everyone welcome back to the market chat my name is richard moglin joining me today is a very special guest mark minovini mark is a veteran trader with over 35 years of experience on wall street and over his career he has yielded incredible performance including a five and a half year period where he averaged a 200 220 percent annual return with only one losing quarter he’s also the author of many of my favorite trading books including trade like a stock market wizard thinking trade like a champion and mindset secrets for winning as well as being featured in market wizards by jack schwager finally he is the us investing champion of 1997 and currently leads the 2021 money manager division with a gain of 111 percent in just three months mark thanks so much for being here welcome to the show hey thanks it’s uh we finally got together yeah it’s great to have you on um and to start things off uh i think i’d like to focus on mindset and kind of the the steps you’ve taken to become the trader you are today so um you said in in previous videos that took you about six years before you’re profitable what were some kind of aha moments that really changed things for you and your trading well i mean i had a lot of aha moments every time i blew myself up and had big problems in the market which were many you know in the beginning because i had no idea what i was doing i had no mentorship i had very little money it was a very challenging environment for me um so what aha moment was reading how to trade in stocks by jesse livermore that’s one of my favorite books that sort of crystallized everything for me i really that little book was was a big uh what was a big turning point for me when i had some years of experience and then read that book and was able to realize that what i was doing uh in real time in a modern day time frame was exactly what jesse livermore was doing back in the 20s and 30s and it really gave me a belief that what i was doing was timeless and to take personal responsibility and then i knew if i just put in the time and got the expertise and the skill that eventually it would pay off absolutely and that transitions well i was going to ask you what’s what are some books uh historical traders that you’ve studied or other resources that really forged the trader you are today and helped you develop your own style well i probably people have heard me say this many times but i have over 4 000 books in my library and i’ve read pretty much every one of them but i would say that there’s a handful that i’ve read you know 40 50 times each so what i did early on was i found some books that i you know really thought were important and read them over and over and over and over until i really internalized the information that’s what i would suggest somebody do with my books you know read them because my books are really a distilled version of a lot of previous a lot of previous works and i’m sure they’ll be you know even more distilled down the road with other people who write books so i would rather you know recommend that somebody reads 10 great books 50 times each than 500 books because you know first of all there’s not that many there’s not that many great books and on top of it you know if you’re reading 500 books you’re reading probably you know four or five hundred different styles and you really want to hone in on a particular style and perfect it uh pick that style and then uh really really perfect the the techniques by internalizing whatever you know that that style needs absolutely and and anyone who has read your books realizes that establishing discipline and following rules um very strictly is a central theme of yours um how important are these things to achieving super performance well it’s the most important you know without rules and without emotional discipline it doesn’t matter if you have the best strategy in the whole world if you don’t follow it and most people don’t follow a strategy even if you know even many you know we’ve had thousands of people that have learned from me over the years coming to my seminars and hundreds of thousands if not more that have read my books of course but uh you know how many of those people actually follow and and and are disciplined a small percentage but it’s anyway it’s no different than how what percentage are great athletes or great doctors or great trial attorneys you know it’s the same in any profession so uh the discipline is the most important as a matter of fact i think i was speaking with uh a good friend of mine from canada the other day and he said to me he said i have to say he said i i think you’re the most disciplined person i i know in in my whole life i don’t think i’ve ever met anybody that’s more disciplined um i would say mark ritchie you know our own mark ritchie is he’s one that’s right up there with me i have to say you know if there’s anybody that i’ve seen that’s you know as disciplined as i am he’d be probably the next one that i know very cool and um and perfect let’s let’s pivot now to your trading strategy and routines well actually before i want to get to that um you talk a lot about priorities in mindset circuits for winning how should new traders who want to achieve super performance structure their goals and also their priorities oh look if you when you look at your life you know i’ve i’ve been around for 56 years now and i look back and i might not have realized this when i was 20 but at 56 i realized that all the things that i have and the things that i’ve accomplished are the things that i put at the top of my list for priorities um and my priorities are different now than they were 20 25 you know 30 years ago my priorities are more family oriented now my wife and my my daughter and my health you know uh but if you were to ask me what my my priorities were you know when i was 25 or 30 it would have been money and success and right stock trading was you know absolutely the top of being the best trader that i can be so you know you’re gonna what your life is going to end up going right where you know as sokoto said everybody gets what they want on the market well that that’s that’s what i’m talking about with priorities what you prioritize is exactly what you’re going to get your your life’s results really will come right in the order of your priority so you know if you want to be a great trader it’s got to be at the top of your list you know you don’t get a gold medal at the olympics by being a part-time uh you know olympic athlete uh without having it be your upmost biggest goal and the thing that you’re striving for every day and pretty much you know gets put above everything for that particular uh time period while you’re while you’re uh you know uh training for the gold medal so the same thing with business and anything makes sense and uh getting into your trading strategy a big part of that is the volatility contraction pattern you’re known for the vcp um but a lot of people i think just see it as a chart pattern could you explain what’s actually going on behind the scenes when it comes to supply and demand that creates that pattern it’s not just something to memorize it’s something to interpret on the chart yeah it’s something to understand and i never you know dreamed that this vcp was going to take off like it has it really has become a vernacular in itself um and i’m really happy for that because when i the reason why i developed it was when i started teaching others and and i was having a hard time explaining what they needed to look for and i was finding that a lot of people were looking at the the o’neill work and looking for cup with handle patterns and then of course i developed these cheat areas that are sort of like coupled handles with a low handle and to explain them i drew this vcp and showed how the tightening in price action would develop so the vcp is really a characteristic right a pattern um i use it in virtually every trade that i make i it has they have vcp characteristics um so it’s the it’s not the cause it’s the effect that’s