Stock Market Wizard, U.S. Investing Champion Mark Minervini Shares Ideas and Wisdom Here FREE!
March 25, 2013
“I long to accomplish a great and noble task, but it is my chief duty to accomplish small tasks as if they were great and noble.” -Helen Keller
As a trader, I know the importance of pacing myself in order to attain the consistency and stamina I need to win over the long haul. Although the same basic fundamentals are always at work, they combine differently in each market and each cycle, and from time-to-time change their character in the interim.
In the early stages of a new cycle I look for new emerging themes that will form the basis of my approach to trading. Themes can be revealed in the way stock prices are acting in general, industry group leadership, and the kinds of economic and political factors the market chooses to react to or ignore; I try to set my pace accordingly, wagering conservatively with smaller than normal “pilot positions” and then pyramiding on those successes.
Only if my smaller pilot positions confirm my assumptions and show profits do I step up my trading size and rhythm. With this type of approach (pyramiding up), I need only one or two good quarters to rack up a really great year. Until the right opportunity emerges, I pay special attention to preservation of capital above capital appreciation. When a promising opportunity eventually presents itself, I’m ready to act swiftly and aggressively with the bulk of my capital intact.
Remember, the top three priorities in trading: First, is preservation of capital. Next is consistency in executing your plan. When you have these two things mastered, you can then pursue the third, which is superior performance.
You should conduct intensive research to identify trading ideas and follow those ideas like a hawk. When the time comes to put money to work, the decision should be automatic and obvious. To trade with ease, you must trade when conditions are favorable. Don't force the trade. Trading should be effortless.
If your trading is causing you difficulty or stress, then something is wrong with your criteria or timing, or else you’re trading too large.
When the market is not acting great and there’s no clear market leadership, it's best to stay in cash. If you choose to trade, play it small with pilot positions. This accomplishes two things: First, you will test the market and keep its pulse. Once you get a strong heartbeat, you can step it up. Second, you stay in trading shape. However, you're not risking much until you have logged some profits. Let those profits finance greater risk.
There is no intelligent reason to step up your trading from say 25% or 50% exposure to 75% or 100% if you’re not already experiencing some success. Small decisions lead to big decisions, therefore, small success leads to big success.
Trading is just like working a muscle; if you don’t work it, it loses strength. Stay in trading shape by using pilot positions as “sparring partners.” However, don’t slug it out and get hurt with your sparring partner. Instead, wait for the main event and then give it your all to capture the championship belt.
Big success in the stock market is built on a series of smaller successes added together. Once you gain some traction, then and only then should you get aggressive and pursue really big returns.
Get more aggressive when you’re trading well and less aggressive when you’re trading poorly. This will ensure that you’re trading large when you’re trading is working and small during difficult times. This how you make big returns and protect your capital.
Be patient and build on success, one trade at a time.