Mark Minervini’s trading wisdoms

Mark Minervini’s trading wisdoms

 

• Being wrong is acceptable, but staying wrong is totally unacceptable. Being wrong isn’t a choice, but staying wrong is.
• Understand that you will always make mistakes. The only way to prevent mistakes from turning into disasters is to accept losses while they are small and then move on
• Concentrate on mastering one style that suits your personality. Most people just cannot weather the learning curve. As soon as it gets difficult, and their approach isn’t working up to their expectations, they begin to look for something else. As a result, they become slightly efficient in many areas without ever becoming very good in any single methodology.

Money solves all of your problems.

It is often said, trading introduces you to yourself. I was in my second year of trading when I heard that phrase. She would go on to ultimately teach me much about life and myself. The benefit of being in my early 20′s and teaching people in their 40′s and 50′s. I helped them with trading, they helped me grow up.

What that phrase means is that who ever you are that day will show up in your trading. This of course comes in varying degrees.

In many professions your emotional state may not effect your earnings or employment. In trading, a “bad” day can create a cascading effect. You lost when you should have made money. You created a bad habit. Losing doesn’t trigger the right response, etc.

A trader views the market through themselves. Now, most of the time it is little things that can be easily passed over. Human beings are always going to have to deal with things they rather would not have to. Every person has a bad day.

Money solves all of your problems, till it doesn’t. The difficult part about trading is the problems start and the money (win or loss) CAN come at different times. Think about this concept another way, a headline comes out and the market reacts to it (or it is reasonable to think it is a catalyst). Well it turns out the headline is old and everyone already knew about it. The story/money and what it bears can often come at the “wrong” or different times. You are rewarded or punished just not always easy to connect the actions in real time.

Money does not necessarily mean your actions are correct. Yes over time it evens out but some run out of money, patience, emotional currency before it corrects. They weren’t honest about who they were that day. It is prudent to always look a gift horse in the mouth. 

8 Things Really Successful People Do

1. Make Materialism Irrelevant

Fancy cars and houses are all well and good, but many foolishly focus on the byproducts of success, rather than concentrating on building sustainable success in the first place. Establish a bare minimum for your material needs, and then you can enjoy the benefits of success, debt- and stress-free.

2. Enhance Knowledge

Success comes faster to those who are open, active learners. The higher up the success ladder you climb, the more complex the systems and opportunities that are presented to you. Absorb all the information you can and if you sense a gap you can’t fill, connect with people who have the knowledge you need.

3. Manage Relationship Expectations

People in your life require time. Successful individuals attract folks, and so they have to carefully regulate the time they can spend with others. It’s hard to limit the time you share and still make people feel important. Make choices about the people who matter to you and determine how you each can get value from your interactions. Then make sure they understand your limitations so they don’t take it personally when you can’t be present.

4. Practice Emotional Self-Awareness

Not all successful people are calm and nice. In fact, many can be volatile. But most are very aware of their tempers and idiosyncrasies. They know how to use their emotions to get what they want from life and work hard to make sure feelings don’t become a detriment. Know yourself and learn how to let your emotions work for you in positive ways.

5. Commit to a Physical Ideal

Everyone has a vision of their own perfect body. They don’t have to be fashion models or athletes to be happy. But physical health is a consideration in their life and it’s a big distraction when it gets out of whack. Determine the body you believe is worth working for and set a game plan to achieve and maintain it.

6. Gain Clarity About Spirituality

There are many highly successful people like Richard Branson and Warren Buffett who don’t consider religion to be important or relevant. But they have a clear point of view as to the role spirituality plays in their life. Find your own way to be at one with the universe and be clear and deliberate in how you practice.

7. Adhere to a Code of Ethics

Really successful people live by rules. Those may not be the rules of others, but consistency is important for them to maintain power and stability. Their individual view of how the world works is the basis for how they believe people should be treated and they will defend it until their dying day. Determine your ethical lines and broadcast them loud and clear so people around you know where you stand.

8. Focus on Time Efficiency

Prioritization is a key component of success. You can’t reach your pinnacle if you are wasting time on distractions. Integration of activities frees up time for greater achievement. Spend your time on activities that are fun, enlightening and productive and soon you’ll have gained hours to reap the benefits of success.

Ultimately, really successful people live their lives by design instead of default, so if you want to be one of them, dedicate time and effort to determining the plan for your preferred future and execute that plan in a focused and consistent manner.