right people have to understand even any chart pattern people think because you know everybody’s looking at the cup with handle or everybody’s looking at whatever a wedge or you know whatever some of these names are i use my own vernacular now i don’t even know the the terms of like some of the standard patterns somebody asked me about a triangle the other day i don’t even know what a triangle is i guess it represents a triangle so you know you have to realize that it’s not because the chart is forming that it works it that’s the supply and demand that’s forming it that and that’s going to be there under any circumstances in an auction marketplace so that tightening and price from left to right and when you get on the very right side of the chart and it gets very tight the volume comes down what it’s telling you is that supply has stopped coming to market and by looking at the chart and seeing where the overhead supply is to the left by the depth of the base and the length of the base and how tight it is on the right side and the volume which it’s not as easy as just as i’m you know pointing it out right now there’s there’s a lot of nuances if you get it right you get a pretty good idea of when there’s no supply in the stock and that makes the stock vulnerable to move very sharply because supply and demand if there’s no supply and you have demand and you’ve done your homework and there’s institutions that have an appetite for that stock well then from that very point it can move fast and that’s why you see a lot of these stocks they’ll explode coming out of these tight areas and that that’s the same if you went back to 1918 you’d see the exact same price action and we’ve looked at charts to into the 1800s absolutely nothing has changed the same exact things happening today has happened then and the same thing will be happening 100 years from now perfect and before we get a little bit more into the technicals um i want to ask you because i think this is a big part of actually becoming a professional trader and taking responsibility um could you walk us through your daily routine and how you set yourself up for success um during the trading day including getting your mind right as well as organizing your the stocks you own the stocks on your focus list as well as your ready list well after 37 years of doing this i got it down pretty pretty much now so it’s it’s not super exciting or super complex it’s done very quickly you know when i get up in the morning i usually spend uh five or ten minutes just laying staying still and going through i do breathing exercises and while i’m breathing um i i go through my day my routine i check the mark i usually turn the tv on i see if it’s you know if the market’s blowing up or if it’s you know maybe maybe it’s going to be down huge or it’s going to be up big and if there’s a you know if it’s let’s just say it’s going to be down huge so i immediately start going through okay my process for you know probably going to have some stocks are going to be gapped down how am i going to handle them what if you know i have something that is you know moves down really big on me i just start going through sort of the day of what potentiality you know what can happen and how i’m going to deal with it and just sort of visualize you know dealing with that day then i get up and i and and i go now all my work is done the night before so any stock work you know when i go to sit down at my desk all the positions that i’m looking to buy uh or or maybe stocks that i want to sell into strength or better profits i’ve already figured that all out the night before so now it’s just a matter of executing i go see if you know those stocks uh cooperate properly if they move to the pivot points but uh i’ve done all that work so now i just go check my check my watch list organize everything and i’m ready to go because like i said all that work has been done before the open and what does your weekly routine look like how do you search for ideas and vcps um i guess and also do you take into account the fundamentals as well as the technicals beforehand and what are some non-negotiable criteria i know you have the the trend template that you talked about in your books uh could you talk a little bit about all of that okay so that’s a bunch of things so um on the weekend i do my biggest work i run a lot of screens and i do a lot of work on the weekend um so i work both on saturday and sunday um usually one day heavier than the other depending um and you know during the week i’m still searching each day intraday um and it depends if i have a whole bunch of names that you know came up on the weekend work then i might not search as hard during the week if it’s something that’s really sparse then i might if there’s really not many ideas and then i real i know there’s not much to look for so that that will ebb and flow um but as far as you know non-negotiables you’re going to want the stocks in an uptrend and the reason why you talked about the trend template in market smith they have it’ll say minority there’s a section that has my trend templates three trend templates the minervini trend templates the reason why you want to be in that uptrend is because when you go back and you look at the biggest winning stocks the stocks that made the big moves 98 of them were in stage 2 up trends 98 of them met my criteria in the trend template so if you’re going to find a big winner you know you want to be in the 98 club not the 2 percent club right you want it 98 so if you’re if you’re operating in a downtrend well then there’s a based on history you’ve got a two percent probability of being in a big winner but people want to buy it before it moves up and they think they that that’s necessary but it’s really not because before the stock makes a big move it’s in an uptrend absolutely and and in terms of fundamentals i guess uh we’ll point people to your book because you talk about that a lot um but could you give some tips for people um who are looking for those vcps and they’re going through the charts you obviously have developed your eyes so you can quickly probably within seconds um go through a bunch of stocks and see it but what are some tips for people to find vcps if they’re newer to this the tips are to you know you have a lot of examples in my books so you go to the books and you take a look at those examples and then look for stocks that look like that and then build your own build your own model books you know look for stocks find the stocks that have those patterns and then you know the ones that worked out the ones that didn’t work out you make you make copies of those you maybe put them in two separate uh piles and you start analyzing them and taking a look at what works and what doesn’t work but you start off with some good you know some good precedence of winners that came from low-risk entry points uh for you know maybe uh uh o’neill’s book i believe these weekly charts so that might be for a little bit longer term investors but to get really specific and pinpoint my book has a lot of uh charts there from the daily perspective and then of course if you’ve gone to you know my workshop you have a workbook and that’s where you’ve got there’s uh four or five hundred pages there and hundreds of examples so you’ve got those precedents and and and that’s the that’s the starting point that’s where i started i started with you know looking at the the best winning names and then seeing uh backing into current names that uh you know that that look like those names i know you asked about fundamentals before fundamentals are i’m always looking for the fundamentals but i’ll never invest in a stock just because of fundamentals it has to have the technicals right so has great earnings great sales great margins great story you know fundamentals are great great management uh return on equity but the stock’s in a downtrend i’m not buying it so but on the other hand stocks in an uptrend has no fundamentals you know or when i say fundamentals reported