Mark Minervini’s Trading Strategy: 8 Key Takeaways
Updated: 5 days ago
Stock market wizard Mark Minervini’s trading strategy won him the U.S. investing championship.
Table of Contents
Mark Minervini’s Trading Strategy
What is the Volatility Contraction Pattern (VCP)?
A Real Trade Mark Minervini Took
Mark Minervini’s Trading Strategy Key Takeaways
Mark Minervini’s Trading Strategy
Mark Minervini is known for trading fast-moving growth stocks while implementing a concrete entry and exit strategy. Minervini believes that timing your trades is critical and recommends you combine technical analysis, fundamental analysis, and risk management.
Mark Minervini is famous for trading the volatility contraction pattern (VCP). The VCP pattern was popularized by the famous traders Jesse Livermore, William J. O’Neil, and Richard D. Wyckoff. He is also known as one of the stock market wizards mentioned in Jack Schwager's book Market Wizards: Interview With Top Traders.
Mark Minervini’s trading strategy allowed him to win multiple U.S. investing championships. In 1997, Minervini put up $250,000 of his own money and generated a 255% annual return winning the U.S. Investing Championship. He entered again in 2021, this time in the $1,000,000 category, and won with an audited 334.8% annual return.
What is the Volatility Contraction Pattern (VCP)?
The overall premise behind the VCP is that stocks in long-term trends will eventually consolidate as investors take profit and more stock is accumulated by buyers. This pattern applies across any time frame, even for day traders, so it is worth learning regardless of your trading style.
However, Minervini warns against mixing up different styles of trading. Instead, he recommends that you pick one type and become a specialist in it. For example, some traders prefer day trading while others prefer swing trading.
Mark Miniervini’s Books
If you want to learn more about Mark Minervini’s trading strategy, you should read his books. The books cover his strategy in-depth and explain how he used the VCP to win multiple U.S. investing championships.
Trade Like a Stock Market Wizard: How to Achieve Super Performance in Stocks in Any Market
Think & Trade Like a Champion: The Secrets, Rules & Blunt Truths of a Stock Market Wizard
Momentum Masters: A Roundtable Interview with Super Traders with Minervini, Ryan, Zanger & Ritchie II
Mindset Secrets for Winning: How to Bring Personal Power to Everything You Do
A Real Trade Mark Minervini Took
On January 4, 2022, Minervini tweeted that he bought the ticker symbol $XLE the day before. After he purchased, the ETF surged in price, rallying over 70% when it reached its peak. Minervini based this trade on technical and fundamental reasons, so let’s analyze what Minervini saw.
$XLE’s technical setup
In the weekly chart below, I have circled where Minervini entered the trade. $XLE is a perfect example of a VCP because the ETF was trending up, making higher lows, and breaking out of a consolidation phase.
The trend is confirmed by the green cloud formed on the Ichimoku indicator on the chart below. Minervini probably could have waited for $XLE to break out of this consolidation completely, but if the trend reversed, he would stop out anyway.
If you want to begin charting like a pro, you can grab a TradingView free trial to get access to one of the best charting tools available.
Image from TradingView
$XLE’s fundamental reasoning
The ETF $XLE follows companies in the energy and oil sector. At the beginning of 2022, there were talks about Russia invading Ukraine and inflation concerns. Both of these fundamental reasons are bullish for the energy sector.
Minervini took this information, combined it with the technical setup on the chart, and decided that $XLE and energy companies were a great opportunity. He was right since the stock has continued up after he bought. At this point, he can set a stop loss in profit and let the trade ride.
Mark Minervini’s Trading Strategy Key Takeaways
1- Manage your risk
Mark Minervini always recommends cutting your losses quickly and respecting your stop loss. Before you get into a trade, you should know when you will bail out if the trade goes south.
2- Never average down
If a trade is going against you, Minervini does not recommend that you try to salvage it. Instead, Minervini suggests that you average into trades when they move up and use a stop loss when the trade goes against you.
3- Lock in profits
According to Minervini, one of the worst things you can do as a trader is let a significant profit turn into a small loss. When you have a position in profit, you must watch it closely and take profit as soon as possible.
4- Protect your breakeven point
Minervini is a fan of protecting your breakeven with stop losses. Ideally, you own a stock that rises in value and set a stop loss above your entry price, locking in a guaranteed profit.
5- Don’t try to buy the bottom
Mark Minervini bases his trades on technical analysis, but this doesn’t mean he is attempting to buy the exact bottom. Minervini instead waits for stocks to be in confirmed uptrends before buying.
6- Concentrate your portfolio
To generate outstanding returns, you must concentrate on the best trades available on the market. Minervini does not believe in diversification because it keeps you focused on your position.
7- Time your trades
While many investors preach to buy and hold, Minervini believes entering trades at the right time is crucial. When a technical setup and fundamentals look amazing, it is the right time to enter.
8- Only trade the best names
Since Minervini recommends you concentrate your account, you should only be trading leading names. Leading names are the most likely to continue their uptrend, especially if they are solid fundamentally.
Bottom Line
Mark Minervini is a trader with audited returns and has proven his success. Regardless of your trading skill level, you can learn a thing or two from Minervini’s process. If you want to start learning from Mark Minervini, he has a service called Minervini Private Access that you can join.
Mark Minervini's Net Worth
As of 2022, Mark Minervini's net worth is estimated to be $30 million.
Mark Minervini's annual salary is estimated to be about $3 million.
How to Learn More About Stock Trading Strategies
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