways to scan without having to do things manually. So if you're in a lot of different positions, say under a couple of hundred dollars total capital per trade, then you just sort by the open P&L, in that way whatever is doing the best comes to the top of the list and then those are great candidates to scale into and start position, sized enough to accelerate your profit and, you know, trail with stop at above your average cost that you, at minimum, break even and often do really well. Yeah, a good strategy.
TraderInterviews.com: So for trailing stops, a lot of people know of course you could put a stop in to make sure you only lose so much. But how does a trailing stop work?
Ken Calhoun: Well, typically, what I'll do is that I'll put in, actually, a hard stop not so much--typically, trailing stops are predetermined, maybe at 10 cents under the inside market. But, what I like to do is I will put in a stop that basically splits the difference between where I'm in it from and what the market's willing to pay. So, from the initial position, let's say, I'm in, let's say, just $200 worth of stocks, I will enter that as a swing trade and maybe use a full point and a half or two as the initial stop. Once it moves in my favor, I'll start scaling into that position, and I'll put a stop in between. So, once it's in the money, I'll put a stop in between my average price in and what the market's willing to pay. So, what that does is let me get in a lot of different positions with small profits, then I can scale in once they start to move in my favor and I tighten a stop in, kind of, like a new surrounding, and tighter and tighter and tighter as it moves in my favor and then as soon as it rolls over, it closes me out and I take the profit.
TraderInterviews.com: Is that automatic or do you manually do this?
Ken Calhoun: All automatic, all hard automatic stops because I'm in so many different stocks and I trade so actively, there's no way I could manually manage all the exits, so I let the brokerage who's offered to do that for me and I'll put the stops and then those are always activated automatic.
TraderInterviews.com: So all of those 320 positions that you have opened, do you immediately then put in some sort of stop or trailing stop?
Ken Calhoun: Yeah. We'll always put in a stop. What I do for a swing trades, and this is a new technique that I've been working on these past 11 months or so, and it's worked really well. My capital accounts were up over 34%. It's a 35-day swing trading chart with ADX and I'll look for ADX over 40 as the trigger signal along with the 35-day high and a 2-day high on a 2-day 1-minute candle chart that breaks out on a high volume. So I'd like to combine those as my entry signals. In that way that gives me the strongest breakouts which has worked really well in this whole market.
TraderInterviews.com: That's great. I want to have you repeat that because I think that was really important information that you gave us there. Can you say that again one more time what you're looking for?
Ken Calhoun: Yeah sure. I'm always looking, I use a 35-day 30-minute candle chart, so I'm looking for 35-day highs accompanied by an ADX, the red line over 40, using a standard 14-step parameter. So red ADX line over 40, 35-day high breakouts combined with a 2-day high breakout and of course you have to pay attention to market internals, if you're going along the market, the trend has to be under 1 preferably under 0.7. So if you're looking to buy the market trend under 0.7 preferably a NASDAQ composite at a 2-day high and your stop, making a 2-day and 35-day high, initiated as a swing trade on small shares and then scale up once it moves in your favor.
TraderInterviews.com: You mentioned 500 shares. Is that typically your entry amount of shares or less?
Ken Calhoun: No, no. My entry, the way I'm in, you know, it's several hundred different positions, is only about $200. It's my 200-hundred-dollar rule. I'll put in $200, I'll buy just $200 worth of stocks and that will only be 10 shares of the 20-dollar stock or 20 shares of a 10-dollar stock. Once it's moved in my favor by at least $15 or $20 in the money, then I'll start doubling into that and start a position, scaling up and once it moves in my favor and I can answer that on either an entry day or swing trading basis.
TraderInterviews.com: All right. Well, that's fascinating. I've not heard that strategy before. That's really a good way of kind of testing the waters before you fully jump in. I like that.
Ken Calhoun: Yeah. It overcomes the worry about, "Hey, I just bought a thousand shares worth of whatever, Research in Motion or Apple or whatever and now it's half a point against me and down $600. Should I take a stop or not?" What it does is the maximum stop-out, you know. If you're using, you know, point and a half or two on this, a couple hundred dollars worth of stocks on a wide variety, wide baskets of stocks is, you know, your maximum stop-out is only going to be $10, $15, $20 on those initial small share trades. So, it lets you play a wide variety, take on through a lot of dirts at the market and I'm in. Everything that I think is volatile and it's worth trading and that also serves the dual purpose of being a great real-time scanner for me because my P&Ls are basically the scanner. So I sort by open P&L all the time. And once it's in the money by 20 bucks or better, then I start scaling into it and adding more shares. Maybe, I'll double into it, add another 100 or 200 shares and then trail a stop in between what I payed for and what the market's willing to pay. In that way, I'll lock in profits no matter what. It's a really good strategy, it's worked really well.