fundamentals right maybe they’re showing losses right no sales losses but it’s a biotech company well 75 80 percent of biotechs don’t have earnings so that’s not a situation that you would ignore now you’re going to be trading off the chart you’re looking for very high relative strength high alpha names you’re looking for you’re looking at the the fda approval process things like that so you have to know the category that the company’s in and then you know what fundamental driver to look for and again in my first book there’s there’s no fundamentals in my second book my first book has a pretty big section on fundamentals perfect and and in terms of uh fundamentals a little bit do you also look for group moves so if a stock is setting up with the vcp does it add to your conviction that multiple other stocks within that sector or industry group are also showing signs of accumulation accumulation and are in stage two up trends yes and no so and i’ll tell you why so first of all you’re in a you’re in a bear market and you start turning up off the lows right and you’re looking for group action right you’re trying to get some confirmation well sometimes you’ll get the very cream of the crop uh will will set up and take off and they’ll and that’s why they’re called leaders they’ll lead and by the time you get to the group and you see that the group’s doing well the best stocks are long gone and this is what happened to me in the 80s and somewhat in the early 90s when i first started getting this down i was looking at the market saying okay wait till you get the follow-through day look for you know good action in the market then look for the groups and then look for the best stocks in the group i was always missing the leaders i very seldom had leader i was buying lagers all the time the leaders were extended you know either i was buying extended leaders or i was buying laggard so i said why am i keep missing these stocks how come i don’t see them so then i flipped it completely around and i said i’m going to go stocks group market stocks lead me to the groups and when stocks are acting well and we’re seeing groups working we know it’s a healthy market and that’s when i started grabbing all the leaders and had that that big run that you’ve talked about that five year run was based on completely flipping the script and during that correction are you running any specific screens or are you just looking at every stock that passes through your trend template well the trend template is just a qualifier that’s just the first criteria so that’s not the all the criteria but that’s that’s a that’s what i call a qualifier non-negotiable criteria has to meet that criteria um so you know i’m looking for stocks now it depends again if let’s say we’re starting a new you know have a bear market starting a new bull market well then i’m going to look for the highest relative strength names stocks near new highs stocks that have held up the most stocks that have rebound the fastest those type of names now let’s say we were in late stage in a market and we’ve been in a bull market for a couple years and we have a six-week correction well in that case i might run a six-week relative strength and see what held up the best during that six weeks that’s what i call a utility screen so you have certain you know it you got to think of it sort of like uh you know you’re a builder a carpenter right you’ve got a screwdriver a hammer drill you’ve got different tools you got to know when to apply those you’re still building a house you’re still a carpenter but you have different tools and tactics for different parts of the job perfect i i think that’s well said and um getting actually down to the buy point let’s talk about the the actual pivot point um could could you define that and uh talk about what you’re looking for in the moment right before you’re about to buy as the stock is passing through that pivot point right so pivot points come in a lot of different shapes and forms they could be off of you know very large patterns small patterns they could be coming off of the low of a base up the right side or for what i call a cheat area or a load cheat they could be coming off of a handle it could be a pullback buy there’s a lot of different ways but a pivot is a an actionable point where it moves through it moves through a level and that level signifies that that’s the area that it’s cleared for you to then start buying the key is is that you’re trading from a perspective that you know what to expect that’s the whole key the whole reason why i’ve dedicated myself to one strategy and one way for 37 years i’m doing the same thing that i started i just i do it better you know i’ve perfected it over the years and my skills gotten better but because i want to be a master at something so i know every every eventuality everything to expect because that’s really the key is knowing when things are acting normal or abnormal because there are no absolutes so i have a certain certain reference points that i’m looking for and from those levels i know this is not acting right this is exactly what it’s supposed to be doing so those pivot points have to be taken you know into consideration but you know jesse livermore used pivot points a little bit differently than i would use a pivot point coming out of a chart back then he was plotting things and plotting price and you know very interesting you know he should study livermore because he’s you know definitely one of the greatest of all time and just really the pioneer of pivot points for sure um so yeah and then o’neil of course you know his work is you know is phenomenal with uh you know with moving through uh buy points and pivot points based on uh precisely what i’m talking about you know i’ve taken it and i think who was it um trying to remember uh oh from stock b um pretty pretty blunt yeah said to me one time we were at a seminar and he said uh this is surgical you know you’ve taken this to a surgical level um and it’s true you know i’ve taken it to a point where it’s really and david ryan made a similar comment where you know this is really sort of like taking uh you know the previous works and and refining them down to really precise really precise uh buying and i think you know you young guys you know you’re getting it where you’re getting more it’s so precise you know you you’re studying my work and you’re putting it all together and it’s just getting more and more and with the with the speed and what we’re able to have the the tools that we have now it’s just getting more and more precise and fast um so and it could you know these pivots can be used on intraday charts too right now it doesn’t it it can be used on intraday charts weekly daily uh doesn’t know any time frame these are timeless principles absolutely it’s it’s supply and demand in its purest form um speaking of intraday charts when you’re actually really pinpointing in on that pivot point are you looking only at the daily um or are you looking into your day and also what are you looking for in terms of volume coming in at that point well i’m always looking for i’m always i’m using a daily to that’s the main chart that i’m screening on once i see something i like on the daily i immediately look at the weekly and i’m always looking for the weekly too and it would take some time to really talk about you know what i’m looking on both and and uh but both are valuable and then when i’m buying i’m not looking at the intraday chart i’m looking at the daily chart i’m buying off the daily the only time i’m looking at the intraday is if i’m buying a pullback sometimes if i’m buying a pullback and i want to wait until it turns back up because i’m very seldom ever buying on the way down even if it’s a pullback i’m waiting for it to turn up i might look at a five minute and see if it’s stabilized and maybe it made a little intraday pattern it’s starting to turn up from that very rare but uh so but 99 of the time i’m relying on the daily chart makes sense and in terms of that initial