Long-Term Trading and Investing

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Mark Minervini is an accomplished stock trader known for his disciplined approach, his consistently high returns and his proprietary Specific Entry Point Analysis methodology. He’s advised hedge funds, and he won the U.S. Investing Championship with a return of 155% in 1997 and with a record 334.8% in 2021. 

 He was also featured in “Stock Market Wizards,” Jack Schwager’s classic 2001 book on investing. Through his own books and mentorship programs, Minervini continues to train stock traders worldwide.

In this recent interview, which has been edited for length and clarity, Minervini shares his insights on risk management, trading discipline and his outlook for the U.S. stock market now.

MarketWatch: With the U.S. strikes on Iran last weekend, have you made adjustments to your short-term trading strategy?

Minervini: The strikes on Iran may create short-term volatility in oil and equities, but history shows that markets often rebound within six to 12 months. While oil prices above $80 could weigh on sentiment, with the S&P 500 SPXstill in a confirmed uptrend and our May 8 buy signal intact, I view any pullbacks as buying opportunities. Expect near-term volatility, but don’t lose sight of the broader trend. Our bottom-up approach remains driven by individual stock behavior, not headlines. 

MarketWatch: What do you think of the U.S. economy?   

Minervini: Right now, we’re in an optimal economic growth period that is good for a sustained bull market. It’s a Goldilocks economy. You have 2% to 3% real [gross domestic product] growth, which is a really good environment for a sustained bull market, It’s not strong enough to have inflation, and we’re not tipping into a recession. On May 8, our firm put out a buy signal for the S&P 500. That’s when we went 100% into the S&P 500. 

MarketWatch: What could go wrong for the stock market?  

Minervini: We have a lot of uncertainty right now with the tariffs, oil and Iran. If oil goes above $80 per barrel, that may be a tipping point that could put pressure on the market. Every $5 or $10 that oil rises above $80 could add to a recessionary scenario. Right now, we’re bullish on the major indexes like the S&P 500, but cautious with regard to individual stocks — particularly small caps and midcaps. 

MarketWatch: Why are you taking a cautious approach with individual stocks? 

Minervini: Right now, participation is weak because money managers are not willing to go too far out on the risk curve, so they are gravitating toward the big heavy-weighted stocks in the index. For example, right now about 40% of the S&P 500’s market capitalization is concentrated in just its top 10 stocks — a level not seen in decades. For the Nasdaq Composite Comp, the top five companies — six if you count Alphabet’s dual share classes — make up over 40% of its total weight. This is not a broad-based bull market. Money is narrowly concentrated. That’s why you see indexes such as the S&P 500 moving up to new highs, but the percentage of stocks that are above their 200-day moving average is still very low. It’s a bifurcated market. If you’re in the bigger-cap names in the indexes, you could make some money. 

MarketWatch: You’re a two-time investing champion, and at one point, you averaged a 220% annual return over five years. What do you think has been the key to delivering those kinds of results?

Minervini: The real secret is risk management and discipline. Discipline is the key — committing fully to a strategy, mastering its details and understanding both its strengths and limitations through every market cycle. You see a lot of traders who are up big, but they fail to respect risk, and suddenly they’re down big, digging out of a hole and only getting back to even. I very rarely dig out of a hole, and if I’m in a hole, it’s a small loss. It’s a simple law of compounding that if you don’t lose big, winning becomes easier. 

MarketWatch: You often emphasize the importance of risk management and discipline — areas where many traders struggle. What specific methods or practices do you recommend for managing risk effectively?

Minervini: When you enter a trade, there really is no other alternative to manage risk except selling a position for a small loss before it becomes a large loss. The key is to get out at single digits, and to do that, you must use a stop-loss. Some people will hedge and maybe use put options — but that just adds risk, because you could lose on both sides. 

MarketWatch: So in your view, managing risk and maintaining discipline is the real secret to trading success?

Minervini: I’d love to tell you something new, but things really haven’t changed a whole lot when it comes to risk and reward and supply and demand. It may be redundant and boring, but if you want the hair on your neck to stick up, then you’re not managing risk. You’re gambling.

When I was interviewed by Jack Schwager for his book, after I gave him the same answer, he stopped the tape recorder and said, “Mark, this is great, but this is what all the market wizards say.” And I replied, “Well, Jack, this is the reason why they’re market wizards!”

MarketWatch: Even with all that in mind, a lot of traders still have trouble making steady profits. What are they missing?

Minervini: Many people spend all their time researching a company and falling in love with products and services such as artificial intelligence. Then they buy the stock, and the next day, the stock is down 3%, 4%, 5% or 8%. They are forced to decide whether to cut their loss. They didn’t plan for the stock to go down.

When you buy a stock and the stock goes down, you’re wrong. If you sell it and take the loss, you’ve admitted defeat. The real fear, and this is what keeps people from selling, is that you’re going to sell it and it’s going to turn around and go back up. Then you will be wrong a second time. Psychologically, being wrong twice is a very powerful force, and it makes us hold on to a position even when it’s clear it should be sold. 

MarketWatch: What advice would you give traders right now? 

Minervini: Be careful because of information overload — including thousands of self-proclaimed financial experts on YouTube. You have to figure out a way to reduce the noise and commit to a particular strategy. You must become a specialist rather than a jack-of-all-trades. 

MarketWatch: Did you make any mistakes when you first started trading?   

Minervini: I made every mistake you could possibly make. Everything I did then was the complete opposite of what I do now. I lost money for almost six years. 

Then I reversed all the criteria. I studied what winning stocks looked like and created a leadership profile, which is what I use now. It’s a technical profile ranking that compares whether a stock meets the criteria of the biggest winning stocks of the last 100 years. We look at the common denominators to see if your stock has what it takes to be a big winner. That’s what has worked for me for the last 38 years. 

MarketWatch: It sounds as if you are a trend follower. 

Minervini: I am definitely aligning my investments with the trend. The main thing is a stock has to be in an uptrend. I will not trade against a trend. Then I look for stocks that are showing relative strength versus the entire market. We also look for a technical chart pattern called the Volatility Contraction Pattern, which is my signature stock setup. If a stock doesn’t meet my criteria, I stay away from it. Many people buy a stock because of a news story or because their friend gave them a tip, but that’s not sustainable. That’s not a strategy. 

MarketWatch: Any final advice? 

Minervini: If you’re new to investing or trading, don’t believe those who say it was easier back in the day. Trading is easier now than ever. This is one of the best times in history for trading and investing in stocks. Be patient with yourself and don’t give up. You can’t become a doctor or a Major League baseball player in six months or a year. Don’t expect that to happen with trading, either. You will have to put in some time, but it’s worth it.