Mark Minervini’s Trading Strategy: 8 Key Takeaways

Updated: 6 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)?

Mark Miniervini’s Books

A Real Trade Mark Minervini Took

Mark Minervini’s Trading Strategy Key Takeaways

Bottom Line

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.

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, new users can usually grab a TradingView free trial to get access to one of the best charting tools available.

A weekly chart of the ETF $XLE on Tradingview.

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$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 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.

Mark Minervini's Net Worth

As of 2023, Mark Minervini's net worth is estimated to be $30 million.
Mark Minervini's annual salary is estimated to be about $3 million.

FAQs

What is Mark Minervini's trading strategy?

A: Mark Minervini is known for his trading strategy focused on fast-moving growth stocks. His approach involves implementing a concrete entry and exit strategy, along with advanced technical analysis techniques like the VCP. Minervini emphasizes the importance of cutting losses quickly and letting winners run, aiming to capture significant price moves in selected stocks.

What type of trader is Mark Minervini?

Mark Minervini is a renowned trader who primarily focuses on swing trading. Swing traders aim to capture short to medium-term price swings in stocks or other financial instruments. Minervini's trading style combines fundamental and technical analysis to identify stocks with high growth potential and favorable chart patterns.

Is Mark Minervini a swing trader?

Yes, Mark Minervini is considered a swing trader. He seeks to capitalize on short-term price movements by identifying stocks that exhibit strong upward momentum. Minervini's trading approach involves holding positions for days to weeks, aiming to capture significant gains during favorable market conditions.

What is the most profitable stock trading strategy?

It's important to note that the profitability of a stock trading strategy can vary depending on market conditions and individual trader preferences. While Mark Minervini's strategy has been successful for him, there is no one-size-fits-all approach. Traders should develop strategies that align with their risk tolerance, trading style, and market expertise.

What are some key takeaways from Mark Minervini's trading strategy?

Some key takeaways from Mark Minervini's trading strategy include:
Emphasizing the importance of risk management and cutting losses quickly.
Focusing on stocks with strong earnings growth potential and positive price momentum.
Utilizing technical analysis techniques to identify favorable chart patterns and entry/exit points.
Incorporating a systematic approach to trade selection and position sizing.
Continuously learning and adapting to changing market conditions.