Transcript for:
Minervini Trading Strategy Overview

Mark minovini strategy explain that's right I got a good video lined up for you today you can see all the different areas of martinabini's strategy that we're going to be covering in depth as we progress throughout this video I would ask you to do two things from at the start of this video If you're not subscribed to the channel and you enjoy videos like this and you want to be notified when I release more please do press subscribe and if you could hit the like button for me you'd be shocked by how much it really helps me out and helping to grow the channel so I'd really appreciate that if you enjoyed this video press the like button for me as we progress throughout this presentation certainly into the fundamentals area you're going to see some charts by market Smith they're today's video sponsor if you're interested in a discounted Market Smith trout there is a link in the comment section below and before we get into our first slide which is on the price cycle I just wanted to give you a quote which I think encapsulates miniveini's approach to trading and it's by Floyd Mayweather I'm a boxer who believes that the objective of the sport is to hit and not get hit that pretty much sums approach to trading hit and don't get hit so by the end of this video you're going to learn how to hit and not get hit and with all of that being said let's get into the price cycle the price cycle is the backbone of minivini's strategy and minovini splits the price cycle into four stages so there is stage one which is the neglect phase brackets consolidation there's stage two which is the advancing stage which is accumulation now this is where minervini is looking for those vcps those power plays those cup and handles which we're going to be coming on to a little bit later there is then stage three which is the topping phase distribution there is stage four which is the declining phase which is capitulation so this here is a weekly chart of the Dow Jones just to give you an idea of these phases and we're going to be going through some individual stocks more recently so you can get a very good understanding of the price cycle the different stages and the transition criteria as well so you can clearly see the cyclical nature to to the Dow Jones here okay you can see that there's a advancing phase and there's a topping phase there's a capitulation phase and then there's accumulation and then we're moving back up here so you can see they're just ebbing and flowing from stage one stage two stage three stage four stage one stage two stage three phase four so on and so forth right so let's look at some more modern day examples stocks that you'll probably be familiar with so the first one here this is zoom now you've probably used Zoom as well you're probably aware of the growth that it had in 2020 as well so this is zoom here okay we've got stage one this is stage one down here then we move into the stage two uptrend this is then where minavini is looking for those vcps and you're going to learn about that as we progress throughout these videos how to spot them again the things that you want to be looking for and having that powerful Market Trend behind you then you have stage three which tends to be a little bit more volatile I'm going to give you some Clues on the different stages in a minute so stage three and then into the stage four decline if we look at another one quite recent this is Peloton what do you notice you have your stage one base here you have your stage two uptrend your stage three distributional top and your stage four decline over here another one this is this is DocuSign many of you will be familiar with it as well big stage one base over here then the stage two uptrend stage three distributional top stage four more markdown so it's very important to know where are you and I'm going to give you some criteria to better understand where are you in terms of the price cycle very important that you can look at the stock look at the market look at an interview PDF and go okay we're in a stage drop Trend we're in a stage four we're in a stage four decline we're potentially in a stage one um base we're in a volatile stage three tops very important to know let's take a look at another one this one here is Amazon so we're going a little bit a little bit further back than some of the other ones but pretty much over the same time span as well what do you notice with Amazon well you have a stage one base here you have a stage two uptrend you have a stage three distributional top look at the volatility in the phase three Distribution on top and then the volatility As you move into the stage four Decline and price starts rolling over prices then below these key moving averages which we'll explain a little bit later on now we're a little bit further back so this is Amgen back in the 1990s you have a stage one base here you then have a stage two uptrend see kind of The Logical volatility in the stage job Trend as well really nice stage three Distribution on top and then see how it breaks down here pretty aggressively on volume as well and we're going to be talking about relative strength as we go throughout this uh as we go throughout this video and then you have your stage four decline over here another one this is Crocs so this one here got very volatile into a stage three top so you have your stage one base stage two uptrend stage three top and then your stage four decline so it's very important that you can pinpoint whereabouts are you let's then take a look at an ETF that you're probably familiar with which is Arc so whether it's stocks whether it's ETFs whether it's the market the price cycle is applicable to all of them so you have your stage one base in here stage two uptrend look at the 52-week cars on the relative shampline we'll talk about that a little bit later on relative strength and then look at the break here into stage three so something that you're going to learn is a characteristic on a transition from stage two into stage three is actually increased volatility and increase volume as well so stage structure and the wind is in the proverbial sales and then stage three Distribution on top okay very volatile price action and then you are swimming against the tide in the stage four to clap so maybe Arc has entered a stage one base down here but it certainly as of yeah it's not in a stage two stage structure now where this can be a little bit confusing is you can think well it's stage one stage two stage two free stage four it doesn't always work like that because sometimes you can transition from a stage one base this is Tesla this is on the monthly chart a stage one base into a stage two uptrend and then you think that well a state tree distribution on top is now going to play out well it doesn't sometimes it can transition basically back into a stage one base which we see here with Tesla so it's not always just to throw a little spanner in the works it's not always stage one stage two stage three stage four sometimes you can get a stage one into a stage two that then transitions into kind of a stage one reaccumulation base if you like and then back into a stage drop Trend and then here you can see the stage three top and then breaking down here for a stage stage four