Method-Pyschology-Risk Management for Traders

 

METHOD:

1. I am a trend hunter I want a stock that has the potential to move 10-20  points in my favor.
2. My top pivot points for trades is the 5 day EMA  (3 & 7DEMA for NF )
3. I play the long side in bull markets primarily and the short side in bear markets primarily.
4. I go long the top monster stocks in up trending markets.
5. I never short a monster stock above the 50 day moving average.
6. I short the biggest  junk stocks in down trends, the ones that are unprofitable and made major missteps with customers and investors.
7. I like to trade with all time highs or all time lows in stocks with in striking distance.
8. Moving averages are my best indicators.
9. I never have targets, I let a trend run until it reverses.
10. My watch list for longs is the Investor’s Business Daily IBD50.
11. I use Darvas Boxes at times to trade stocks.

PSYCHOLOGY:

1. I am not trying to prove anything about myself I am only trying to make money.
2. I will quickly admit when I am wrong when a stock moves against me enough to show me I am wrong.
3. I trade my own method, I do not trade others advice.
4. If I am losing and very unconformable with a trade I get out of it.
5. I trade position sizes I am mentally comfortable with.
6. I do not try to predict the future I look for what the chart is telling me.
7. I trade the chart not my personal opinions.
8. I am not afraid to chase a trending stock.
9. I understand that I chose my entries, exits, risk, and position size and the market chooses when I am profitable.
10. I do not worry about losing money I worry about losing my trading discipline.
11. I have faith in myself and my method.
12. I do not blame myself for losses.
13. I do not blame myself for losses where I followed my rules.

RISK MANAGEMENT:

1. I attempt to never lose more than X % of my total capital on any one trade.
2. I NEVER add to a losing trade.
3. I use trailing stops to get out of winning trades.
4. I use mental stop losses to get out of losing trades.
5. I use position size to limit my risk.
6. I use stock options to limit my risk.
7. I know my biggest advantage in trading is small losses and big profits.
8. I never expose more than X % of my capital to risk at any one time.
9. I understand the market environment I am trading in.
10. I understand the volatility of the stock I am trading.

The strategy of one of the best-performing hedge fund

Norway is not what you would call a hotbed for hedge funds. Due to restrictive regulatory requirements and an almost uniformly long-only focused investor-community, there are only a handful of hedge funds managed out of Norway.

Despite this, Norwegian Warren Short Term Trading (WST) is one of the best performing hedge funds in the world. Since the fund’s inception in November 2011, its return has been 46.7% with a net 2012-return of 29.1% after fees (pdf).

WST hedge fund manager Peter Chester Warren explains how this works:


Our hypothesis is that most of what happens in the markets during a single day is noise created by orders, rumors and other temporary influences and that there is no informational value in this. Unlike our other funds, we do not try to separate the signal from the noise in WST but accept it for being just noise. … Time is instead spent on creating mathematical and statistical models meant to uncover short-term human behavior.

This is a significantly different strategy than that of most other hedge funds, which typically own assets over a period of time. WST rarely owns assets longer than a few minutes or sometimes even a few seconds.

And every day when the asset manager goes to sleep, he holds zero assets. Then, when he gets back in to the office the next day, he starts from scratch again, looking for tiny opportunities in the markets using a combination of correlations, math and experience.

If the fund was tracked by hedge fund-tracking firm SYZ—which most but not all funds are—it would have been the 10th best performing hedge fund in the world last year, according to a recent report. HSBC’s hedge fund tracking report yields a similar result. In non-hedge fund-speak, the fund is running on very low risk (the fund has a sharp ratio of 5.8 and an annualized standard deviation of 4.7%), but still providing excellent returns.

Life as a hedge fund manager is not what it once was. Back in the early ’90s, it was not uncommon to see funds with above 30% returns every year. People like George Soros and Julian Robertson offered mind-numbing returns, in some years around 100%.

Then the market got crowded. This year there are a little over 11,000 hedge funds, all chasing some version of the 11 different investing strategies (pdf). This has caused the average returns for hedge funds to drop. Last year the average hedge fund returned only 6.2%. That is down from almost 20% in the heyday 1990s.

“At the moment, the demand to become an investor in the fund is so great that we have had to soft-close it. The reason for this is that we are still figuring out what the capacity of our strategy is, so we are hurrying slowly,” Warren said.