Minervini & Dave Ryan webinar notes:
Guiding rules:
*No forced trades: develop sit out power.
*No big losses: always respect risk
->only trade proper setups
->keep losses small
->never average down
*Losers average losers.
Ryan: Follow rules. Systematic system to eliminate emotions.
Having system + set of rules is the 1st step.
U must have discipline to follow it.
U need to stay in ur area of competence.
Trade only setups that u r familiar with.
Best advice: Never never add money to a losing trade.
Professional trading goals:
1. Take minimal risk
2. Capture relatively large gains: its relative as for day traders even a 5% gain is big but not for LT investors.
3. Maximise compounding: don't h wary of turnover
4. Be in the market as little as possible: USIC, 155% up , only 50% of the time in the market.
Many big returns r acheived being out of market.
Warren Buffet is timing his trade. He has his timing mechanism based on fundamentals.
4 keys to Big performance:
1. Timing: people say u can't do it coz they can't do it.
Ryan: patterns repeat over and over again.
Identify base, topping out, middle of moves etc. U cud buy just as moves r starting.
Look for defined patterns that come up over and over again. Timing works and continues to work.
Big returns: 40%+ per annum.
Shot for triple digit yearly returns.
Even before bear market single digit loses r great.
*50-80 rule:
Big market leaders when they finally top the chances of them going down 50% is 80% and falling 80% is 50%. Average fall for big leaders r 70-75%.
This happens cycle after cycle.
Emotions of people: holding to big high time names. Its a fallacy.
Volatility contraction patten(VCP):
Overlay of C&H. Ryan & O neil has been doing for long time.
Its an improvisation to improper c&h pattern and getting a low risk entry point.
Master trader program: workbook 400 pages
Recommended: HTMMIS by WON
greatest book ever written.
Look for stocks coming out of consolidation. Timing ur trade where its moving quickly.
U want to have loss very quickly. U don't want to b in a bad marriage for 20 yrs. Knowing u r right or wrong quickly.
Look for vols dry up. Breaking abv the base vols greatly pick up.
Not all patterns r gonna work.
If u trades not working:
1. Criteria if flawed
2. Market is not right.
U sud b selling stocks when they r peaking/topping out. MMTT is then out of windows.
Admit when u r wrong as quick as possible.
2. Turnover:
Make lots of money- pay lots of taxes. It's good that u r making money.
U hav a big problem coming down the road when it's obvious.
Its good when u have an edge.
Opportunity cost:
1×75% 75%
3×20% 73%
6×10% 77%
12×5% 79%
Same or better results. Compounding works.
Better at finding 6 stocks going 10%.
10-20% profits r good and some big winners abv 30% and 50%.
Ryan:
USIC, shorter term trades
Hold for couple of weeks, 30-40-50%
When they r tired then move on to next.
Rotate money from stock to stock. Looking for breakouts.
Cut ur positions way down and wait for base formation.
Consistent returns yoy: timing + turnover.
In 1980's: commision were high.
Now is the great time to do.
Define ur style:
1. Day trader
2. Swing trader
3. Long term(LT) investor.
Ryan: never think about taxes.
U r missing the big picture and think too small.
In the beginning perfect urself and don't have style drift.
People try to do things in bunch of things while being perfect in one.
3. Concentration
4. Risk/reward management
Explanation:
Big returns: concentrated portfolio
Diversification to a certain degree is ok.
Result based assumption forecast: Insert in hopper..
4 keys to minimising drawdowns:
1. Always trade directionally
One hedge fund was up 1000%
Next year they were down 99%
One sud b directional.
Minervini: 88% of my months were +ve.
U have to learn urself. When u have drawdowns then get so down on urself.
Ryan: 30k to 60k and then below 20k. Learn from mistakes. Look for exact that setup. Performance gets to start up. Its all start from learning from mistakes.
Always bought stocks going up. Never bought falling stocks. In and uptrend coming out of base.
Stacking probabilities: all the forces behind u. Always buying in direction of the trade.
Best names: u r profitable right away. Kee record of all names.
Poor perfomers give hard time from beginning.
Stock pullsback 20% in short times and pullback is shallow then hold.
U can buy on cheat area. Lower 3rd is cheat and upper 3rd is handle.
2. Expose progressively.
Nvr plunge down on market on opinions.
Say u r 100% cash i.e. correction. First toe in water with 25% cash and then move on to 50% and if everything works then move to 100%. Start with 1-2 stocks 10-12% position.
If u build into exposure when things r working and scale down when bad then u wud b trading ur largest in bull markets and lightly in bear market. U r safe.
Ur profits finance ur position on the way up. Bending with the market.
Ryan:
10 stocks in portfolio. 10% each. Start with 5% and it works quickly. U move to 10%. It may b next day or 3rd day. If it starts coming down. Don't add more.
Up 20% to 30% and build new base. Then double down there. One to two stocks per year may do wonders.
Lot of people tend to revenge trades. U got to b humble.
Minervini: doing for 3 decades and Dave for 4 decades.
U have to cut loses. U got to bend and give up revenge trading.
Loss price u pay is an insurance policy.
3. Protect breakeven.
Do not buy stocks trading at 10cents, >$10 is preferred.
Key is not to choke ur trade. Leave then to perform normally.
If the stocks goes into 1st pullback and then goes to breakeven then move stop loss to breakeven. Protect it.
Look for natural reaction and stock moving to new high ground.
It happens wht u do over time and on an average and not one time event: stock trading is about probabilities. U have to do hundreds of times.
U have to throw ur ego into trash can. U can come in back. Just bcoz u lost few times in a stock u don't get in back. Its ur ego that holds u back.
4. Sell into strength:
Sell some of position as it goes up and move stoploss to protect half.
U wud sell into top high is once in a blue moon. U cant sell on top.
Preroll the trade.
Stock bought at cheat and sell some in upmove and then protect stoploss at breakeven.
Always trade VCP.
Almost always selling in strength until forced out.
Ryan: see for signs of top, cut down position, vols high, topping.
Look to see signs when things go excessive.
Don't just buy wht u know:
80% of big winners r new issues(IPOs) within the previous 10 years.
Most of the big winners r winners before they become household names.
Smaller names, midcap names, new techs. Etc
Amazon was one of the most hated companies.
Thank u. Have a grt learning time.
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Trading is both, the easiest thing to do and also the most demanding thing you've ever done in your entire life. It can ruin your life, your family, and everything you touch if you don't respect it, or it can change your life, your families, and give you a feeling that is hard to find elsewhere if you succeed.
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