decline so this is for all stocks all ETFs all indexes across all time frames but the higher the time frame the greater weight I would give it so if I saw kind of a stage drop trend on the monthly chart or the weekly chart I would give that much more weight to a stage drop trend on say the five minute chart hopefully that point makes sense so let's go into putting a little bit more a little bit more contact so this is the price cycle here so stage one neglect phase okay which is the consolidation transition criteria into a stage two advancing phase accumulation so these are mini beanies worth it so key technical action the share price is above the 150 day which is the 30 week and the 200 day which is the 40-week moving average the 150 day moving average is above the 200-day moving average the 200 day which is the 40-week moving average is sloping upwards and it's preferably been sloping upwards this is a little subtlety for about four to five months the share price is generally making higher highs and higher lows so that there is a nice strength High highs high lows what were you really looking for other other notable action to monitor larger volume on up weeks relative to volume on down weeks more on up weeks than on down weeks more up weeks than down weeks or a supportive action on pullback so I ideally when the share price is pulling back or the price of whatever it is whether it's the markets or the queues the spies and ETF the stock when it is pulling back you'd like to see supportive action so you'd like to see quick quick recoveries and reversals preferably holding key moving averages as well as I put down here let's look at a phase three topping so this is a stage three topping phase also known as distribution so some of the key key action to be to be looking for that you're in a stage three top you would have obviously liked to see a rally going into it so it's stage two uptrend but key characteristics key technical action that you're potentially in a stage three is increase price volatility that's obviously on a relative basis okay apples and apples pairs of pets you want to be comparing the stock Zone Action to the stock Zone Action there's no point comparing this Stock's action to Google or Netflix or Amazon or whatever compare the action what is volatile for this stock versus its own behavior which is also then accompanied by high relative volume so if you get really volatile price action at the top of a long uptrend and then suddenly you see it's really volatile there's a lot of volume that can be institutions larger operators in the market offloading their shares aggressive declines and pullbacks so they're not kind of nice and gentle they're very volatile very aggressive widespread candlesticks are downside on volume price no longer respects or holds key moving averages so you're kind of seeing violations of key moving averages maybe they were once holding a support like the 50 day or the 21 day was holding as support but now you just see prices slicing through them climactic Behavior rapid price Advance accompanied by high relative volume which is basically feeding in to the increased volatility point that you might see towards the end of a stage too did a stock in the last three weeks has gone up say 25 but in the most recent three weeks it's suddenly up 75 and the share price Advance is very rapid we're going to talk about that as we come on to sell rules a bit later other notable action that you could be in a stage three topping phase the base count of the stage 2 uptrend is four four later so I've got an example of Luv on the weekly chart and looking at bases as we go on so looking for late stage bases they are much more failure prone sector and or group is weak and or volatile price action keep moving averages beginning to flatten or roll over so potentially say like the 50 day was just pointing up nicely but now you start to see it's kind of rolling over and Topping like this that can be something to be looking out for you could have a material deceleration in the earnings you can have earnings are unsustainably high so I've got a couple of charts of say Zoom that you're gonna see and you're going to see this with a lot of stocks and this is a quote by manovini as well the stock can actually top out when the earnings are the highest so we'll look at that in a couple of slides time and the overall Market position has the overall Market just gone from a powerful stage structure and then into what looks like a very volatile stage three top because the market trend is going to significantly affect stocks let's take a look at some transition criteria so you've now entered stage three and then we're looking for the transition criteria into a stage four decline which is basically a stock you really want to uh you really want to evolve so key technical action the share price and this is basically the opposite of everything that we're saying from stage one transitioning into stage two the share price is below the 50 day which is the 10 week the 150 day the 30 week and the 200 day being the 40-week moving averages the 50-day moving average is below the 150 day and 200-day moving averages so you're starting to get the moving averages rolling over and in the in terms of an uptrend you'd like to see the 50 above the 150 above the 200 whereas in a stage four decline you're often seeing the opposite so the 50 is below the 150 the 150 is below the 200 okay so on and so forth the 150-day 30-week moving average is below the 2 40 week moving average the 200-day 40-week moving average is sloping down so it's kind of topped and rolling back over like this the share price is generally making lower highs and lower lows excuse that actually low in there so lower highs and lower lows so it's now in the context of a downtrend rather than higher highs and higher lows that we'd like to see in a stage 2 uptrend notable at another notable action to monitor significant declines on the stock and or weekly chart accompanied by the largest volume since the rally began so if you go and watch back this section and you go and look at some of those charts like Crocs like Zoom like Peloton like art so on and so forth you'll see that the brakes that come through oftentimes are accompanied by the largest relative volume since the rally has begun the technical action of related stocks so these are brother sister socks stocks in the same Industry Group are you seeing a lot of breakdowns in the industry group the technical action of the market sector and group as well so yes you want to be looking at the individual stock but what is the market doing what is the sector doing what is the group doing have they just undergo on the face redistributional tops and then into a stage four decline or do they still look pretty powerful stage two staged erupt Trends and this stock is then showing a lot of relative weakness so things to think about there the earnings reaction as well we're going to look at this later on looking at the earnings reaction you get a very good sense of what are the larger operators in the market doing especially if it's more more can slim type names what are they doing around the earnings do you see positive or negative reactions so that there is very key and we'll look at that a little bit later on so that ends our