Mark Minervini Interview - How to trade like a champion

Tuesday, Apr 17 2018 by
53
Mark Minervini Interview  How to trade like a champion

Mark Minervini loves to talk stocks. After more than 34 years as a professional trader, he’s achieved a reputation as one of the world’s best.

Part of his secret has been to stick to a strategy of swing trading growth stocks. In essence he looks for the biggest moves in some of the market’s most exciting and fastest growing companies. But there’s much more to it than just reaping big profits from trading in and out of the market.

Mark credits his success to his methodology, discipline and mental strategy. In fact, in his new book, Think & Trade Like a Champion, he goes deep on the psychological pressures faced by traders and investors, and how to overcome them. His message is that focus and risk management are just as important as good stock picking when it comes to being successful in the stock market.

When I first interviewed Mark back in early 2017, he was just finishing Think & Trade Like a Champion. It’s a follow up to Trade Like a Stock Market Wizard: How to Achieve Super Performance in Stocks in Any Market, where he sets out his trading strategy in depth. Mark says his new book is essentially volume 2 with much of the material being the information he couldn’t fit in his first book.

When we caught up again we picked up on some of the big trading questions that he covers in his new book and discussed some of the finer points of his strategy.

Mark, right at the end of Think & Trade Like a Champion there’s a discussion between you and Jairek Robbins about what you see as the most important features in the mindset of a successful trader. Why do you think the right ‘behaviour’ is so important in trading?

Well, I have a long history of attending workshops run by Jairek’s father, Tony Robbins. Jairek himself is like an encyclopedia of mental training techniques, he’s really amazing. So, it was an incredible honor and pleasure to work with him at my workshop and collaborating for that chapter in my book.

When it comes to behavior and mental control, the bottom line is that if you think you can’t do something, then you are right, you won’t be able to. The real key is that humans can only perform up to the level of their self-image or identity. So,…

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Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


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36 Comments on this Article show/hide all

abtan Tue 10:28pm 17 of 36

In reply to ricky65, post #8

Thanks for sharing this.

I noticed that the realised gains were pretty much entirely due to Frontier Developments, and as others have pointed out, £K3C formed the basis for nearly all unrealised gains.

I wonder whether it only takes a couple of exceptional holding for Minervini's method to work, and the quick ins and outs simply level everything else out?

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ricky65 Tue 10:50pm 18 of 36

In reply to abtan, post #17

abtan, I think you're right about a few stocks accounting for a large proportion of the gains with Minervini's method. I follow well known swing trader Dan Zanger on Twitter and he says that the majority of his gains came on less than 30% of his trades.

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Velo Tue 11:37pm 19 of 36

In reply to ricky65, post #18

Ricky, if you and Abtan are right then it explains Minervini's, total and utter ruthlessness in enforcing stop losses without mercy or dithering. And I think that attitude comes about when you pick a fair quantity of "losers" in your portfolio whilst waiting for the "one" to come along. For instance I must be the world's worst participant of stop losses ( run without them).

The thing is - if my portfolios were made up of overwhelming losers and hardly any winners I too would evolve into a strong advocate of insisting on stop losses. So until I read his book, you may be onto something - a system with multiple poor returns but a few that perform so well, that they more than adequately cover all the small losses and still leave a decent profit overall?

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dfs12 Wed 7:49am 20 of 36
5

"After more than 34 years as a professional trader, he’s achieved a reputation as one of the world’s best."

The article starts with this claim but doesn't qualify it. Is there some recent evidence of the outperformance of the Minervini approach? Clearly he has a large number of fans (including many intelligent investors at stockopedia ) and some people are making it work for them so there is value there. But the only evidence I can find relates to stock picking competitions won in the late 1990s. Surely there must be some stuff more recent than that?

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ricky65 Wed 12:03pm 21 of 36
2

In reply to Velo, post #19

Velo, I agree that Minervini is ruthless in enforcing stop losses. I think that's one of the keys to his success. Minervini says that over the long term he's only right around 50% of the time. That implies that around half the time he's cutting his losers off for a small loss (he says 10% maximum with average 5-6%).