stop-loss point um where does that usually line up the low of the day the low of the week um or does it depend on the technical chart pattern it depends on a handful of things you know the low of the day is very obvious you know and these are very obvious levels so you have to be careful about putting them at such obvious levels but there are times where obvious levels are you should use when things are really working well you should use obvious levels because they’re not going to take them out very often and they should hold when you’re in a whipsaw market and you’re going it’s and things are moving all over the place uh you can get you know the undercut these very you know the 50 day the 20 day you know the recent low the days low the low in the pivot low in the base they become levels that you know uh it seems like the you know the price seeks those levels it hunts them out and knocks everybody out you know creates those shakeouts so uh it it’s it sort of depends on the environment the main thing is the math behind it you know you don’t want to think about it as much as where’s the stop level to the chart you want to think about where’s the stop level on the chart or whatever the stop level is what is that what is that math if you’re if that stop on the chart is that is 15 away from your buy point and your average gain is 10 percent well and you’re and you’re right usually 50 of the time well that’s a losing proposition so rule number one you always want to be getting odds on your money you always want to get odds on your money absolutely and and how many names do you usually hold at once and how do you determine your initial position sizing and and also um do you enter all at once or will you add to a position um if that applies well there is no set you know in stone formula except there are some general guidelines you know i’m usually not taking a position i might take a very light position just to keep my finger on the pulse and you know i’ll buy a token amount of shares when things are really not working or i’m just getting in the market but generally speaking you know a five or ten percent position would be a small you know would be a starter position would be on the smaller side a large position would be you know 25 percent although right now trading with this u.s investing championship you know like i’ve said a few times before you know you got to trade like an animal because everybody else is trading like an animal um and you know it’s like in sports you know the other guys are taking steroids so you have to take steroids so i know i’m i i’m going full you know full margin using you know leverage with the uh uh you know with my trading right now so a lot of big positions a lot of short-term trading around positions um but generally speaking uh and and going back to let’s say you know some of the periods where i made my biggest returns uh 25 position sizes anywhere between five or ten percent on the on the low side trying to shoot for an optimal four to eight stocks fully margined no more than 10 or 12.Makes sense and um after you have a position set and you’ve got some profit uh when do you decide when to to take some off the table um and how do you balance locking in gains while also letting winners trend what was the first part um when do you take profits if you’ve already got a gain so again it depends like right now in the recent this recent little run we’ve had pretty much all year but uh definitely for you know a couple maybe six eight weeks of this first three months of the year or so breakouts just stopped following through yeah yeah you’ve probably you’ve seen that where i’ve had happen so many bases set up there’s all these big you know these bases setting up and everything was breaking out but you’d get one to three days so i made an adjustment real quick i said i’m gonna take one or three days and i’m gonna just you know i’m gonna pound this with you know with big positions and short-term trade it’s worked out great uh that’s not something that i always do um so but let’s just say everything was working and you know stocks are coming out and they’re and they’re ripping higher and they’re following through and you find that you sell that stock in a couple days and you’re you know you’re sitting there going boy i wish i didn’t sell that stock it’s not 20 well you know you’ve got to change your tactic you know you’ve got to adjust to that you don’t have to but look here’s the thing it doesn’t matter what happens to the stock after you sell it if you were to if you were to take five percent risk and sell every single stock at a ten percent gain and you were able to do that fifty percent of the time for each and do it i don’t know a couple hundred times a year you’re a very rich man in a short period of time okay does it matter the stock and doubles from there where you sold it for 10 if you can roll into another one and do it again and again and again and again so you know think of it as flipping a coin if i told you i’m gonna give you two dollars for heads you lose a dollar on tails and you can flip that coin you want to flip it as many times as possible right right so if you could flip it and your your goal was to say hey i want to get to you know x number of i want to make x amount of money by by this amount of time well you would have to just say okay in that amount of time i’ve got to flip this coin this many times because i’m going to make a net dollar every two times i flip it right so that’s sort of the thinking it’s it’s is there an optimal place to sell yeah if you have a crystal ball and in hindsight but no there’s really not and i sell stocks all the time at 10 gains and they go up 50 100 i bought cisco off of the new issue i took five points and it went up seventy thousand percent after that you know i traded home depot for a 30 30 move in the 90s it went up 40 000 you know so but i made 36 000 in that same time period trading right so it really depends on how you want to skin the cat you know so i sell when i think the risk outweighs the reward mm-hmm and here’s here’s a key i’ll give you a sort of a key tip when do you sell to strength versus selling to weakness when do you backstop versus sell right into the strength well if your profits are 10 and your your losses let’s say are five you can’t wait until the stock stops you out on the downside because if it goes up 10 12 by the time you get a reversal or whatever you’re you know looking for to stop you out you’ve given back most of the gain you’re probably only up five or six percent so there’s no profit now if you’re up fifty percent you’re up a hundred percent and you took a five percent risk okay you maybe use the 50 day a weekly close below the fifth day or you can backstop it trail it and really give it some room because you’ve got a big move now so see it depends now if i’m on a shorter term move you know i’m just getting out when the getting’s good i’m not waiting for that stock to break and coming in on me because then i’m going to give back all my profit absolutely and and uh i think that’s a great great point um getting into risk management which we we’re just talking about a little bit i think is really the most important thing you posted a great tweet um last year showing after the september correction how you progressively increase positions you had snap early on you you added more the next day the more more the next day and as the market turned you kept adding more stocks uh could you talk a little bit about progressive exposure and how do you put it into practice for instance coming out of this most recent correction there’s so many ways i i use progressive exposure intra-day i use it daily so and just this last week i i went over that with the way that i trade it throughout the day just how i traded throughout the day and use progressive exposure so i’m always thinking progressively exposing and and and decreasing my positions based on the the traction that i’m getting so a very simple you know way to explain it is so you buy one