section for the price cycle in the next section we're going to be going into explaining the volatility contraction pattern the volatility contraction pattern explained also known as the vcp so the vcp is a pattern itself but the same characteristics are found in other chart patterns that may just really confuse you but by the end of this action section hopefully it'll make some more sense what's happening from a supply and demand perspective is the most important so as we work through the examples in this section by the end I'm hoping by understanding and kind of teaching you about price and volume what is happening from a structural perspective the higher lows in the bass the tightness the volume declining in key places you will start to understand that the vcp is a visual representation of what is going on with supply and demand but we first want to begin with well what on Earth is the point of a vcp well the point of a vcp so volatility contraction pattern is to create a low risk repeatable entry point with asymmetric reward to risk potential and you have an idea of what should of what should happen next for Normal and abnormal behavior so as we start going through this presentation there are slides on what you want to see after the breakout point and what you don't want to see after the breakout point so Normal and abnormal behavior this then really helps you with the trade management aspects as well so the vcp is a very repeatable point on the chart to identify which is very good because of the deliberate practice nature of things and also skill acquisition so you really want to acquire the skills to identify the vcp and then understand how to trade it and improve your skill set around trading it as well so several key points here and then we'll go and work through this example so several key points prices in a strong uptrend everything that we just discussed in the in the criteria for stage two uptrend higher lows are forming in the base is preferable the debt for the contractions are lessening we'll talk about that volume lessening on pullbacks versus rallies final contraction single figure percentage that's to help control your risk tightness in bars before the breakout we're going to be talking about a little concept that I also call trigger bars but minivini calls it the one two punch so we'll talk about that in a few slides time ideally you'd like to see volume on the breakout and after the breakout here you would like to see what minavin equals tennis ball action so after the breakout you would like to see higher highs and higher lows higher highs higher lows which is the definition of an uptrend so let's work through this example here so what we're going to say is price rallied from 50 down here up to the pivot point and the pivot point is also the buy point in essence okay so it's like pivot buy point if you like so prices rallied from 50 to 100 so it's gone up 100 and then it's been riding its 50-day moving average so for the purpose of this we're just going to use one moving average to keep the charts nice and simple so this is going to be our 50 day and generally speaking the stock has found supportive action around the 50-day and it does after the breakout as well there was one kind of undercut and reclaim which is a good thing remember we looked at the quickness of the recoveries and the reversals so I did really if price undercuts a key moving average you'd like to see that be very short-lived it recovers quicker so price moves up to a hundred dollars and then it starts building vcps or a vcp so there's three contractions in this space we have contraction one that takes the share price from a hundred dollars down to eighty five dollars so about a fifteen percent decline price rallies back up to one hundred dollars and then pulls back down to ninety dollars each time for the purpose of this finding supportive action around the 50 SMA but this could be the 21 EMA or whatever whatever you want to use so now it pulls back down 10 so we've had a decline first contraction of fifteen percent rally second contraction here of ten percent so 100 down to 90 and then we rally and then a contraction of five percent which is then from a hundred dollars down to ninety five dollars so we now have that the depth of the contractions lessening from left to right and building higher lows that's very good I just there's a rough kind of um a rough kind of indicator ideally the contractions are pretty much halfing in terms of percentages each time so you could go from like 20 percent to 10 to 5 it doesn't always have to be that kind of perfect but the better ones will you'll generally see that the depth of the contractions are roughly halfing each time but certainly the final contraction over here you'd like it to be in single figures now you'd also in terms of percentages now you'd also like to see the volume on the pullbacks declining relative to the volume that you're seeing on the increases why because that's an indication that there's more demand stepping in on rallies and then there is a lack of Supply lack of selling pressure coming through on the declines so it's a combination of two things it's a combination of the depth of the declines are lessening each time and preferably building higher lows so higher lows are bullish it's positive price action but the volume also confirming that there is a lessening of Supply there's supply has stopped coming to Market as minivini would call it and then you're looking for this tight final contraction here preferably in single figures so then your stop loss can go underneath the final contraction now it's not always that simple just to go stop loss underneath the final contraction I will show you a lot of variations but that there is a good kind of barometer okay it's a good starting point for us let's go on to our let's go on to our next slide which is going to be the volatility contraction pattern so it's still a volatility contraction pattern because volatility contracts but this is called the 3C so the cup completion cheat and I've got a couple examples as we go through here so let's say here well let's actually do what is the difference between a vcp that we just went through and say a 3C or a low pivot or a mid pivot it's basically where you're getting the type final contraction is lower on within the base so you'll hear and I've got a slide a little bit later on minavini talk about a low cheat a cheat and then also basically a high of higher base breaker so you get these pivot Points form in different areas of a base so you can get them forming in the lower third the middle third or the higher third so a 3C invariably forms in the lower third to the to the to the lower half pretty much if I walk through this example it then make a little bit a little bit more sense but some keys to be looking for it's still like price to be in a strong uptrend now price within eight percent of the 50-day moving average so with a 3C a cup completion cheat miniveini will buy it underneath the 50 day but as long as prices within eight percent of the 50 day but for the purpose of this I've actually shown it setting up now the best candidates invariably will set up above the 50-day moving average check out some the base with quick recovery so you see here how we go down to 90 and then