I don't think you necessarily need to find just that one or a few big winners. I think most people overlook the power of compounding and think they need that one moonshot stock to get a great return. I think of that example from Minervini's book where four 20% returns compound to an 107% return.

I definitely advocate using a stop loss, at least a worse case scenario stop loss. I used to to stubbornly hold onto losers and my performance went from mediocre to stellar when I introduced stop losses.

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herbie47 Wed 12:13pm 22 of 36

In reply to ricky65, post #21

Hi Ricky,

Out of interest where would you set your stop loss on say Filta Group (LON:FLTA), say you bought it at 200p?

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mrosbiston Wed 12:21pm 23 of 36
4

In reply to ricky65, post #21

I think of that example from Minervini's book where four 20% returns compound to an 107% return.

i'm not sure this is a completely fair comparison, as you are likely to have a more diversified portfolio (10 positions or less - concentrated i know, but he does advocate a concentrated portfolio). The point is you are unlikely to compound 4 trades together at that level to achieve a return.

I do think with UK small caps you do need a few moonshots to pull up the performance, largely due to illiquidity. The average spread in my portfolio is around 300bps, so i need high returns to level that out - if i traded exactly like Minervini the only winner would be my broker.

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mrosbiston Wed 12:29pm 24 of 36
2

For critique - here are my Minervini screeners - welcome any suggestions or tweaks. Some things are slightly limited and there is still a fair amount of manual work to pick out good names.

Stage 1
https://www.stockopedia.com/screens/minervini-stage-1-293933/?display=tables#display

Stage 2
https://www.stockopedia.com/screens/minervini-2017-275938/

Power Play
https://www.stockopedia.com/screens/minervini-power-play-351948/

VCP
https://www.stockopedia.com/screens/vcp-360743/

Code 333
https://www.stockopedia.com/screens/minervini-code-33-275858/

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mrosbiston Wed 12:31pm 25 of 36
2

In reply to mrosbiston, post #24

just want to reference that some of the work on the stage 2 and Code 333 screeners was done by other posters from the original MM thread - so they deserve the credit for those.

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BH1991 Wed 1:16pm 26 of 36
3

I've created a Minervini-esque portfolio and I've implemented his methods for just over a year (not long enough, I know!). From my experience so far, I agree with the comments above, that the strategy produces a smaller number of large winners, however because you keep losses small, the strategy is profitable.

My win ratio is 39.02%

Win Ratio = (Total winning trades / Total trades taken)

However, my Risk/Reward Ratio is 1.80 !!

Risk/Reward Ratio = (Total Gains / Portfolio Value) / (Total Losses / Portfolio Value)

In other words, I lose more than I win, but when I win, I win big!

I've made 41 trades in total (16 winners and 25 losers). My average loss is 7.68% and my average winner is 21.47%. Here are a few examples of my biggest winners:

  1. Games Worskhop 96.25%
  2. Kaz Minerals: 31.54%

3. Fenner: 27.52% (this was a buyout)

5. Anpario: 21.90%

6. Burford Capital: 33.04%

7. Stock Spirits: 20.2%

8. SSP: 23.54%

I also have some big winners which are yet to be cashed in (so aren't included in the statistics) such as Future: 53.9%, Plus500: 44.9% and NMC Health: 21.4%.

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ricky65 Wed 1:53pm 27 of 36

In reply to mrosbiston, post #23

Yeah, for UK small caps where the spread can be sometimes 10% or even more, I'm looking for a bigger move than 20%.

I was alluding to bigger caps. I've had some success with shorter term swing style on smaller spread FTSE 250 stocks where I'm currently a 7%/14% average loss:average win (Last year I traded stocks such as McColl's Retail (LON:MCLS), Thomas Cook (LON:TCG), Man (LON:EMG), Senior (LON:SNR) ). I think that's closer to Minervini's style.

It's worth noting that in the USA they have tighter spreads (often 1 cent!) and also the trade fees are a lot less so that encourages a more short term approach.

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ricky65 Wed 2:02pm 28 of 36

In reply to herbie47, post #22

I have my stop at 170p (below the 200 MA). That's a 15% loss from 200p (not including fees).

