Market Wizard Mark Minervini answers my questions.
1. You often say the individual investor/trader has a great advantage over the Professional manager. What gives the individual investor the edge?
[Mark Minervini] The biggest advantage that the individual investor has is control. With today’s technology, most traders can have the same tools as a pro. However, the individual trader has a tremendous advantage over professionals like mutual fund managers, mainly because they have greater liquidity and speed. This enables the individual to be more concentrated in a smaller list of well-selected names at lower risk because the individual can utilize stop-loss protection with little or no slippage. The individual, with a faster response time, can be more patient and strike at only the most opportune moments, which is the best advantage of all.
In my opinion, the individual investor, using the proper method, should be able to beat the S&P 500 Index every single year regardless of the market environment. You’re not running a mutual fund that must own eighty or a hundred different names, so you don’t have to be overly diversified. Thus, you can avoid the pitfalls that lead to compromises in quality. You don’t always need to have market exposure either. You can move to cash at will.
As an individual investor, free of the oversight of boards and committees, you can decide when it’s time to enter or exit the market and do so quickly because of your relatively small size. Therefore, you can concentrate your capital in a handful of topnotch names that you follow very closely. When there is a change in the picture, you can move in an instant. Speed, liquidity and autonomy are major advantages.
2. What creates explosive performance? As someone who has has demonstrated explosive returns over a long period of time, what is the real secret of explosive gains year after year?
[Mark Minervini] Not losing or I should say not losing big is the most important principle for winning big. If you get yourself in a hole, then all you do is spend your time digging out of that hole. I spend the grand majority of my time concerning myself with assessing and managing risk. If you expose yourself to good risk/reward situations, then the profits takes care of themselves.
Specifically, you should not risk more than you expect to gain on average; I call that the “Cardinal Sin.” If you’re averaging say 10% on your winners at a 50% batting average, then you obviously can’t take 10% losses or you will lose money. As obvious as that may seem, most traders hold losses beyond their average gain quite often. Incidentally, we are currently in the process of developing Minervini Analytics, an online suite of calculators and spreadsheets that will help investors track their results, conduct post-analysis, and asses and manage risk.
Even worse than letting losses get out of hand is throwing good money after bad, which is to add to a loser. You should never average losers. You should also understand that you’re not going to achieve huge returns consistently by being overly diversified; 4 or 5 names to as many as 8-12 should be enough diversification if you take acceptable risks and manage that risk. It’s better to have a small list of well selected stocks that you follow closely than it is to be spread out all over the place.
3. Stock selection is critical to success. How can investors do a better job of selecting the right stocks?
[Mark Minervini] Stock selection is indeed critical; however, it’s not nearly as important as managing risk and making good risk/reward decisions. You can pick the best companies, but if you manage the trade poorly you will end up losing money. The real Achilles heel of the average investor is risk management. Traders who do well consistently and stand the test of time, are those who understand how to put their money in a good risk/reward position. They’re not concerned with winning all the time, rather making more on winners than they lose on situations that don’t work out.
Most investors miss the whole point of trading, which is to make a profit. Most investors are too concerned with Monday morning quarterbacking and pampering their egos than they are at actually making big returns. They constantly adjust their plan based on emotions and end up frustrated and confused. This stems from a lack of defining style and objectives.
You’re not going to get the high or the low, so stop kicking yourself. If you can make more than you risk consistently you will achieve great results. You can rarely trade perfectly, but you can perfectly execute your plan.
SWSH is a good example. I bought the stock on 3-31-11 and sold it 5 days later for a 24% profit. If I held another 9 days, I would have realized an 84% gain! The point is: I achieved my goal; I made a decent multiple of my risk. Of course, I’m always looking to improve my trading: however, if I achieve my goal and make a decent gain, I have no regrets. Ringing the register and avoiding losses is how you rack up big returns. Stock selection is important, but stock selection is the easiest part of the equation.
4. Entry and exit selection is critical to success. How can investors do better job of selecting the right entries and exits?
[Mark Minervini] The only thing you have direct control over is when you buy, how much you buy, and when you sell. In order to make those decisions to the best of your ability, it’s critical that you know the truth about your trading. Study your past trades, in particular your mistakes. If you make an honest appraisal of your results, this will allow you to hone your timing. Look for common denominators in your trading; things you do over and over. Strengthen your weaknesses until you have no weaknesses. That’s how you become a champion in anything. Much of what you need to know is in the results you produce. I can look at 15 or 20 trades that a trader makes and tell you almost everything about them.
5. How can traders shorten their learning curve?
[Mark Minervini] You can shorten your learning curve by exposing yourself to good information and maybe a good mentor. The problem is, good advice is hard to find. We try to help people shorten that curve through our Master Trader Program seminar and through our daily interaction on our Minervini Private Access platform. However, even getting great advice, the one thing you cannot shorten is your experience curve; it takes time to learn anything worthwhile.