we quickly recover tightness in pivot might be a mini vcp so you could have a larger base forming and I've got an example to show you a little bit later on you could have a larger base warming but because of the fractal nature of the market you could have a vcp form within a vcp so if you look at this area in here we actually have a vcp that then forms in the context of a larger but a larger vcp and or carbon handle type pan uh you want to see tightness in the bars before the breakout so this is the one two punch also called trigger bars in my definition uh you want to see volume lessening on pullbacks versus rallies as we discussed on the previous slide you want to see the final contraction in single figure percentages again to control the risk volume on the breakouts and tennis ball action thereafter the breakout so higher highs higher lows higher highs higher lows so when we're looking at this here this is the 50 day so price found support of action on the 50 day and then it undercut it made a lower high in here then makes a lower low quick recovery and then it reclaims the 50 and starts putting in these contractions over here now imagine if these contractions this time are going say this could be say maybe seven and a half percent then five percent then two and a half percent over here so oh well we'll say five percent so this pullback here could be five percent then maybe it's four percent then maybe it's here it's kind of two and a half three percent something like this so you're still getting the vcp action it's then making some high lows in here volatility is Contracting because we can see that is going into a tightening range and look how the volume is just drying up and then oftentimes the day before so the bar or the Candlestick before the breakout can often be the lowest volume that you see within the base or very low relative volume certainly underneath the 30 bar moving average for the uh for the volume this one here is the power play also known as the high tide flag so some several Keys as you'd like to see price Advance greater than 100 in less than eight weeks you can see here we're going from fifty dollars to a hundred dollars so 100 price amounts in less than eight weeks the peep to trough decline is less than 20 to 25 now that's an indication of strength because if the stock goes up 100 or more and then it only pulls back around 20 25 maximum that's an indication of strength especially if we dial it in look at some of the individual candlesticks is the stock then respecting key moving averages the 21 EMA is going to be much more applicable for a power play Slash High tight flag than the 50 the 50 is kind of probably going to be lagging over here um somewhere so I would suggest the 21 EMA or the 20 there if you want to have the 20 day is going to be a useful moving average to have on your chart because oftentimes you can then see that the stock is respecting it's 21 EMA and then kind of that really tight final contraction sets up around the 21 EMA but it could also be the 10 email as well that's just a suggestion by uh me tightness in bars before preferably the base is building high lows volume Lessing on pullbacks versus rallies the final contraction ideally in single figures to control the wrist the volume on the Breakout and you'd like to see tennis ball thereafter is also High highs highlights just on the final contraction single figure percentages it's also the reason that's important is to Auto control the risk but it's also an indication that there isn't much selling pressure there isn't much Supply coming to the market if the volume is dried up on a relative basis say below the 30 bar average okay and it's building higher lows it's just an indication that actually yeah there isn't there isn't too much Supply that's coming to the market so let's go on to the next slide which is going to be cupboard handles cheats and low cheats so often lower pivots can form within a cup with handle pattern so minivini has three he has the low cheat which is in the lower third of the cup he has The Cheat which is in the middle third of the cup and then the handle the kind of traditional William O'Neal handle in the upper third of the cup so let's go on to a slide too illustrate it so this is a cup with handle pattern and you'll see that I've pointed to a 3C here so a cup completion cheat because you see his price comes down this is our 50 day so imagine we've gone from say 70 to 100 pivot here price then loses the 50-day rallies into it puts in the lower high falls down but then you see in this region in here well we now have a mini vcp so we actually have a vcp from the low of the cup and then we have a vcp form in the handle as well so it's quite common that you'll see these little vcps where volatility basically contracts remember it's a pattern in and of itself but it's a characteristic of other patterns as well so here you can see we have where we have one contraction then we have two contraction three contraction building higher lows the volume really dries up before this receipt and then it reclaims the 50-day moving average so this is where minivini was talking about with a 3C so that kind of load that low G he will look for it within eight percent of the 50 day so it can be eight percent below the 50-day moving average which is what I'm trying to straight here just the subtlety on a cup and handle as you then transition up and out the right hand side of the of the cup you want to see bullish price action widespread decent volume coming through as well and then up here this would then be the kind of traditional handle you see how you get some vcp action going on as well one contraction two contraction three contraction break out and then you get your higher highs your higher low so your tennis ball action several keys with a cup and handle Peak the drop decline less than thirty percent so what I've Illustrated here from a hundred dollars down to seventy dollars tightness in the bars before the breakout so over here and also over here volume lessening strong rally out of the cut final contraction again in single figures for everything that we have been uh everything that we have been discussing so that is it for understanding a bit of the vcps I've got a lot of examples to go through a little bit later on the next slide we're going to be looking at a study of when do vcps work best so I'm going to take you through some of my own research for a study of when vcps work best and there are 3 000 breakouts in the next slide that I'm going to show you but this is the Dow Jones and again it's just showing them the price cycle or on the monthly chart this time from 1944 into the 1960s so you can see these green areas here which is indicating a strong Market Trend so any breakout strategy whether it be the likes of minovini Weinstein O'Neill Livermore Davis so on and so forth ideally you want a strong Market Trend behind behind you that proverbial tide lifting all boats the wind in your sails if you're trying to do it in these red zones where it's a phase three top or a phase four decline it's going to be much much harder so the market trend is very very very important this final period here that you see this is when Darvis made his proverbial 2 he made it well it's not proverbial he made his two million in