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herbie47 Wed 2:09pm 29 of 36

In reply to ricky65, post #28

I see thanks, so a lot looser than Minervini. I found 10% on small caps to be too tight.

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ricky65 Wed 2:29pm 30 of 36

In reply to herbie47, post #29

herbie, no problem. Something like a FTSE 250 stock I'm never going more than a 10% stop loss. I agree that 10% is too tight for some small caps. Looking at the chart, I saw that Filta Group (LON:FLTA) bounced off the 200 MA almost exactly in December last year. The current 200 MA is apparently 171p so 170p seemed logical to me for a 15% stop. I'm sure other people would have a different analysis. I agree with Minervini when he says there is an art to trading. Of course it could hit my stop and carry on up. That's tough! In that case I would be looking to buy back in if it set up again.

Incidentally, I don't like the negative price action after yesterday's results. Was up yesterday morning but has slipped back. I'd guess that Minervini would be out already! Let's see how it goes.

I've gone up to 25% stop loss on small caps before but I think that's too much. I'd now rather pass if the stock looks too volatile for me.

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ricky65 Wed 2:32pm 31 of 36

In reply to BH1991, post #26

Some impressive results there BH! 39% win ratio illustrates that you don't have to be right more often than wrong to win at this game!

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clarea Wed 9:10pm 32 of 36
1

In reply to ricky65, post #31

Interesting stuff Ricky can I ask what was you aha moment when you went from average to above average and any red flags tips that you use stocko for to weed out dubious stocks.

Thanks Andy

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martin576 Wed 9:20pm 33 of 36
2

FYI Minervini is doing a free online webinar on May 2nd
https://mpa.omnovia.com/register/77801524015727
For some reason the page didn't open with Safari but did with Chrome

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PhilH Thu 12:01am 34 of 36
9

The posts here have made me revisit my own performance as I was surprised by quoted win rates and the suggestion that the super performance of a couple of stocks drove big returns. Whilst big wins can drive super performance I dont think that you need to have that to get very good returns.

Analysing my own trades from my fantasy fund (which matches personal purchases) since feb 2013 I have made 143 trades, with 20 of those positions still open.

Of the closed trades, 55% are winners giving an average return of 19%, average gain 45%, average loss -12%
Of my open trades, 75% are winners giving an average return of 24%, average gain 34%, average loss -5%

Overall I have 59% winners with an average return of 20%, average gain 43%, average loss -12%

In terms of the spread of returns ...


So 1 in 8 - 9 of my stock selections double in value, 1 in 5 increase by in excess of 60% and over 50% gain more than 20%.

I think using price momentum/price breakouts as an entry point allied with a good selling strategy to limit losses serve to maximise the opportunity to maximise my win ratio and then make that pay by letting winners run and cutting losers.

EDIT : apologies lost my table data

Professional Services: Sunflower Counselling
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PhilH Thu 12:03am 35 of 36
7

In reply to PhilH, post #34

< - 60%
< - 40%
< - 20%
> 20%
> 40%
> 60%
> 100%
> 200%
> 300%
0
1
9
45
26
16
10
3
1
0%
1%
11%
54%
31%
19%
12%
4%
1%
Professional Services: Sunflower Counselling
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ricky65 Thu 9:15pm 36 of 36
1

In reply to clarea, post #32

Andy, glad you found it interesting. It's hard for me to pick one "aha moment" as there's been many, and I'm still learning. If I had to pick just one I'd say cutting losers and honuoring stop losses. In the next few days I'm going to create a new post with all my musings as a Minervini influenced trader.

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About Ben Hobson

Ben Hobson

Strategies Editor at Stockopedia. My goal is to help private investors learn and invest with confidence through the articles, ebooks and other resources we publish on site. I also occasionally bunk off to interview famous investors at expensive restaurants. I studied History at Aberystwyth University, trained as a journalist and covered business news and corporate finance before settling in as one of the first staff members at Stockopedia.  Away from Stockopedia I'm a mountain bike junkie. more »

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