It’s important that you specialize. I know of no one who, for example, can successfully trade value in one cycle, and then switch to growth the next, long-term investing, and then day trader. Find a style and stick with it, learning all that you can so that you are truly an expert at something. Specialize on a specific approach. Once you define your style and objectives, it becomes much easier to develop and stick to a strategy and your learning curve will then accelerate.
[Mark Minervini] The biggest advantage that the individual investor has is control. With today’s technology, most traders can have the same tools as a pro. However, the individual trader has a tremendous advantage over professionals like mutual fund managers, mainly because they have greater liquidity and speed. This enables the individual to be more concentrated in a smaller list of well-selected names at lower risk because the individual can utilize stop-loss protection with little or no slippage. The individual, with a faster response time, can be more patient and strike at only the most opportune moments, which is the best advantage of all.
In my opinion, the individual investor, using the proper method, should be able to beat the S&P 500 Index every single year regardless of the market environment. You’re not running a mutual fund that must own eighty or a hundred different names, so you don’t have to be overly diversified. Thus, you can avoid the pitfalls that lead to compromises in quality. You don’t always need to have market exposure either. You can move to cash at will.
As an individual investor, free of the oversight of boards and committees, you can decide when it’s time to enter or exit the market and do so quickly because of your relatively small size. Therefore, you can concentrate your capital in a handful of topnotch names that you follow very closely. When there is a change in the picture, you can move in an instant. Speed, liquidity and autonomy are major advantages.
2. What creates explosive performance? As someone who has has demonstrated explosive returns over a long period of time, what is the real secret of explosive gains year after year?
[Mark Minervini] Not losing or I should say not losing big is the most important principle for winning big. If you get yourself in a hole, then all you do is spend your time digging out of that hole. I spend the grand majority of my time concerning myself with assessing and managing risk. If you expose yourself to good risk/reward situations, then the profits takes care of themselves.
Specifically, you should not risk more than you expect to gain on average; I call that the “Cardinal Sin.” If you’re averaging say 10% on your winners at a 50% batting average, then you obviously can’t take 10% losses or you will lose money. As obvious as that may seem, most traders hold losses beyond their average gain quite often. Incidentally, we are currently in the process of developing Minervini Analytics, an online suite of calculators and spreadsheets that will help investors track their results, conduct post-analysis, and asses and manage risk.
Even worse than letting losses get out of hand is throwing good money after bad, which is to add to a loser. You should never average losers. You should also understand that you’re not going to achieve huge returns consistently by being overly diversified; 4 or 5 names to as many as 8-12 should be enough diversification if you take acceptable risks and manage that risk. It’s better to have a small list of well selected stocks that you follow closely than it is to be spread out all over the place.
3. Stock selection is critical to success. How can investors do a better job of selecting the right stocks?
[Mark Minervini] Stock selection is indeed critical; however, it’s not nearly as important as managing risk and making good risk/reward decisions. You can pick the best companies, but if you manage the trade poorly you will end up losing money. The real Achilles heel of the average investor is risk management. Traders who do well consistently and stand the test of time, are those who understand how to put their money in a good risk/reward position. They’re not concerned with winning all the time, rather making more on winners than they lose on situations that don’t work out.
Most investors miss the whole point of trading, which is to make a profit. Most investors are too concerned with Monday morning quarterbacking and pampering their egos than they are at actually making big returns. They constantly adjust their plan based on emotions and end up frustrated and confused. This stems from a lack of defining style and objectives.
You’re not going to get the high or the low, so stop kicking yourself. If you can make more than you risk consistently you will achieve great results. You can rarely trade perfectly, but you can perfectly execute your plan.
SWSH is a good example. I bought the stock on 3-31-11 and sold it 5 days later for a 24% profit. If I held another 9 days, I would have realized an 84% gain! The point is: I achieved my goal; I made a decent multiple of my risk. Of course, I’m always looking to improve my trading: however, if I achieve my goal and make a decent gain, I have no regrets. Ringing the register and avoiding losses is how you rack up big returns. Stock selection is important, but stock selection is the easiest part of the equation.
4. Entry and exit selection is critical to success. How can investors do better job of selecting the right entries and exits?
[Mark Minervini] The only thing you have direct control over is when you buy, how much you buy, and when you sell. In order to make those decisions to the best of your ability, it’s critical that you know the truth about your trading. Study your past trades, in particular your mistakes. If you make an honest appraisal of your results, this will allow you to hone your timing. Look for common denominators in your trading; things you do over and over. Strengthen your weaknesses until you have no weaknesses. That’s how you become a champion in anything. Much of what you need to know is in the results you produce. I can look at 15 or 20 trades that a trader makes and tell you almost everything about them.
5. How can traders shorten their learning curve?
[Mark Minervini] You can shorten your learning curve by exposing yourself to good information and maybe a good mentor. The problem is, good advice is hard to find. We try to help people shorten that curve through our Master Trader Program seminar and through our daily interaction on our Minervini Private Access platform. However, even getting great advice, the one thing you cannot shorten is your experience curve; it takes time to learn anything worthwhile.