or two stocks all right and maybe they’re five or ten percent positions okay those stocks start working out maybe they’re up seven eight percent each okay you can buy another one or two you got a little bit of profit maybe you sell one of them you nail down a 10 profit well if you if you have one stock goes up 10 you sell it and your stops are 5 you just finance two more trades you could buy you can now buy two stocks and use a five percent stop on each and if you get stopped out you’re going to break even because you’re financing using that gain the finance and now you’re you’re levering up so and now let’s just say you get a few more winners so now you’ve even banked more money and you can get a little more aggressive this is the exact opposite of what people do you know usually they’ll sell and then they get nervous that you know things are going to turn around on them and then when they go when the stocks go down and they’re at losses they start doubling up and they start progressively exposing by averaging and that’s how they get themselves into a lot of trouble so and just the opposite when things are let’s say those few stocks go against you so now you would cut your position sizing down and then and keep progressively bringing it down until you’re trading you know negligibly or you know you’d be in cash if you’re if you’re you haven’t seen a profit in your last four or five trades at 20 25 exposure you shouldn’t be going to 50 exposure you should be going to 75 or 100.You should be going to 10 to 5 to zero you know is and and bending with the market so i think progressive exposure is probably one of the the most important tactics that you can utilize to protect yourself and to keep yourself from having big drawdowns and also to keep yourself where you’re where you’re invested in bull markets because you’re you’re exposing up see the key is is that you want to you want to have a system that guarantees that you’re trading your largest when you’re trading your best and you’re trading the smallest when you’re trading your worst so by by progressively exposing and and increasing your size when things are going well you’re going to be heavily invested in a good bull market and by bringing it down you’re going to be lightly invested when you go into a bear market makes sense and um are there any things you look at in terms of the market whether it’s an extension from a moving average the the breadth of the market that when we’re getting a little bit longer the tooth in a rally where we’re we’re all we’re already up 30 percent in a few weeks um that might tell you to scale back a little bit um to prevent maybe a big drawdown when when the market really reverses hard well you’re talking about like market indicators or stock things in individual stocks market indicators so maybe it’s uh the market getting 15 above the moving average something like that no no because that can go on for a long long time you know i’m looking i look at sentiment you know when everybody’s bullish then you know my antennas go up and i start looking for very specific sell signals in the individual stocks but the main thing momentum trumps sentiment you can i mean you can have a lot of bullish sentiment and keep going for extended period of time so ultimately it comes down to the individual stocks i’m really letting the stocks dictate and it’s going to show up in the stocks if the market is in trouble the stocks are going to roll over they’re going to stop me out they’re going to if this if the market’s really running up too fast you’re going to have all the stocks are going to be extended and i’m going to be selling into strength and it’s going to all show up in the stocks and sometimes it shows up in the stocks you know well before the market gets into trouble or even you’ll see a bunch of stocks set up before the market bottoms in a bear market and it’ll give you a lead time i found the best indicator for me are the individual stocks but i guess you have to know what you’re looking at and know how to read them right all right so mark why don’t we take a look at some charts and and see how you analyze price and volume action and and we’ll look at some that that worked and some that ultimately stopped you at a loss yeah okay so nmm bought it right here coming out and then see it comes in a few days and then got knocked out and this is one that you know if this may be tightened up right here this might have been what i call a failure it was a failure reset it just wasn’t crisp enough for me and it kind of wedged up it got away from me i was looking to maybe buy it back but i did not and bang comes out now it’s just put in another base and it’s coming out of this it came out on thursday had a reversal now you got a little reversal recovery on friday so still moving along here i know what’s this up here so since i yeah so this is up almost 70 from that first buy point so unfortunately yeah so again this is you know how they normally look it’s usually within a few days to a few weeks that i’m knocked out at a loss it’s pretty quick and you know that’s an important thing to to talk about or important thing to understand is that you want to be knocked out fast now you know people get frustrated they buy the stock and boom it turns around and they’re out right away that’s exactly what you want you want to know right away if you’re wrong so now you can move to something else and you’re not wasting time if i sat in this stock for six months and it didn’t go anywhere and then stopped me out why just wasted six months of time to invest so that’s one of the reasons why you want to time your trades as best as possible and know if you’re right immediately know i’m right or i’m wrong and engage along the way you know if things are acting normal or not so you can you know if it’s not acting right and it’s not making you money you move on you know the only good stock is a stock that’s going up absolutely and and here um talking about the failure reset uh maybe you’re looking at other names but do you know specifically why you didn’t re-enter this um it had some nice support support moves off the lows there on those two bars yeah i mean you know when we get volatile like this and and you know i call the megaphone effect when you do this here right you know instead of being tight you start widening you know that is the exact opposite of what i’m looking for so that volatility i have i’m very careful to you know start getting back you know getting into a stock when it’s volatile that’s where you really get whipped around so yeah that’s you know the main reason if like i said maybe if this set up really crisp around the old high here i i can’t really tell you what i was thinking at the time if i’m getting hit on a number of names you know i’m not going to probably start playing failure resets you know if this is maybe this is the third or fourth stop that got hit in a row you know i’m going to be more timid you know if if i if everything else is working and um and i’m seeing a lot of stocks that you know shake out and reset you know i might i might be uh you know getting back into this it really depends on on you know how i’m gauging the environment at the particular time very interesting and you’ve said something a couple times along the lines of you’re paying attention to what’s working and kind of shifting your focus to that type of setup so it’s interesting that if breakouts are working you’re looking at those pullbacks are working you’re looking at those it’s kind of uh obvious but it’s something that definitely people should be doing well here’s and here’s the danger of saying that i have to be very careful and be very people take things very literally to make these interviews that it does not mean you’re changing your strategy that doesn’t mean that i’m not buying from vcps it doesn’t mean that all of a sudden i’m buying stocks that are down it means it means that i’m changing my tactic within the realm of my strategy so that like again i’m selling a lot of stocks now that