"Think & Trade Like a Champion": Mark Minervini’s Top Stock Trading Strategies (Part 1)

Author: Mark Minervini

Mark Minervini (1965~) is a renowned American stock trader. He is known for achieving remarkable returns, including a reported 33,554% return over a five-year period. He won the U.S. Investing Championship in 1997 and 2008. He has written popular financial books, including "Trade Like a Stock Market Wizard" and "Think and Trade Like a Champion".

Minervini developed his momentum approach by studying successful traders, combining technical and fundamental analysis, with a focus on risk management and trading high-quality growth stocks showing strong price momentum.

Why I read this book

Before diving into this book - "Think & Trade Like a Champion", let me clarify one thing: as my blog title suggests, I’m not aiming for quick returns or overnight wealth. My focus is on growing wealth slowly and steadily through long-term strategies, value investing, staying optimistic, and trusting the magic of compounding over time.

However, I’m always eager to learn from other successful investment techniques, particularly from gurus who have achieved sustained high returns and have valuable insights to share. Mark Minervini, while likely the opposite of my investment style, is a highly respected stock trader. After reading his book, I found that many of his principles align with what I believe.

Although his technical stock trading approach isn’t one I plan to adopt, I think his book offers valuable lessons for investors of all types. As usual, I’ve highlighted passages that particularly resonated with me, so this is not a straightforward summary of the book. I’ve also rearranged, rephrased, or condensed some parts. Also, I’ll mark my thoughts as "Neo" to distinguish them from the book’s content. Let's dive into the key takeaways from the book.

Champion Mindset

You need to shift your focus from outcome to process. Making money is merely the by-product of effectively executing a well-thought-out plan. [Neo: This resonates with me the most in the entire book. I very much agree.]

Fear is the primary emotion that causes traders to undermine their discipline. To master these fears, mental rehearsal is key. The more you mentally rehearse sticking to your discipline and plan, regardless of the outcome, the better you’ll manage your anxiety.

Mental rehearsal is different from positive visualization. While positive visualization involves imagining the best possible outcomes, it doesn’t reflect reality. Muhammad Ali used mental rehearsal before every match, preparing himself to take punches, feel pain, and keep fighting. When those punches landed in the ring, his mental preparation gave him an edge, helping him persevere and become the best. [Neo: Most people, myself included, knows about positive visualization. But I wasn’t familiar with mental rehearsal. It makes perfect sense.]

Remember, your timing won’t always be perfect. In fact, you’re likely to be right only about half the time.

Don’t allow yourself to be overwhelmed or distracted by irrelevant information or, even worse, by the opinions of others that interfere with your decision-making. Be like a shopper who goes to the mall with a clear purpose - get exactly what you need. Limit the news you consume. [Neo: I agree. Unless you're a short-term trader, stop monitoring hourly or daily stock movements. Instead, focus on working, reading, writing, exercising, and meditating. Spend quality time with family and friends. Enjoy hobbies. You can watch the news you trust occasionally.]

When something goes wrong, instead of asking “Why did I do that?” ask, “How can I improve?” The first question leads to wasted time and self-pity, while the second sets you on a path of learning and growth. [Neo: So true for investing and life in general.]

Winning is undoubtedly a choice! Champions don’t leave success to chance - they decide to win and live each day with that goal in mind. [Neo: True, winning starts within oneself, and it’s not just about confidence; it’s about putting in the time and effort that matches the size of your goal.]

Those who achieve great success share a common mindset: You keep going until you succeed, or you die trying. Quitting is never an option. Without that mindset, you’re likely to give up when challenges arise. [Neo: This applies to the most valuable things in life. You should never give up until you achieve your goal or die trying.]

Your strategy is the one that works for you—not necessarily every time, but over time. [Neo: In stock investing, even Warren Buffett isn’t right every time with his stock picks. What matters is that an investor’s cumulative decisions should generate a solid overall return over time.]

To achieve greatness, you must focus and specialize, avoiding “style drift.” The key is to stick to a particular style. [Neo: This might be true for short-term technical trading, but I don’t fully agree for long-term investing. The reason we invest in multiple stocks or an index like the S&P 500 is to diversify and reduce risk. Taking it a step further, we create portfolios that include equities, bonds, and commodities. So why not go further and build a portfolio of portfolios, each following a different style - like momentum, value, small-cap, or international? But you must adhere to stick rules fitting to each investment style]

It’s better to do something imperfectly than to do nothing flawlessly. The best time to start is now! [Neo: I completely agree. Don’t let perfect be the enemy of good. The real magic happens when you start taking actions!]

Three Deadly Traps for Traders

1. Emotions: They lead you to make irrational decisions.
2. Opinions: Fixed ideas can narrow your perspective and limit your vision.
3. Ego: It prevents you from admitting mistakes and making necessary corrections.

Plan Before Investing

Over time, I realized that there’s no such thing as a "safe" stock - just like there’s no such thing as a "safe" race car. Both are inherently risky. [Neo: A funny but true analogy. However, stocks do vary in volatility depending on factors like size, industry, and economic moat. So while no stock is completely safe, they do carry different levels of risk.]

Always have a process, any process, but have one. A process gives you a foundation to work from, make adjustments, and improve over time. Go in with a plan. A strategy is only as effective as your commitment to following your own rules. A solid plan requires disciplined execution. [Neo: Absolutely. Whether you call it a process or principles, you need a set of rules to guide your investments. Without them, you’ll fall prey to your own emotional fluctuations.]