the market ran about 50 million in today's money in a period of about 18 months two years so it was this period in here where Darvis I'm sure many of you have read that but it was this period in here so that strong Market Trend behind you is thinking about it from a price cycle is very very important so if you take a look here okay this is my own this is my own research So within this database there are 3 000 breakouts okay 3 000 different breakouts and I'm looking from the period of 1986 to 2000. and 20 and 2022 and what I'm looking at is when do these breakouts happen and looking at it from a context of the market Trend and a longer term Market Trend so what I'm looking at is when the NASDAQ Composite which is applicable for the stocks I trade stocks minovini trades as well okay one of these breakouts happening relative to when the NASDAQ comp is in an uptrend versus a downtrend and I simply Define that as the NASDAQ comp either above its monthly 10 email or below its monthly 10 email so this year this is the monthly 10 EMA for the Dow Jones so you can see how well just really really simple Simplicity is often the best you see how when the 10 email is trending up and prices above it you get the nice uptrend when prices below it and kind of chopping down that is when I'm saying that you're in a face redistribution top and or a phase four decline so what I'm doing here is looking okay when are these breakouts happening what is the importance of the market Trend behind you that tide lifting all boats well 90.77 so pretty much 91 of the 3 000 breakouts in this in this database which include the breakouts from minivini's book from O'Neill book from Weinstein's book from darvisburg from me just looking at thousands and thousands and thousands of them okay 91 are occurring in a month that the NASDAQ Composite closed above its monthly 10 EMA so that longer term trend on your side is very important so if you look at these green zones here just to kind of put it into perspective if you look at these green zones 91 of those 3 000 breakouts are occurring in these green zones okay I know they weren't actually the database is not for this period in time but this is just a visual illustration only nine percent are pretty much happening in these red zones okay so these green zones are where 91 pretty much of these vcps these power plays these cupping handles are occurring the longer term Market trend on your side is very very very important indeed so you could almost think about it are you in a 91 environment or are you in a nine percent environment so the longer term Trend also being in a confirmed stage two uptrend for the general indexes that tide lifting all boats the wind in the sales I cannot stress the importance of that so hopefully that side was was uh was enlightening for you and now we're going to be going deep down into vcps and I'm going to show you vcps from from over 100 years ago so carrying on with our Dow Jones theme you can see we've got it loaded up here from 1926 1927 and 1928 and what do you notice well you probably just spotted a vcp haven't you and you're probably like what had it on vcp form nearly 100 years ago 97 years ago at the time of filming this video how on after that happen and wait till you see the next slide as well this is back in 1904. this is over 110 years ago look at this one contraction two contraction three contraction then the breakout coming through why on Earth is that happening well vcp is a visual representation of supply and demand forces at what it is the effect it is not the cause so the vcp is not the cause the vcp is the effect of supply and demand accumulation and distribution okay it is one contraction two contraction three contraction four contractions you see how the depth of the contraction they're not quite halfing each time but certainly as we start getting into the second third and fourth contraction they're pretty much halfing each time we're going from a 12 decline to a five percent decline to a 2.5 percent decline now this is a little subtlety that we're going to pick up on in this video the Pivot Point okay the pivot buy point is not always the higher the BET okay it's not always right up here the highs of the base it's where supply has stopped coming to Market this is what a minibini studied live more intensely what Livermore called the line of least resistance so the vcp and understanding it is helping you to identify the line of least resistance where has Supply stop coming to Market where is it really dried out where can you create a more asymmetric risk versus reward trait and here's the Dow Jones so this is coming off of the bear Market lows in 1903 into 1904 so first contraction here eight percent next one five percent next one here third contraction 1.5 now note the extremely tight Candlestick this is on the weekly chart in the context of how the vcp has developed so you see the tightness of this bar and we're going to be talking about this about the one-two punch and I also call it a trigger bar see the tightness of this bar it's extremely extremely tap now I know we don't have the volume on the chart but imagine that the volume is very low so you've gone through the proper basing action one contraction two contraction three contraction above the key moving averages that are now starting to turn back up as well on the weekly chart then you get this really tight bar and the volume on this bar would have been very low as well that's indicating supply has stopped coming to Market there's hardly any selling around so this is the cause sorry this is the effect it is not the cause it's understanding what is going on from a supply and demand perspective of accumulation of absorption of Supply now let's start going through some actual slides so this one here this is Dick's Sporting Goods now something to be kind of aware about is v-shaped okay so you can see with with dks here and I wanted to do this one before we go into some of the more detailed ones do you see how this is very v-shaped in nature it hasn't actually had time to go through the proper vcp um action so constructive vcp action where you actually then get a mini so you see this is then it turns out to be a cup and handle type pattern and then you get a mini vcp forming within the handle here it's a decent sites around about four or five weeks or so isn't it some check out demand Tails price bouncing off the 50 SMA so these moving averages here this is the daily chart black line is the tedium a blue line the 21 and the purple line here is the 50 estimate but you see how here dks goes from the low of the base recovers quickly but it then runs up very very quickly so it's running into overhead resistance there are going to be trap buyers within this base who've ridden this stock down as soon as they get it back up near Breakeven what do you think they're going to be doing they're going to be pressing sell so then that Supply comes to the market but then the stock starts basing out correctly and then look at the tightness that you get over here look how the volume dries up as well and something else to be looking for I'll start talking about it now is relative strength so relative strength is extremely important why because relative strength will lead you to the best opportunities in the market because