Mark Minervini’s Risk Management Wins The 2021 U.S. Investing Championship With A 334% Return

Mark Minervini is a well-known swing trader with 40 years of trading experience. Mark rose to the spotlight in the mid-1990s when he turned $5,000 into $2 million. In 1997, Mark won the U.S. Investing Championship with a 155% return proving his effective trading strategy.

Mark Minervini wrote “Trade Like a Stock Market Wizard,” “Think & Trade Like a Champion,” and “Mindset Secrets For Winning,” and educates aspiring traders through his Master Trader program and Private Access mentorship. As an educator by heart, Mark aims to help traders specialize in developing essential trading skills.

Although 2021 brought many challenges to growth stock traders, Mark sought to prove the validity of his timeless approach and won the U.S. Investing Championship with a 334% gain.

This blog dives into Mark’s system to achieve consistency throughout any market, touching on mindset, routines, risk management, and progressive exposure, and it provides multiple trade reviews.

Risk First – a Timeless System

The successful system that Mark Minervini developed can be applied to every unique market. Although the market and leadership stocks change over time, the system stays the same by simply adapting to the current trading environment.

By assessing what he is achieving to the upside, Mark is able to adjust his timeframe while focusing on keeping his risk tight. Understanding he can’t control the upside, Mark insists on minimizing the downside risk by adjusting his stops accordingly.

If your normal stop loss is 5% and you are not getting larger gains to offset the risk, then something has to change. You can control where you sell. In a weak market, make adjustments and take quicker profits and smaller losses.

Risk Management

To make considerable returns, Mark is using leverage and large position sizes. This approach is extremely risky, requiring concentration and timing with defined risk management parameters.

When trading with such large open risk, Mark monitors the markets closely and quickly acts when the stock goes against him. With a leveraged position, Mark will tighten his stops and demand a gain immediately intraday when the trade is placed.

Once the stock is up, Mark locks in gains. The sacrifice is losing out on the longer-term trade.

By locking in gains quickly, Mark solidifies smaller wins on sizeable positions but will miss the longer move. This system capitalizes on compounding returns instead of holding positions through intermediate-term corrections.

Fundamentals

Mark is primarily focused on only three fundamental characteristics of any stock. Stocks that show positive fundamental traits make Mark’s larger watchlist.

• Sales refers to the total revenue a company makes. Analyzing Sales Growth can illuminate potential growth.
• Margins measure profitability by comparing income to revenue. Looking at profit margins provides insight into how efficiently a company can convert sales to profit.
• Earnings are the total profit a company makes after all expenses. Assessing Earnings Per Share offers perspective into potential stock performance.

Routines

The majority of Mark’s routine is all stock work. Instead of relying on the indices to dictate the movement of stocks, Mark takes the bottoms-up approach by screening through stocks to get a feel for how the market is performing.

• Lean bullish when many stocks are setting up and breaking out of bases
• Stay bullish when stocks continue into new highs
• Lean bearish when there are few stocks set up
• Stay bearish when breakouts fail and stocks continue making new lows

By analyzing the movement of the individual stocks, Mark can easily determine his level of aggressiveness for the next trading session. Based on the overall price action, Mark then categorizes stocks into three lists.

• Buy Alert – In position to be bought
• High On Deck – Close to being bought
• Watchlist – Buy candidates but not close to being bought

Visualization For a Prepared Mindest

Every morning, Mark prepares for the trading day by visualizing how he will respond to the current market. Mental rehearsal allows Mark to plan how he will react to any gaps up or down, news events, stops getting hit, or buy alerts triggering.

If the stock doesn’t meet Mark’s criteria and gets away from his buy point, he will maintain discipline and leave the trade alone. With all the work done the day before, Mark is fully prepared when the market opens.

Enter With Positive Feedback – Sell Into Strength

Mark practices progressive exposure by using test positions to get a feel for the market. The initial positions, when small, are designed to obtain feedback from the market.

When the smaller trades begin to work, Mark will become more aggressive with position sizing and the number of trades. When the initial positions are getting stopped out or don’t get any traction, Mark will wait for conditions to improve.

Act quickly when things start working for you, just as you would when they go against you.

Once the stock starts going up, Mark will start selling into strength. The stock may keep going higher, but he is always trying to sell out as the stock is making new highs.

This will cut down on the volatility of your equity curve. By selling into strength, you are consistently selling when your equity is at new highs.

Improve The Worst-Case Scenario

Mark Minervini preaches that “improving your worst-case scenario” is a $1 million statement.

After a stock starts moving up, Mark wants to protect his break-even point and finance his risk. Once the stock provides positive feedback, Mark looks to improve his worst-case scenario by:

• Moving his stop up to break even
• Selling half when the stock is at a gain equal to the original stop

The best way to manage a trade is to sell half when the gain is double the original stop and move your stop up to break even. The goal is not the upside but to limit the downside.

Chart Analysis

Mark defined the 2021 market theme as “Pop And Drop.” After a strong 2020, Mark now noticed that when stocks were breaking out, they would move up for a couple of days and then roll over and fail to make new highs.

Symbol: SCHW
Company: The Charles Schwab Corporation
Date: October 15, 2021

Click on the chart above to make it bigger.

Mark entered SCHW on a gap-up after a “squat reversal” while watching the open. Keeping tight risk, Mark would exit the trade if the gap reversed lower.

Symbol: PYPL
Company: PayPal Holdings, Inc.
Date: June 9, 2021

Click on the chart above to make it bigger.

Although PYPL closed on the lows after breaking through a range, Mark stayed in the trade as his original stop wasn’t violated. The next day, it opened lower but quickly found strength, confirming Mark’s thesis. Profits were locked in as Mark sold into strength.

Symbol: NUE
Company: Nucor Corporation
Date: August 9, 2021

Click on the chart above to make it bigger.

NUE clearly displays how Mark viewed the Pop And Drop theme for 2021. After NUE broke out of a traditional base, it never found follow-up strength and eventually rolled over.

Define your Style With Post Analysis

The main mindset Mark has is preparation for every eventuality. Studying and evaluating what went wrong and what went right uncovers areas for improvement to refine and then make a new plan.

The key to maintaining a prepared mindset is constantly conducting post-analysis. Routinely study successes and failures to know the truth about your trading at all times.

Knowing Your Averages

Success in the markets is a mathematical equation. You must know your average gain, average loss, and batting average (win rate). Your personal averages must align to ensure your wins outweigh your losses.

You only have control over four moving parts

• What you buy
• When you buy
• How much you buy
• When you sell

Understand you can not control how much the stock goes up, but rely on position sizing, timing, and risk management.

Knowing your averages will assist in defining your stop. Once you know where you will exit the trade when it works against you, you can plan where to take a profit as it correlates to your risk.

Become A Specialist

Achieving superperformance in the stock market takes time. Temper your expectations but more importantly, believe in yourself when developing a strategy that fits within your personality.

Keep your risk tight to minimize downside losses. Sell into strength at a multiple of your risk to ensure your averages are asymmetrical to the upside as you seek to improve your worst-case scenario.

Routinely screen to stay on top of current market themes while finding the outperforming stocks with growing fundamental metrics.

Conduct post-analysis to look for patterns in your strengths and weaknesses. Aim to reduce your trading flaws in weak market conditions and maximize your potential in stronger environments.

Acknowledge how the stock moves after you buy it is out of your control. Focus on what, how much, and when to buy, but more importantly, when you sell.

Be prepared for any market scenario. Visualize potential price movements, then act.

The people who are great champions do one thing well. Concentrate and commit to a strategy that resonates with you.