Mark Minervini: “Keys to winning in the Stock Market” Until the right opportunity emerges, I pay special attention to preservation of capital above capital appreciation. When a promising opportunity eventually presents itself, I’m ready to act swiftly and aggressively with the bulk of my capital intact. Remember, the top three priorities in trading: First, is preservation of capital. Next is consistency in executing your plan. When you have these two things mastered, you can then pursue the third, which is superior performance. In stock trading, waiting is the hard part. While you are sidelined, reading latest news or watching the Dow move up may pressure you to make trades that you would normally not take. Patience is the key. Daily surveillance is necessary, while suppressing the temptation for action, meaning the desire to initiate a trade, until the right opportunities present themselves. I conduct intensive research to identify trading ideas and follow those ideas like a hawk. When the time comes to put money to work, the decision is be automatic and obvious. To trade like this, in almost a Zen like manner, you must trade when the conditions are favorable. Trading should be effortless. If your trading is causing you difficulty or stress, then something is wrong with your criteria or timing, or else you’re trading too large. When the market is not acting great and there’s no clear market leadership, play it small with pilot positions. This accomplishes two things: First, you will test the market and keep its pulse. Once you get a strong heartbeat, you can step it up. Second, you stay in trading shape. Trading is just like working a muscle; if you don’t work it, it loses strength. Stay in trading shape by using pilot positions as “sparring partners.” However, don’t slug it out and get hurt with your sparring partner. Instead, wait for the main event and then give it your all to capture the championship belt. Sacrifice: Must know who you are and what you will be doing- A successful Trader will need to establish their edge Status: Do you want to be a Hyundai or a Mercedes? The average trader spends the majority of his/her time in between Indecisiveness <<<<<<<<<<<<<<<<>>>>>>>>>>>>>>>>>>>>>>Regret Should I buy Should I sell Should I hold
I should have bought I should have sold I should have held
50% win rate is enough KEY Point: Perfectly executing your plan is the key, not perfectly trading the stock
It is a business of being wrong- How you manage this determines your success.
Discipline Process following game plan
EGO: do you want to make money or be right? A destructive Force inside all of us.
Don’t focus on $... Focus on Process Money is the Scoreboard Scoring is a by-product of successful speculation. Focus on being the best you can be Focus on implementing sound principles Focus on implementing your plan consistently
Master one Style Multi-tasking hurts development and confidence
Master one style Master one strategy w/in that style Master one tactic w/ in that strategy within that style Develop a consistent routine (like the military. “SOP” standard operating Procedure” Become profitable first (most traders set unrealistic goals)
Trading Priorities: Preservation of Capital How much can I lose (consistent application of discipline) Consistent Returns Superior Results Have a contingency Plan for every situation before it happens
Initial stop –loss must be determined beforehand- It should always be a function of expected gain “R” When to take profits A) Into Strength B) into weakness Re-Entry Plan- some of his best trades have been from previous failures Disaster Plan
Reasons many fail to achieve superior Results
Poor selection Criteria Style Drift Failure to cut losses Averaging Down Let good gains slip or even worse turn into a loss
Seeking Action- trading is supposed to be boring
(Missed 7-10- I sent him a message to get the bullets but have yet to hear back) SACRIFICE Practice does not make perfect Conventional wisdom guarantees mediocrity You will have rotten days Position Sizing:
He has and will put up to 25% in one position His goal is to put as much capital as he can in his best ideas He will risk 1-2% of equity per trade Avg Stop/loss 4-5% Max Stop would be 10% (only breached on nasty gap down) Smaller positions if stock is thin All you have is your entry- Your stop is only as good as you are at setting it. Max Positions – 12 (unless they r small caps and he has smaller positions) In ideal situation he can have 8 positions- fully margined.
Must do best to take emotion out of play Have a plan and contingency plan He would rather lose following his plan than win outside his competency He uses no indicators: Focus only on Price, Volume and a few MA’s just for reference.