just when they write when they run up but i’m still buying from the exact same buy points i just know that they’re not following through as much so i haven’t changed my my research or i haven’t changed the way i do things i just changed my expectation from the upside until i start seeing better upside because i i can’t be using stops for swing trades if you’re only getting short-term moves out of them and i keep getting stopped out it’s not paying for it you always have to think am i going to pay for this risk you’ve got to pay for the risk right you’ve got you flip that coin you’ve got to get two dollars on heads if you’re gonna risk a dollar on tails or i mean if you got a dollar ten it’ll still work but you’d have to flip that coin a whole lot more times so if you’re a day trader you can have a smaller ratio right so again it all comes down to math absolutely um and thanks for clarifying that um looking at this chart how long does that contraction have to be that last contraction because it looks like this this is about two two and a half weeks before it moves up through that prior hive well that was one of the problems that this really wasn’t a very long base and it’s kind of stubby yeah yeah it well it it’s this was more of a power play type situation if you go back here from the top and you go back a couple months eight weeks and you measure from here to here you’re at 124 so that that is a power play but i call it power play uh o’neil would refer to these as high tight flags you don’t have a this isn’t a real powerful though explosive power play it sort of just kind of you know worked its way higher and then you put in the short base so these short bases i’ll play on the power moves but you didn’t have that type of real explosion so sometimes those get what i call wiggles you know you get some wiggles around the breakouts and it didn’t really really tighten up super tight so you know it wasn’t it wasn’t perfect but it was good enough to play gotcha and would you mind bringing up snap and maybe we can talk about uh a low cheat setup or i’m not i’m not quite sure what setup you bought this off of last year let’s see if the there’s still though yeah i i love i loved how tight it was within that base for i think it was a three weeks tight within the base which caught my eye after you post about it on twitter yeah this this that i have drawn on here was for my clients and not uh for this particular presentation but um it’s still here so so bought it here on 9 15 as it started moving right through and you see it comes it moves out follows through the next day and then comes in one two three days but has a good close on the third day see that didn’t come down enough to stop me out it didn’t come back to my stop so it was still in it um and then i believe this is where i sold into earnings so then it had the earnings report and i had a nice little cushion see it it worked its way up let’s get the percentage tool out so that looks like about so going into earnings you know like maybe a 16 17 cushion so now you can go into earnings and and and sell into earnings so that stock went up you know into earnings you know about 50 um so that you know that’s a very classic now this was if you look at the market this was actually setting up during a correction yeah yeah so this was one of the very first i’m not sure if it was the first but i think it was the first second or third stock that i bought after going to cash so coming back into the market this was one of the very first stocks um and and again i don’t know if let me see if uh bring up the nasdaq if we can’t what what date was that that was like september september 15th or around there somewhere yeah somewhere i think it was yeah right there i think it was around there so see look at the market here so i’m buying it right here see the market had just come in on a correction here but see that’s how that stock broke out here’s what happened that stock broke out all right let’s go let’s look at this and then we’ll go back to snap so that stock broke out here then this little pullback in the in the market this next leg down in the market all that did was just bring snap in but not enough to hit the stop then when the market turned back up snap broke out of its base let’s bring snap back up so see again see how the stock was telling the story here not the market if you waited for the market you’d be buying over here you know you’d be buying late so see broke out here now as the market came in snap just came down for a few days but it as long as the hole just stopped that’s fine you know if the market comes in if they’re holding or stop then it’s acting fine then when the market turned back up snap came out and went back into new high ground so it was leading leading stocks lead absolutely definitely a clear example of rs um and uh what are your thoughts on on traders taking responsibility for their trading i see some people buying stocks 50 off their lows um and and they get stopped out while it’s still in a downtrend what are your thoughts about people really focusing on themselves studying their own trades and uh kind of improving themselves and taking responsibility for what actually happens with their trading instead of blaming the algos or or all of that well i don’t know i mean i don’t know who else could be to blame trading is one person you’re making the trade you’re making the decision so if uh this is about the purest business there is where it that’s why i got in it there’s no red tape there’s no prejudice there’s no uh boss to uh to impress and if you’re good you get rewarded i mean the the the results tell the the level of skill if you’re skillful at this then it’ll show up in the p l um so you know again personal responsibility the algos all this crap that we hear that it’s you know it’s it’s manipulated and this that you know back back when the 87 crashed it was program trading you know then it was then the sews bandits came in those were the algos of the day in the 90s it was they blamed the sews bandits you know and then it’s high frequency trading and now it’s algos this is nonsense this is nonsense all right all those computers have to basically make the same exact maneuvers that a human would make and i could tell you right now i’ll trade any algo or any computer out there any day it’s absurd to think that a computer is going to cause all these problems and out be able to out maneuver uh a skill for person it’s not it’s not gonna happen it’s just that um yes can can can they cause noise sure and at certain times they’re great sometimes though you know people didn’t mind i guess the uh uh you know these uh algorithms or whatever when uh gme ran up right then then it’s okay then everything’s fine when you’re on the profitable side of them but then the market crashes and we have a flash crash you know we’ve got it we’ve got to blame the computers it’s the computers but the bull market goes up for three years it grinds its way higher for three years and everybody makes millions and everything’s okay until you have that one big down day absolutely we always have to respect risk um going back to this chart of snap um did you play a portion of this for a larger move maybe sold half because we were just coming out of a correction no i don’t remember exactly how i played this that’s why i’m going by these notes here that were here but but again no but i tried to come back in it i think right here if i if i remember i think i tried to come back on over because now it made a power play now it moved up see it’s up over 100 percent has that little tight pivot and then i got stopped out right here yeah well actually yeah i’m pretty sure i bought it on 11 6.And it got knocked out again and then it again it was a reset came back up and then you know now it’s getting more sloppy as it gets later you know you’ll get more and more sloppy as the stock gets more more eyes on it gets more followed and then of course you know as it’s getting more and more profitable you’re having the the bigger