It is a well-accepted fact that to be a good engineer or a doctor requires years of training. Similarly, to be a good trader, time is required to learn the ropes of trading.
In this respect, trader Mark Minervini finds it insulting when people come up to him and ask if he could teach his trading methodology over a weekend retreat. He likens it to asking a brain surgeon, “If you have a few extra days, I’d like you to teach me brain surgery.”
Having won first place in the 1997 US Investing Championship, Minervini is well-qualified to make such an observation. Being a junior high school dropout, it was almost against all odds that Minervini achieved recognition by appearing in Jack D Schwager’s renowned Stock Market Wizards.
Minervini has shown that if there’s a will, there’s certainly a way. Like the successful traders featured in Schwager’s book, Minervini treats trading as a professional career. What sets Minervini apart from mere traders is that he trades for a living. And because of that, being disciplined is important to him. Traders fail because of indiscipline.
His determination to turn in a winner every time drives Minervini to focus unwaveringly as a trader. Initially, he was attracted to the stock market because of the money, but soon, it wasn’t all about money but more of the recognition – being the best at something. Minervini opined that money is not an issue if you’re the best; for him, being recognized as the best in the field is what counts. He felt that once he was the best, money would ‘fly in through the window.’
Minervini’s journey to the top is paved with much blood, sweat and tears. Some of the key lessons that can be learned from his career are:
- At the beginning of your trading career, it is a good experience to lose a little money rather than think you’re on a lucky streak, winning all the time. There’s nothing like having false hopes raised for no reason only to fall down with a thud later on. Trade with an amount of money that is small enough so that you can afford to lose it, but large enough so that you will feel the pain if you do.
- Manage losses tightly. By capping his losses, Minervini increased his overall returns.
- Develop a personal style of trading you are comfortable with and stick to it absolutely. Minervini chooses not to reveal his strategies as he says that his methods were developed for himself, and thus wouldn’t necessarily be a good fit for others.
- Do your own research, act on your own ideas and do not be influenced by others. To become a trader, the most important thing to do is trade.
- Have a contingency plan for every possible event, which includes how to get back into a trade and when to take profits if the trade goes in your direction.
Ultimately, what counts isn’t how often you’re right, but how much you profit on your winning trades versus how much you lose on your losing trades. On average, Minervini is profitable about 50% of the time, but he makes much more when he is right than lose when he is wrong.
Consider developing your own style today. Spend time to study the key tips of successful traders, experiment with different styles to find the one that you are most comfortable with, and stick to it.