It’s important that you specialize. I know of no one who, for example, can successfully trade value in one cycle, and then switch to growth the next, long-term investing, and then day trader. Find a style and stick with it, learning all that you can so that you are truly an expert at something. Specialize on a specific approach. Once you define your style and objectives, it becomes much easier to develop and stick to a strategy and your learning curve will then accelerate.
Are you serious about your trading?
If you are serious about your trading and want to build an enduring edge the Stockbee Member site might help you. Members tell me they have tried lot of things before coming to my site and it has offered them the most extensive and detailed methods to swing and position trade.
It is only for those who want to develop their own self sufficient trading method. It is not a stock picking service. It is service for you to build your own scans and trading method to have your own daily pick based on your method.
Be warned it will take you time to learn to trade. Learning to trade is difficult art and unless you are willing to spend months or years to perfect your strategy and also develop your mental edge you are unlikely to succeed in this game. Unless you understand that no site, no service, and no mentoring is going to work.
Why traders come to stockbee?
The member site is one of the most recommended site for learning to trade by other traders and bloggers. You will see no advertising, no hard marketing, no promotions, no free offers, no affiliate marketing, no incentive to other bloggers to promote the site, no constant twits self promoting the site, no free trial and no tall claims of making you instantly wealthy, and yet the site attracts new members everyday. Members come from all walks of life and all kinds of trading size and trading styles.
You will see that many trading bloggers have been using my market timing methods, scans , stock ranking lists and chart templates. They have developed their own methods based on my methods. Many paid newsletter site recommend my site to their subscriber for learning about trading and market.
Over the years thousands of traders have been members and those who benefited from the learning talk about the site to others or talk about the methods used and that is how new members learn about the site.
What will I learn in the members site?
The members site will give you in depth understanding to develop your own trading method. The emphasis is on making you self sufficient and confident of your own trading method and style.
As a member you will learn the basics of swing trading, momentum investing, growth investing and risk management.
You will learn about Stockbee Trend Intensity Breakouts method that uses momentum based swing trading to find 3 to 5 day swing trades for 8 to 40% profit.
You will learn about Stockbee Episodic Pivots Breakout method which uses Post Earnings Announcement Drift (PEAD) to find stocks that had a game changing earnings and that are likely to rally for 3 months to 12 months.
You will learn about Stockbee Dollar Breakout method that uses momentum, range expansion and swing trading approach to find 5 to 40 dollar moves in high priced stocks.
You will learn about Stockbee Lemonade Strategy for 401k which uses market timing and momentum to invest in 401k. You will get weekly update on how I am using the strategy on our 401k to do allocation decision.
You will learn about Stockbee Market Monitor method for market timing using breadth. It allows you to avoid risky periods in market and allows you to identify market turns. It is used for 401k allocation decisions.
You will learn about Stockbee Double Trouble method to find stock with confirmed upside momentum using anchored momentum and that are likely to continue their up move.
You will learn about Stockbee Night Time is Right Time method to find news catalyst based trade ideas for short term day trade and swing trade.
You will learn about Investor's Business Daily’s IBD 200 list and how it can be used to find swing trading candidates for explosive moves.
You will learn about Telechart 2000 and how to use it effectively to scan for swing and position trade ideas and to set up your 401k strategy.
You will learn about Jesse Livermore Range Breakout, Darvas Box setup, and many other member shared methods.
You will learn how to set up your own scans, select right kind of stocks, how to set up stops, when to enter , when to exit, how much to risk, how to track your trades and all other details about trading. You will learn about developing your own methods and not relying on others for trade ideas.
The site has hundreds of videos and trading methods and variation of methods. Members help each other in developing the methods and share actively their research and finding. A collaborative spirit allows you to get input from others on your trading ideas or problems.
The site gives you opportunity to interact with some of the most successful traders and learn from them about their trading methods. It is a vibrant community with members from different background and experience willing to help each other. The emphasis is on continuous learning and up gradation of market knowledge and setup knowledge. The members range from hedge fund employees, financial advisers, active swing traders, investors and new traders.
If you are looking to develop your own trading strategy the membership site might be for you. You have to be willing to put in the effort to build your own method. There are no silver bullets offered on members site. Every method, every scan, every nuance is detailed and all possible help is offered to design your own method.
Do you have a trial?
If you are just looking for trial you are better off trying thousands of other trading sites that offer free trial or one month trial and offer you promise of riches.
It is for those who are ready beyond the trial phase and ready to put serious months or years of efforts to learn to trade on their own. It is for those who want to learn to find their own fish.
The free blog has all the details about the methods I trade and if you go through the posts highlighted in the sidebar you will learn about them.
How can I become a member?
To sign up go to www.stockbee.biz and follow the sign up process. The site uses Paypal for payment processing.
No comments:
Post a Comment