Stock trading, investing strategy from market wizard Mark Minervini - Business Insider

Mark Minervini, stock trading legend and the author of “Mindset Secrets for Winning,” sticks to a timeless trading strategy that's been the secret behind his success. He employs both fundamental and technical analysis in his trading approach and looks to buy stocks in strong uptrends that are coming out of consolidations.Minervini says that when it comes to trading “the most important part is the mindset.”Click here for more BI Prime stories.Mark Minervini, stock trading legend and author of “Mindset Secrets for Winning,” lives a life today that's diametrically opposed to where he began.“It was terrible; I grew up very poor,” he said in an exclusive interview with Business Insider. “I had just about every strike in the world against me.”But Minervini didn't let his circumstances discourage him. He began pumping money into the stock market, hoping a trade would stick and turn his life around.“At the time, I didn't know what I was doing, so I was losing,” he said. “I put it into options and blew myself up there. Then I took advice from a broker, and he blew me up.”He continued: “Finally, I said: I've got to figure this thing out.'”And that's exactly what he did. Minervini started reading the trading philosophies and strategies of the legends profiled in Jack Schwager's “Market Wizards” book, and immediately took a liking to Paul Tudor Jones' risk-averse style. He would employ many of Jones' principles to his own trading process going forward. And, perhaps ironically, he wound up profiled in a later version of Schwager's book.“I stuck with the same style and strategy for so many years that I got really good at doing that one thing,” he said. “I was doing the same exact thing I'm doing now — looking for stocks that are in strong uptrends that are coming out of consolidations.” When a stock consolidates, neither buyers nor sellers demonstrate unbridled conviction. During this period, the stock churns sideways with few interruptions. However, that stock will eventually trade out of a defined range — and if it's to the upside, Minervini is waiting in the wings. Minervini adheres to a strict, multilevel criteria, but isn't opposed to looking for cup-and-handle patterns and pivot points to identify potential entry points.For context, a cup-and-handle pattern is viewed as a bullish continuation pattern, and is generally used by investors trying to figure out when to buy a rangebound stock. Meanwhile, pivot points are technical indicators that help indicate either bullish or bearish shifts. When the price of an asset trades above the pivot point, the expectation is that the day will be positive.By employing that consolidation-based strategy and its various offshoots, Minervini garnered compounded total returns of 33,554% over a five-year time horizon. To put that in perspective, if you handed him $100,000 in 1994, he'll drop more than $30 million in your lap in 1999. Larry Hite, the legendary hedge fund manager who garnered 30% average annual compounded for the duration of his career, utilized a similar strategy.Pairing technical analysis with fundamentalsDespite his reliance on technical analysis, Minervini also looks closely at fundamentals.“Once you get that stock in an uptrend, then it's looking for price and volume action coming out of proper consolidation — and hopefully, you've got the earnings and you've got the sales if it's a growth company,” he said. “You want to make sure that the price is confirming that. It doesn't make any sense if you've got these big giant earnings and sales and the stock is hitting 52-week lows.”He's not buying unless the chart confirms the underlying fundamentals. What's more, he keeps tight stops and always cuts his losses before they get out of hand.“It's less of coming up with a new way — or some secret way — and more of perfecting a very standard look at supply and demand,” he said. “Something that's timeless.” Minervini's current positionsMinervini was kind enough to share four positions he currently has on. He's been in the majority of them for months, and wouldn't be a buyer at these levels today. However, if an opportunity presents itself, he may pick up more shares in the future.Along with a long position in the iShares PHLX Semiconductor ETF (SOXX) — which encompasses an array of semiconductor companies — he's also picked up shares of 10X Genomics (TXG), Hilton (HLT), and Apollo Global Management (APO).With all of that under consideration, Minervini shares the most important aspect of trading — and interestingly enough, it has nothing to do with parameters, metrics, valuations or financials. “The most important part is the mindset,” he concluded. “You can get all the techniques and the price patterns and all the criteria, but when it comes down to it, you've got to execute that. And that requires discipline.”