One of my goals this year was to get back to Trading. Honestly, it was a heck of a challenge for me. No reasons for it, I just have not prioritized it yet until this September.
To refresh and motivate me back again with Trading, I went on to reading Mark Minervini’s book: Think and Trade like a Champion which is recommended by some guys I know from Investagrams (Javi Medina, RedViper). Mark Minervini is one of America’s successful traders, averaging 220% annual returns per year trading the US Markets.
Contrary to popular opinion, I read this second book of his first, rather than the first one: Trade like Stock Market Wizard. I’m just too itchy for this 2nd book as they say it was the best. Though there were unfamiliar terms, such as the SEPA System, it didn’t hinder me from understanding the concept I was learning.
My notes & golden takeaways.
PSYCHOLOGY & MINDSET
- Winning is a choice
- If you don’t accept this, then by default, you must believe that you have no control over your destiny. What’s the point of even trying to succeed just to see to get lucky? Until you accept that, you won’t realize your full potential and you’re a defeated winner.
- You can accomplish much more than you think!
- Champions live each day with that goal in focus.
- Feed the builder in you, not the wrecking ball.
- Why Mark read the books of his role models?
To get in their heads & think as they did. Before you can master a concept, you must TRULY own the language/knowledge. Once owned, you could go beyond them.
- Embrace the process
- Nothing is missing inside of you from “getting it”.
- The more hours have given = the greater you will be!
- Not just the hours but the persistent intention to improve by examining your results and tweaking it!
- Focus, Specialize, Prioritize, and most importantly Take Action!
- Have too many goals? Try one goal at a time.
- Spreading yourself too thin = mediocre/average results
- Mastery requires sacrifices, something must come first! Make a list and act on it accordingly. Minervini trains 12hrs/day.
- The longer you put off committing to something, the easier it is to delay it even more. Counterpart: ACTION.
” Better do something imperfectly than do NOTHING flawlessly. “
- Go beyond the comfort zone
- Comfortable = less, Uncomfortable = more
- The mind once stretched by a new idea never returns to its original dimensions – Ralph Waldo Emerson
- Achieve the 3rd stage of knowledge which is Knowing = experienced truth, then LEARN from it.
- Always go with a plan
- Without a plan, you can only rationalize and be gripped by indecision at the moment you need to act swiftly.
- By being mentally rehearsed, you will eliminate panic and heightened emotions that would cause you to make mistakes.
- Key Elements of a Trading Plan
- An “entry” – buy decision trigger and reentry criteria
- Stop-loss – risk-management when it goes against you, where will you get out?
- Selling at a profit – how to protect your profits? Sell into weakness or strength?
- Position Size – portfolio allocation (%VAR) and when to reallocate them?
- Disaster plan – internet down? gap down? what’s your back-up system?
- Approach every trade risk-first
- Always apply risk-management. Define your stop-loss, capital stop-loss, and trail-stops.
- At least 2:1 Risk-Reward Ratio
- Suggested: if losses are 1%-2.5% of your port, CUT without question!
- Don’t go all-in but don’t also diversify too much. 4-5 stocks at a time only. Start with a 6.25% position, then you may add another 6.25% after confirmation until it’s 25% of your port size.
- Know the truth about trading
- Take control by understanding the math behind your trades
- Keep track of your trading. Journal every move. Post-analysis of your results.
- What’s your batting average ( # of Winning Trades )
- Compound money, not mistakes.
- Don’t buy more on losing stocks. They are bargains for a reason. Buy only winners. Follow what Institutional players are buying.
- 50/80 Rule -> Once a market leader is at the MAJOR TOP, there’s a 50% chance that it will decline by 80% & an 80% chance it will decline by 50%.
- Careful on Differential Disclosure -> when fundamentals don’t match price action.
The book ended with an interview with Performance Coach Jairek
I’ll end this here, I’m spilling too much already! Haha. I wish I’d read this sooner. Highly-recommended book for every trader out there and it certainly deserves to be on your bookshelves. Thank you, Mark!
On to my next, Minervini book -> Think like a Stock-Market Wizard.