TraderInterviews.com: Do you have some sort of automated scanner that actually finds these stocks that have made the 35-day, 30-minute highs, that sort of thing?
Ken Calhoun: No. It's still a lot of manual hard work as always. But you know, with these, everybody do it and stay home and get in their own island and that kind of thing. So I like that it's hard work. What I do is I'll look at NASDAQ.com site for the advance decliners in the big chart site and see the hot stocks or the most up and down stocks each day and then add those to my portfolio and anything that's breaking out to a new 35- and a 2-day high. I'll put on a small share, you know, I'll buy 150 to 200 bucks worth of that stock. And once it starts to move, if it does, then I'll scale up. And if it doesn't, if it, promptly if I buy the top which I do all the time, it's okay, if it rolls over against me, the most I'm going to be down is 15 to 20 bucks and on just $200 worth of stocks, that's several points, you know, a point and a half or two points. So, it rarely takes out that stop.
TraderInterviews.com: All right. You've, over the years, developed a few products to teach people some of the strategies you've learned. Can you talk about those?
Ken Calhoun: Yeah, well, the flagship product I have is this one that I've developed in partnership with my colleague Steve Nison of candle charts' fame and one of the key products is a
14-DVD stock trading successes and it combined--it captured two entire live markets, live real-time markets of combining the best of these candle patterns with my breakout techniques using time and sales, market internals like factors and trend, 2-day high charts, and the typical millennium breakout strategies. So that's the flagship product. I also have an
online trading course. I have thousands of traders sign up for that over the years as well as live, or I should say, daily trading alerts at the chart scan site. So a number of different products are available and services for active traders. I guess the main difference is I'm a real working trader and I post my P&Ls from my brokerage screen capture and these examples of those are regularly on my forum. So, I'm a real trader and I proved it. And that's one of the things I think that makes a big difference in terms of who you choose or who to learn from.
TraderInterviews.com: I'm glad you brought that up Ken because that's one thing. I don't do a lot of promotion of a lot of different people. One of the criteria that I have right after that is, if I'm going to talk to my audience, who I've built this trust with that you have to trade as well. I mean, you cannot just be a person who talks about trading or teaches trading and doesn't trade. That's really critical and very important to me. And I think that's a real distinction people need to understand about you.
Ken Calhoun: Yeah. Yeah. It's one of those things. I mean, it's not to say you can't learn from all the folks out there who aren't successful traders. So, it's kind of like learning how to golf from you know, community college instructor who's probably okay and decent compared to, you know, professional, pro-Am or retired pro-AM golfer, you know, Tiger Woods or somebody who's actually out there making money doing that. So, it's not to say there's nothing to be gained from those folks because I think there is mostly on the mental side of it and the discipline-related things. But from an authenticity standpoint, I think it's really important that, you know, people ask to see brokerage, P&L, blotters, that proves the, you know, what they're being taught and what they're paying to learn from. It's something that's actually proven and real-time trades done recently by that instructor. I think it makes a big difference.
TraderInterviews.com: So the DVDs and the products you have are strategies that you actually use yourself. That's another key distinction.
Ken Calhoun: Oh yeah. Yeah, for over a decade. Yeah, absolutely. It's what I use to make a living in the markets for a decade now and that's the strategies that I've captured from my background in quality management and quality engineering, TQM, and the rest of it and one of our key foundation criteria thing is you document what you do and do what you document. So, I like to make a process map or map out exactly what I do step by step so people can follow it and understand it. It's been really tough for thousands of traders in the world for a decade now. So that's one of the key differences, two to three hands on very specific and authentic use to help with real trades.
TraderInterviews.com: Alright. Well, listeners and viewers of this video with the slides, what I want you to do is go down, you'll see links to Ken's website where you can check this out for yourselves. Ken is the real deal and I highly suggest you go and check it out. There's not a lot of people that I endorse in this industry and there's a lot of riffraff out there. Ken really sets himself apart by
trading what he talks about on these DVDs. So go down, scroll down just a little bit. The link will be right there. You'll see a link to Ken's site. Ken, thanks a lot for your time today. I really appreciate it.
Ken Calhoun: Oh, thanks so much, Tim. I appreciate it.