Risk-First Approach

With every trade I make, I always follow a “risk-first” approach. Knowing exactly how much you stand to lose if things go wrong is far more important than what you could gain if they go right. Before I enter any trade, I determine the exact price where I’ll sell at a loss if the trade doesn’t go as expected. My focus isn’t on the upside; it’s on managing the downside. [Neo: This approach is likely more suited for short-term traders. For value investors with conviction, the perspective might be slightly different. But I completely understand his perspective.]

Trading without a stop-loss is like driving a car without brakes - every major loss starts as a small one. The only way to prevent a small loss from becoming a large one is to accept it early, before it snowballs. In over three decades of trading, I haven’t found a better method. [Neo: For long-term investors, handling losses is more nuanced. Whether to use a stop-loss depends on how convinced you are about a particular stock when it starts dipping.]

Investors often hate admitting mistakes, so they rationalize. Amateurs shift between being a “trader” when they’re right and an “investor” when they’re wrong. When a trade goes against them and begins racking up losses, they suddenly declare themselves long-term investors. [Neo: This is spot on for most amateur investors.]

I may have my eye on a specific stock, but I won’t buy it unless it offers a low-risk entry point. Risk is controlled when you buy, not when you sell. [Neo: That's right. This applies not only to traders but even more so to long-term investors.]

You need to associate small losses with progress and large losses with pain. Avoiding big losses is the single most important factor for winning big. As a speculator, losing is inevitable, but controlling how much you lose is key.

Long-term success in the stock market isn’t about hope or luck. Successful traders have rules and a well-thought-out plan. [Neo: Yes, a well-defined plan and rules are essential for long-term investors as well.]

Have Rules and Stick to Them

The key difference between an amateur and a professional is consistency. Success comes from relying on probabilities and following a strategy with positive mathematical expectations.

By applying sound rules, your preparation and criteria will increase your chances of success. And when things don’t go your way, remember: it’s better to lose correctly than to win incorrectly. Losing correctly means you’re only a short-term loser; over time, your discipline and mathematical edge will make you a consistent winner, allowing you to compound your gains. In contrast, winning incorrectly reinforces bad habits, which can ultimately lead to failure - even bankruptcy. [Neo: quoting Mark's own words, Making money is merely the by-product of effectively executing a well-thought-out plan. I entirely agree]

Saying, “Just this one time,” and breaking your rules undermines your discipline. Trading is already difficult - don’t sabotage yourself by violating your own principles.

Resisting external pressures (noise) that challenge your discipline is even more important than your strategy. Without discipline, you don’t have a strategy, only hope and luck. [Neo: If you don't have a discipline to follow your own rules, what's the point of having rules?]

Luck is fleeting - it might work in the short run, but in the long run, luck is for losers. [Neo: If you continue to enjoy lucky, outsized returns that you haven't truly earned, you may become overconfident or negligent about risk. Eventually, this could lead to a downturn where you lose all your accumulated gains - and possibly even more.]

A trader’s emotions swing between greed and fear - mostly fear. The only antidote to anxiety and fear is having rules and setting realistic goals. With steadfast rules, your decisions won’t be driven by emotion, but grounded in reality. Remember, trading isn’t about buying at the absolute low and selling at the all-time high. It’s about buying lower than you sell, making sure your profits outweigh your losses, and repeating this process consistently. [Neo: Mark is  repeatedly stressing the importance of having rules, processes, and disciplines, which I agree completely.]

Follow Momentum

To grow your wealth and avoid compounding mistakes, your aim should be to buy stocks on the way up, not on the way down. Even if your strategy involves buying at support levels or during pullbacks to a moving average, it’s better to wait until the stock starts turning upward again. Catching a stock in freefall is risky - you never know how far it could drop. [Neo: Peter Lynch said "Trying to catch the bottom on a falling stock is like trying to catch a falling knife. It’s normally a good idea to wait until the knife hits the ground and sticks, then vibrates for a while and settles down before you try to grab it."]

There’s no smart reason to increase your trading size when your positions are losing. Instead, when trades are going well, use the profits to finance additional risk and build on success. [Neo: A gist of momentum trading]

My starting point is always to have the "wind at my back." I only buy stocks that are in long-term uptrends. A stock moving sideways within a strong uptrend could be a good buy candidate, while a stock consolidating in a strong downtrend may present a shorting opportunity.

The foundation of my approach is trading with the trend. Having the market tide in your favor makes all the difference - swimming against it is extremely difficult. Trading legend Paul Tudor Jones famously said he exits any position if it falls below the 200-day moving average.

When it comes to growth stocks, those that seem “expensive” often continue rising. On the flip side, “cheap” stocks tend to get even cheaper. That’s why trying to buy at the absolute lowest price rarely leads to the best outcomes. [Neo: This is mostly true for many market leading stocks.]

When a stock falls sharply and dramatically underperforms the market, it’s usually a warning sign, not a bargain.

Closing Remarks - Part 1

There’s so much to cover that I’ve decided to divide my review into two parts. In Part 2, we’ll explore the Line of Least Resistance, Stop Loss strategies, Profit Taking, four key methods for limiting drawdowns, and my final thoughts on the book.

Thanks for reading. Wish you grow rich slowly and surely!

This blog post includes excerpts from the book “Think & Trade Like a Champion”, published by Access Publishing Group, quoted under fair use as permitted by copyright laws in relevant jurisdictions. The content includes both direct excerpts from the original work and my personal thoughts, rephrasings, and interpretations. All original text and images from the book are the property of the respective author and publisher, and are not to be used for commercial purposes.