relative shrimp it's not my opinion it's not your opinion it's the opinion of the market now I have a free relative strength line on trading view search my name in the indicators you'll find it you'll be able to use it do you see how dks here is hitting 52 week highs it's hitting 52 week highs in the base it's hitting 52e cars very soon after the breakout as well if it's got 52 cars and a very strong relative strength line it's an indication that the stock is a leader in the Market at that present moment in time so don't rush the vcp let it go through through the constructive proper vcp action you can see a little vcp in here as well see that one contraction two contraction tight tight tight for this little lower lower pivot and then aggregate so let's start going through some so this one here this is Cyrus logic now this is more of your standard vcp your volatility contraction pattern higher base breakout I've got some low mid pivots and all all sorts of variations to show you in in um in slides to come so with Cyrus logic here it pulls back down for the first contraction bounces it then actually tightens up in here for a mid pivot because it's pretty much in the middle of the base and then it comes up to the high so it's now running into this overhead resistance so it's logical isn't it price is running up there's trap bars up here there's Supply that comes to the market the stock has to absorb that Supply so then we're looking for that constructive vcp action and within this region here we actually get a mini vcp within the context of a larger vcp and or cup and handle so fractal nature of the market patterns will form within patterns so here you actually have one contraction two contraction three contraction look at the tightness coming through now this is a concept that I'm going to be talking to you about as well which minivani equals the one two punch I just call it the trigger bar because visually for me this is what I'm looking for as well so at the end of a proper vcp invariably you will see an extremely tight range bar on low relative volume and the volume can often be very close to the lowest in the base if not the lowest in the base so this is the volume here in this black line is the 30 bar moving average for the volume so you see how the volume dries up and look at the tightness in price in the context of a proper vcp this is an indication supply has stopped coming to Market this stock is ready to move then ideally you'd like to obviously see a powerful breakout but a common theme you're going to see on the best of the best is this kind of one-two punch this volume really drying up tight tight tight bar preferably sitting on this black line here is the Tenny May that's just something I found probably invariably that trigger bar is going to come through around the 10U mate and or 21 EMA 52e ties good volume look how the moving averages are just sloping up like this they're kind of fanned out in a way as well so let's go and do a vcp so a low and mid pivot now this is eBay in here so I'll actually start over here eBay is obviously in the context of a very powerful uptrend this was soon after its IPA we can see it's a leader we've got the 52-week cards look at the bounce of volume coming through as well and look at the kind of relationship with price as well these widespread candle 6 minovina users bars I personally like candle six which is why I've used candle six if you get these widespread candlesticks look at the volume coming through fantastic stocks in a powerful uptrend then here it starts the base so see how it pulls down finds support on the blue line the 21 EMA and then it builds this mini little cup and handle it's like a low handle so a low pivot so see how you get this tightness here so remember the volatility contraction pattern the volatility contraction is a pattern that you see within other patterns so this is more of a kind of cup with a very low handle so a low pivot look how the volume dries up you get that one two punch really tight bar before it goes again so this tightness in price low relative volume really key to look for now this is more of your kind of classic mid mid to low pivot I would say it's more of a mid pivot so you have the first contraction here bounce run into this overhead Supply so it's very logical you've got a lot of trap bars up here they get back in their Break Even they're going to press sell sell orders flood the market price pulls back down but look how you build a higher low you get what I call a ShakeOut demand L on the low here this is a gap down reversal bar as well but they ShakeOut Demento then you bounce and look how tight the third contraction is I'm sure many of you would have read darvis's book as well oftentimes you can actually see the the final contraction maybe that's the third contraction maybe it's the fourth maybe it's just kind of a low pivot forming within the base oftentimes you can actually see a mini Dart of this box which is pretty much a rectangle so these sideways consolidations are really ideal to see it may only be kind of four or five bars as we're seeing here these mini kind of Darvis boxes for me but that's very good to be looking for so you get this mini Darvis box for me right around the 10 21 and 50 SMA look how the volume dries up for the one two punch then add it goes so no I I keep on labeling this what are the characteristics of the final candle say so it's What is the characteristic what is it looking like before the stock moves out really really important to study this in a very deliberate very deliberate manner this is icpt so this again is more of a mid pivot so the stock has a huge move up here going from around about 60 50 to 405 dollars get a huge huge move look at the volume coming through and then it pulls back into its 10 EMA so the black line is atenema Blue Line 21 purple line is the 50. gray line is the 100 and then the red line here is the 200 so our moving averages are like this the stock is clearly in a stage two uptrend and then you see here remember I was just talking about that mini darbus box forming as well we'll see how for a what's that maybe 10 bars eight eight ten bars in here you're just moving sideways and look how the volume is just stair stepping down I'm very visual for how I learn so do you see how the volume is trending down but it's also kind of stair stepping down as well that's really good to see so your volume stair stepping down kind of tight sideways consolidations think of it as a rectangle little Darvis box as well and then you can see tightness of the final bar volume dries up I think that's probably the lowest volume bar thus far in the bass but arguably the tightest Candlestick as well and then it goes and see our price is sitting on the 10 EMA so you could be thinking on this bar here well this is this is this is this is a this is where the volume is dried up it's a tight bar yes but it's extended from the 10me so what I would say is when you're doing this and you're studying and you're building out your own model but look for price to at least be around the 10 EMA and the 21 EMA may be there as well just help you kind of maybe avoid some of the extended stocks like up here you see how prices kind of it's wedged up here this is a little subtlety prices wedged up here is extended