players now are going to be profit-taking and they’re going to create you know that real volatility because they’re moving to big size absolutely but are you willing to are you more willing to play a stock for a larger move when we’re just coming coming out of a correction and maybe use the the 50-day rule if it’s a if it’s a major bear market like we had in march so the time when you should be giving a stock you should be giving a stock the benefit of the doubt and trying to play it for a larger move is coming out of out of a correction out of a bear market or a correction spend the larger the correction the more you should be thinking longer term because now you might be on to a key leader that’s going to start that news cycle and make a multi-year run and if the market goes into a bull market you could have these leaders going to go up three four five hundred percent and in some cases you know many thousands of percent so in that case you know you’d be using you could use what what you have to you know read about that of course is my 50-day or better rule um where uh uh you know you use the 50-day once it catches up to your to your stop and then your break-even point you switch over to a close below the 50 and there’s a stock just recently i think it’s um my memory serves me i was just seeing it today boyd so we took a look at let’s take a look at a weekly on boyd so look at boyd boyd comes out of the spare market you see how look at this ride to 50 the whole way wow wow not a single weekly close below the 50 through the entire move right so if you just said hey i’m just going to wait for a weekly close below the 50 and maybe you know if it if it’s below it by a certain percentage you don’t want to wait until it’s you know 50 below if it crashes but uh within reason um you would you would stay with this through this whole move and if you go back cycle after cycle uh you’ll find that there’s a handful of leaders that do this that will will stay above that 50 for the whole move or a good portion of the move um so yeah investing in in a bull market now later on you know if i was to buy it here now and i’ve seen it’s held for all this time now i’m looking for it maybe to get extended from the 50 and to start running up and accelerating its rate of advance and i use that to sell into because now you’re getting a blow off a climax top something like that and you’d be selling it to strength there absolutely and looking back on a trade how do you determine whether something was a good trade versus a bad trade well you can have a first of all you could have a good trade you can make a perfect trade and get stopped right you can make a terrible decision and be and make money that’s why you can’t the the result can’t justify the means you have to have rules and a strategy a good trade is a trade that you stuck to your rules and you and you you executed your strategy effectively so that could mean losing um so that’s the see that’s the problem with the market you there’s periods where you know you might do things that are really not very prudent and not uh and have no strategy at all and just get lucky and just be in the right place at the right time and the next thing you know you think that’s the way to do it and meanwhile you’re you’re like a turkey being fattened up for the kill so you know it it’s really important that you have rules and when you go back and you analyze what you did and you’re doing post analysis you’re not being biased by the outcome you don’t want to be outcome biased you want to be disciplined biased you want to be strategy biased did i follow my discipline did i did i follow the rules okay take a look at that how’s that working and then and then reassess but don’t say oh well the stock went up so i made a good decision not necessarily and how important is it for traders to keep track of their summary statistics the batting average average gain average loss average holding period for losers and an average holding period for winners is something that dr wish really emphasized in the course that i took how how important is that so how important are the numbers the average gain average loss batting average so for for me i think it’s the the utmost importance i mean i look at it this way how do you know where to set your stop if you don’t know what you’re you know if how would you know where to set the loss on tails on that coin that i talked about flipping if you don’t know what you’re going to gain on heads and you don’t know how many times it’s going to fall on heads what if it’s going to fall on heads 1 out of 10 times and you’re only going to make a dollar 10 on heads so can you still lose a dollar on tails you know or can so again you know you have to how you have to know what your outcome or potential outcome is at least to a point where you have a realistic expectation you know to me it’s like flying a plane without an instrument panel uh so the important thing is to not only know your numbers in hindsight to see what you did but then forward to when you make a decision trading that thinking the spreadsheet makes its way into your trading so now as you’re you’re making a trade you’re cognizant of what you need to achieve mathematically and that starts to work into where you set your stops and you’re thinking you know in terms of risk reward relationship how would you be able to do that if you didn’t know that information and that’s how you kind of determine whether you’re a singles doubles triples or a home run hitter you you look at those numbers the average gain average loss and then from those numbers you decide where to take your profits on average and of course when to cut your losses yes and if your average gain is say 10 you go back and you take a look at your last 100 trades 200 trades and your average gain has been 10 you know you’re right you know 48 of the time wrong 52 percent of the time your average gain is 10 well if you have a stock that’s up 20 percent you’re you’re double your average gain if you sell that stock what does that do to your average gain it boosts it it improves it right so you know right there you’re improving right if it’s at five percent and your average gains 10 you have to think to yourself well that’s not even at my average right that’s probably not a time to be selling it unless something’s going wrong and then you look at your loss let’s say your average loss is five percent well if you’re taking five percent gains ten percent losses are are you gonna is that profitable to take five percent you know so now you know that’s really not a spot that you should be looking to sell unless something’s wrong if something’s wrong yes that’s a different story but so you know again letting the math work its way into your trading and that’s really the key is not just knowing okay this is what i did okay now what are you going to do with that information now you could that your information is very valuable to to for your mindset as you’re actually placing trades absolutely and and to bring up a great question that uh somebody posted on twitter i asked for questions i thought this is excellent um how do you mentally come back from a a gap down a large loss larger than your average loss or or even a period where you’re not trading well how do you mentally reset do what you need to do follow your rules and and prepare for for the next trade and get back on your feet well you know i know this is going to sound maybe crazy to some people but i very i almost never get in that situation to be honest with you i very seldom get myself into big trouble and that’s because i’m really very prudently using progressive exposure um never really you know opening my nose up and putting myself at big risk without really being covered you know in poker they say always give yourself outs now it doesn’t mean that i don’t get torpedoed every now and then yes that does happen that does happen uh if it does happen there’s there’s not much you can do about it right i mean if if the stock you know gaps down on you and