In order to attract Wall Street’s attention, they have to grow and prove themselves. Until that happens to the point of being quite obvious to most investors, there are price inefficiencies all the time, every day—I know, I have been successfully trading them for several decades.
Contrary to some popular theories, not all information is baked into a stock’s price, especially when you are dealing with the smaller, under-followed companies. Thus, there are situations when stocks are inefficiently priced, which often lead to great investment opportunities. The key is to avoid randomness.
A relatively unknown company’s growth prospects and earnings potential are under the market’s broad radar until it explodes onto the scene and begins attracting widespread attention. In the interim, you, the individual investor, have the potential to position yourself and reap large returns as the next big stock winner makes its move.
Regardless of how many academicians claim the stock market is fully efficient, the facts are it is not. Inefficiencies in pricing abound because information is not fully disseminated and digested on every publicly traded company. I would even offer my own track record as proof of the market’s inefficiencies, which create investment opportunities when lesser-known stock candidates are discovered ahead of the pack.
Those who subscribe to the flawed efficient-market hypothesis might imply or suggest that my success as a trader is the result of luck. During my 28-year career as a stock trader, I have made tens of thousands of trades. Could someone be lucky so many times? What are the odds of having such a lucky run?
I’m not the only one: many stock investors and traders have consistently produced stellar performances because they acquired a unique skill that few are willing to work to posses. Mark Ritchie of Chicago won my “Triple-Digit Challenge” and turned his $25,000 trading account into more than $50,000 in just over five months. Two days later, Matt Glascoff from Connecticut crossed the 100% finish line. Matt traded his $850,000 account to a triple-digit gain in just over 5-months (Read blog “We Have a Winner” http://is.gd/FRT5Fj).
The really big opportunities in the stock market are generally in the smaller, underfollowed and undiscovered companies. 95% of the biggest stock market winners in history had relatively small floats. Believe it or not, at one time, very few investors heard of Wal-Mart, Dell Computer, Cisco Systems, Research in Motion, Starbucks, E-Bay, Amazon or Yahoo just to name a few.
Success in the stock market comes from having a set of sound rules to guide you; rules that work, and then having the courage and discipline to follow those rules. One of those rules should be to avoid randomness.
Mark Minervini
CLICK ON IMAGES TO ENLARGE
Posts
Great post Mark!
ReplyDeleteChad
Mark, have you ever revealed any of the technical patterns you hinted at in SMW?
ReplyDeletelenderap,
ReplyDeleteYes. I reveal all of them at the Master Trader Program. I hope to see you there this year.
-MM
Hi Mark, you said you would offer your own track record as proof of the market’s inefficiencies. Can you share your record for the past year or 2? Not the 90s please. Thanks
ReplyDeletemarketmakerX,
ReplyDeleteIn the past couple of years my numbers have been running better than ever; not much has changed with regard to strategy or performance. Of course, we have been in a strong market; however, making a determination to be in or out of the market is a big part of my approach. As you may have read, even a couple guys from my recent seminar reached triple-digit returns in less than 6-months. Could this be achieved if the market was fully or near fully efficient? NO!
-MM
Mark,
ReplyDeleteThe best part of your training is that when most of us sat in cash, your students, it seems, continued to trade and rack up returns!
Is that correct? The graph in the blog does not show any flatness anywhere.
PhoenixTrader,
ReplyDeleteThe “students” you are referring to started trading their accounts in October 2010. Since then we (MPA) have had three periods when we moved to a defensive posture: 11-16-10 thru 11-30-10, 1-20-11 thru 2-02-11 and 2-22-11 thru 3-29-11. You don’t have to be in the market all the time to get big returns. In fact, over exposure often impedes performance. The key is to be in the market when stocks are set-up properly and offer low risk buy points.
-MM
Hi Mark,
ReplyDeleteGreat post. Is your market position defensive now or favorable? Your student Joe Fahmy went into cash 4 days ago.
Thanks,
David
dsnover1,
ReplyDeleteWe are still on our 3-29 buy signal; recently stopped out of some names as well as nailed down some decent profits in SWSH, FMCN, TSCO, SKH , but still holding up relatively well with 26 names still long. More weakness from here would likely put us defensive if our individual stops are hit. In the event we do get a sell, I will post it on the blog as usual. As far as Joe is concerned, he’s playing it close to vest lately, taking a more trading approach. I think that’s a smart decision as this bull market matures.
-MM
Hi Mark,
ReplyDeleteThanks for your reply. I have one more question regarding risk management.
I understand you use protective stops for all your trades. What happens if you hold positions overnight and the market gaps down (500 Dow points for example)and your stocks suffer heavy losses. Do your positions get sold at your predetermined price?
Thanks,
David
dsnover1,
ReplyDeleteA gap down of that magnitude (500 points) in the DJIA is an extremely rare event, and almost always, weakness in most of your individual names will stop you out beforehand. Sooner or later however, some of your stocks will dive under your sell price before you can react; this is called “slippage”. My advice: get out immediately! Take whatever the next bid price is. Such a hard-falling stock is sending a warning. 20-25% position sizing (4-5 stocks) should provide enough diversification to lessen the risk of any single stock blow-up. Best wishes!
-MM
Mark,
ReplyDeleteYou mention "nailed down some decent profits in SWSH, FMCN, TSCO, SKH , but still holding up relatively well with 26 names still long."
1.Why did you book profits in few stocks. Why not move stoploss up instead? Is it to rotate to other stocks?
2.For other 26 stocks do you tighten your stoploss as the market has fallen for 4 odd days? Like do you move upto stoploss to breakeven?
(How do you prevent death by 1000 cuts? 26 is huge- you have to watch your risk reward ratio).
PhoenixTrader,
ReplyDeleteAs you know I always answer everyone's questions here on my blog. You are asking good questions. However, your questions really require more than just a sentence or two. The short answer is: I booked profits because I made decent gains and achieved my goal. I do tighten my stops; however, each situation is different and depends on a variety of factors. I prevent "death by a thousand cuts" by incrementally adding positions and building on successes; not all the positions where added at the same time. Each position has its own stop-loss. The collective risk is set at an acceptable level.
I'm happy to hear from you from time-to-time and I hope my answers assist you in attaining your trading goals. My suggestion is that you attend my Master Trading Program in October and/or join our Minervini Private Access platform. This is where you will really learn what’s needed to take your trading to a whole new level. Sorry to sound self promotional, but this is, in my opinion, the best way for you to learn how to achieve really outstanding results. Hope to see you.
-MM
Mark,
ReplyDeleteI see your point. (And no, you are not self promoting! Its a correct observation. What's wrong in giving an honest opinion to your followers?)
I will try and be in Minervini Private Access platform (2-3 months)as I live across the planet and also have time constraints.
Meanwhile I may drop in Qs time-to-time.
Once again, a million thanks for your consistent kindness and sharing the best thoughts on the net (atleast IMHO).