short term but over here it kind of pulls back in little Darvis box action again the volume dries up so the 10i May at a minimum I think is something something you want to look for certainly on power plays this is a cup completion cheat so this one here I've I've chosen this one because it's kind of like the rounding out of a cup but sometimes you can you can see what looks to be kind of the rounding out of a cup and handle but then no handle forms so this is why understanding the the cup the cup completion sheet so the low cheat and the cheat is affected because sometimes you can think well I'll buy if a if a handle forms up here but no handle forms so what we have is Socket we have a positive reaction to the earnings we get a very good sense especially if it's more so kind of a growth stock a can a can slim name of what what are the bigger boys doing what are the large operators the institution doing around the earnings well if we see huge relative volume coming through positive price action and the stock moving up like this it's probably an indication certainly if the Stock's not just run up 100 from a base and it then goes and built a base we get an indication that actually larger operators potentially accumulating this stock especially maybe if there was a very positive earning surprise coming through on the earnings and the sales or something like that we can see that there's good volume and good price at Price Advance prior to the rally or prior to the base as well so this rally there's a lot of evidence that there's some there's some strong demand for this stock why are we seeing it in the price action we're seeing it in the volume we've got the 52e cars on the relative strength line the rally has gone up 94 and then Peak to trough we pull back down 27 So within that kind of 30 ball part for a cup and handle and then see how price respects the 50 hit this shake out demand L on to the 50 then we bounce put in this high low and then look at this here okay look at the tightness in price and consistently low volume and what does that mean it means there's very little Supply coming to the market look how the volume dries up so you get tightness in price volume drying up and it's kind of that trigger bar type action it's the one it's the one two punch look how tight this bar is you actually get the tightest bar in the base and the lowest volume it looks like within the base before price breaks out like this so it's an indication there is no more Supply coming to the market now these these kind of what I just I just call them trigger bars okay but you call it a one one two punch bar whatever you want to call it it does a couple of things in the context of a proper base it tells you gives you an indication there's very little Supply coming to Market so price should move quickly through this level but it also means that you can control your risk as as well and we'll come on to stop loss placements a little bit later on in the in the video this one here this is a power play Slash High type flag so we can see that the stock here from the lower this bar here to here Stock's gonna have 392 and the peak to trough decline is 26 and you might be saying well earlier on in the video you said it's got to be between 20 and 25 apply a little bit of Common Sense here okay the stock has gone up 396 and then from the top of this bar which is a supply Chute to the lower this bar which is a demand tail it's only gone down 26 that is an extremely strong stock and it holds its 10 EMA and then it builds this flag type pattern and if you take a look it's actually building higher lows within the base with some volatility contraction pattern characteristics why well if you look here we're building the high lows we've got kind of one contraction two contraction three contraction really tight look how the volume is generally drying up certainly in the last three days we get these multiple tight candlesticks this is saying that there's very little Supply coming to the market and prices respecting the 10 email the strongest of the strong kind of power play high tide Flags will respect their 10 EMA and or 21 EMA as well just a little subtlety here this is to apply to vcps and also power plays note the prior trend of the stock this is just my own own just my own experience basically that if a stock is trending up and it's staying above all the key moving averages and it's not chopping around underneath them like this it's just all over the place it could be a much better stock to trade because it's a smooth mover so if you then think about your trade management rules and we're going to come on to that later on in terms of minivini and when to sell you ideally you want to see a stock that is less choppy it's just a smooth mover because the trade management side of things could then be easier because if you're going to use a key moving average or two as your trailing stop ideally you would like to see the stock has respected that in the prior rally the reason is in my view the best indication of how a stock is going to act in the future how is it acted in the past stocks like humans have personality characteristics when you build out your model books you will probably come to the same conclusion as well just another thing on this one if a stock hits so you see this you see these blue dots in here the stock is hitting 52-week highs while it's still in the base on my relative strength line if a stock is hitting 52e cars well it's still basing in the context here of power play or a vcp it's telling you it's extremely extremely strong it's that proverbial basketball being held underneath water now the next one here this is the cup with handle and vcp so I just really want to stress the point that the vcp it doesn't always have to look like a perfect or one contraction two contraction three contraction it's a characteristic volatility Contracting is a characteristic you see in a lot of these other chart patterns whether it be Flags whether it be cup and handles whether it be Darvis boxes okay so you can see here we get this cup and handle note How ba systems this is a bay system this is a UK stock note how it's pretty new in terms of its IPO as well so the 50 kicks in here the stock respects the 50 which is a good spot for large operators to come in and step in and then you see over here it actually builds out a mini cup and handle because there's little one contraction then it's tightening see how you get the volume drop the one two punch what are the characteristics of that final Candlestick then the powerful breakout comes through so it's very important to understand from a pattern recognition standpoint what are the repeatable patterns you see and then in the pivot so I.E just before price breaks out in the pivot as the pivot is developing what are the characteristics you see what do you see where is where are the final bars or the final candlesticks in relation to key moving averages what is the volume doing what are the characteristics of said candle 6 or bars really important to study everything in an extremely deliberate manner so this tightness in price gives you two things it tells you not much supplies coming to the markets in the context of the overall chart pattern but it also enables you to better control your risk as well create