it gets through your stop you know you’ve got to you’ve got to cut the bleeding you know you don’t know how bad it’s going to get you know sometimes the stock gaps down you know your stop is five percent it gaps down 15 you sell it turns around rallies all the way back and it turns out if you held it you wouldn’t have lost any money or maybe made money well that doesn’t mean that you should not cut your loss next time first of all those are those are what we call the tails and the distribution curve those are the tails those are outliers all right they’re not going to happen that often all right it’s going to be it shouldn’t be unless you’re putting yourself in again you’re putting yourself into downtrends and stocks that you know yeah then you’re gonna have uh um you’re gonna be buying what david ryan calls serial gappers you know these are stocks that will you’ll get unhappy surprises because you’re in a downtrend so if you’re doing all the proper work these are going to be very rare and in the long run they’re not going to really make much of a difference i know they’re not going to make any difference if i’m if i do 200 trades 500 trades a thousand trades and i’ve got two or three outliers they’re not really going to make a big difference unless i have my entire account fully leveraged into one stock and i would never you know i would never do that holding overnight and putting myself in a position where i had gap risk perfect and last question when it comes to charts and i think this is something that i personally struggle with and a lot of people do um it’s kind of knowing when to sell into strength is it completely a mathematical thing when it’s going to improve your your average gain that’s when you do it or is it a feel thing it’s market dependent what kind of are the factors in play there well they’re all the factors above that you said but the the situation is is that there’s a whole selling section in my in my most recent stock book and think and trade like a champ there’s a whole selling section and it would take quite a bit to go through all that and look at all those cell rules but there’s a there’s sell rules for selling at the strength and selling into weakness uh but when the stock has an accelerated rate of advance and it becomes unsustainable it doesn’t mean that you don’t sell the stock and it goes up much more from there see you have to realize what trading is about it’s not getting the high and getting the low it’s about making more than you risk and being able to do it over and over enough times within a given period of time to reach your goal that’s what trading is about it has nothing to do with hindsight of what happens after you trade the key is what happens during the trade what happened before and what happened after is not relevant to your profitability all right it may be relevant to your analysis of when you’re going to get in the stock or maybe improve your decision making later on by looking at your post analysis of what happened but it doesn’t make it doesn’t make a hell of a beans difference uh of to your profitability your profitability is in between the buy point and the sell point and if the stock has gone up ten thousand percent and then you buy it and it goes up ten more percent and you sell it that’s all that matters you made that amount right and if if if it uh you know if it’s uh not done that and it’s gone up five percent and then you make a hundred percent neither really makes a difference it matters of what you make in between the buy and the cell so uh um you know again i don’t know i gotta wait probably from your question uh but uh you know there’s there’s a lot of different cell rules uh like i said before the general rule of thumb is that if you’re on a shorter term trade you’re looking to sort of get you know get out when the getting’s good right sell into strength because you can’t really let the stock come back on you because it’s going to give up too much and you’re going to give back all your profit because you’re going to keep your stops very tight on those short-term trades if you’re going for a bigger move well then you can allow more room and maybe use uh backstops and allow allow yourself to sell stocks uh uh into downside cell rules that’s sort of the general you know rule of thumb but i would refer to my my book on cell rules and o’neill’s book too has a lot of great cell rules some of ours are going to be the same too because you know i’m using uh some of the same cell rules and some permutations of those cell rules all right mark that that’s awesome uh i always like to to end it with one more um kind of question what kind of motivating words you have for new traders who maybe are getting chopped up a bit in 2021 and what can new traders do to shorten the learning curve well the good news is is that it’s a great time to be a stock trader it’s a great time to be anything and the reason why is because the learning curve is automatically shortened because you have you have things like this right here right we have youtube we have the internet we have uh zoom and we have all kinds of uh twitter and all this exchange of information that when i started there was nothing i was going to the library and i was reading books that were old and outdated and from strategies and techniques that never worked in the first place so it took me years and years and years of trial and error and trial and error to figure it all out but now your learning curve has been shortened tremendously but but here’s the main thing you have to remember it can be shortened only so much right you can’t force experience and there’s a certain amount of experience michael jordan can tell you how to dribble and toss a basketball but you’re not going to be able to be a professional basketball player without playing and being in those situations and having a certain amount of experience on the court and in big games so it’s the same thing you know you still have to have a certain amount of experience so my words would be to to make sure that you understand that it’s going to take time and make a commitment to it and and do what you love you know that’s the main thing if you enjoy it then stick with it and you’ll get great at it but there’s all the information’s there we have information overload now there’s too much information it used to be you couldn’t find any information now you got to figure out what is the good information and what’s the [ __ ] that’s the that’s the big problem now is narrowing it down to the good information but that’s a better problem to have i think than no information so it’s a great time to be a stock trader it’s a great time to be anything you could learn how to i’m a musician i’ve been a musician my whole life when we first you know when i first started playing and i was learning songs i had to take the album and i had to put the needle back and listen to it and take the out put the needle back and try to play it now the person who played that part and wrote that part is on youtube teaching you how to do it right that’s why you’ve got these you got seven-year-olds playing uh song you know playing the guitar uh incredibly and you know these incredible they look like they’re protege you know gifted uh uh um you know musicians when in fact no just the information now in the learning curve has been cut way down because our teaching is so much better we’re accessing the whole world and we’re accessing talent from around the world so this very thing that we’re doing right now is the reason why you should be very excited and very motivated for the future awesome mark thank you thanks so much for your time we really appreciate it um thanks for coming on you’re welcome back anytime uh for everybody watching thanks for tuning in if you enjoyed please go ahead and leave a like down below and subscribe if you want to see more great interviews like with great traders and market wizards like mark minervini and i’ll see you guys in future videos
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