more asymmetric recessable trades and probably should move very quickly through that level because there's little Supply coming to Market so some demand coming in can quickly tilt those supply and demand scales price can move out rapidly you can free roll the trade and then look to ride the train also just a little subtlety look at the volume and the rapid price Advance coming in before this base built really good seat look at the 52 Week highs as well strong strong shot so let's go into this vcp one two punch which I just call a trigger bar um for me in my head that is the proverbial final piece of the jigsaw puzzle that I'm looking for when I see a vcp a power player carbon and or diverse box or whatever it may be for so the trig bar does two main things as I've been blabbering on about one in the context of a proper base indicates little supplies coming to Market and two enables title risk control those two things are really really really important so this one here this is ticker color so it's a power play so the stock goes up from here to here goes up 130 now Peak the trough it only pulls back to the lower this demand tail 13 so you have a stock that goes up 113 but 113 and then only pulls back 13 it's telling you it's extremely strong it's ridiculously strong and then what do you see over here the extremely tight Candlestick sitting on the 10 EMA and this here is your one two punch look how the volume dries out but what I would say is ideally just for me this my own experience I like to see at a minimum the 10 emulator for a power play so you see here how price isn't because I want to get my initial stop loss ideally underneath the 10 email for me that's just a better better kind of Aid if you like a tool or guideline for where I want to be so up here yes price is very very tight and you're getting kind of the one-two punch but the stop loss well I'd have to put it all the way down here and the reverse reward is getting a little bit out of whack so you see here you would have been filled here and then knocked out here so I just like to see the kind of 10 EMA hopefully that point is kind of sinking up so like here you see how you get this one two Punch coming through but my stop loss could be underneath the lower this bar which is pretty much going to tie in underneath the 10 email so pretty much at a minimum what I'm saying there for me I would like my stop loss to be underneath the 10 EMA that's just my experience it's not covered in the book I'm just giving you a little bit of my a little bit of my experience there 52-week highs 52-week highs on the breakout bar so a couple other other subtleties here if you get a 52 week high in the base it's very very strong so if you get a 52 week car on the breakout it's a very strong stockings indeed so you can see the 52-week high coming through on this breakout here and then over here for this final one 52 week high Blue Dot coming from the breakout really really really good too see now let's go into the primary base so the primary base is basically the first Bible base following an IPO so sometimes it can happen like this that it actually occurs I'm going to show you Pega I'm going to shoot Amazon as well so you can see Pega here actually builds out a cup and handle type pan so this is more than a mid pivot slash handle it's more of a handle it's a little bit hard so here's your proverbial cup then here's your handle you get the tightness in price but the darkest box action see how price it's basically just go sideways for around about eight but eight bars you get a 52-week high in the base would have been mean saying 52 week high in the base extremely strong stop breaks out and then this is more of a classic vcp because you do have one contraction here you sorry first contraction second contraction and then you tighten over here what do you notice okay that little kind of rectangle so again just visually this is very very visual in terms of pattern recognition I'm going to talk to you in the final slide of this presentation about how you can improve your vcp skill set but do you see how you get this tight action here and look how the volume dries up this looks just visually like the lowest volume within the bass and see where it sat just on the 10 EMA okay do you see that so number one it tells you in terms of a proper basing action very little Supply coming to Market if it sends out on the 10 EMA as well it at least the 10 email then can it then can enable tighter risk control to create more favorable reward to restraints as well so it's very very important looking for those kind of one-two punches those proverbial trigger bars as well but this is basically when a stock IPOs oftentimes it can sell in the first couple of days first weeks first months so you're then looking for that first basing action and the first basing action is basically then the first prudent time if you're trading BCPS to then be looking for looking for a entry point Amazon so you can see here with Amazon initially sells off after the IPO it's very very common to see that if a stock doesn't and if you remember you can go back you go and look at Dick's Sporting Goods that was actually an IPO and that's the one I was talking about the v-shaped rally and then it went through the constructed basing action Dick's Sporting Goods had a very good rally straight from the IPA back there can also be a sign of science trunk to be looking at but Amazon sells off it then puts in some vcp action much more of a low pivot down here so you have one contraction two contraction look how the volume dries out then big volume comes in 52 cars stocks a leader and then see how it pulls back down here and you get one contraction two contraction three contraction look at the tightness look at the volume drawing up then very soon after the breakout there's your 52-week cars coming through so it's not always kind of down here maybe that was an entry maybe there wasn't volume did dry up on on that bar here I'd say that one is much harder um to kind of identify in in real time so to speak than this one this one in here but see how price comes back up to near the highs of the base absorbs the supply and then these multiple tight candlesticks in the volume drying up is also telling you something it's telling you especially if prices rally to the highs and then you start to get these tight candlesticks and volume drawn up it's telling you there is not much Supply coming to Market that's very good in the context of a proper basing uh forming as um as well so let's now go on to positive signals after an entry so we're going to look at positive signals and negative signals after an entry these are in minavini's uh and words I may paraphrase it a little bit but the position shows you a profit immediately there is follow through buying demand so the share price is then just going up afterwards widespread candle sex or bars volume coming through 52 cars on the RS line would be very good more updates and or weeks and down weeks strong closures on bars candlesticks that tennis ball action higher highs higher lows higher volume on the rallies low volume pullbacks price holds above key moving averages such as the 20 day and the 50-day negative signals after an entry low volume on the breakout followed by high volume back in so it kind of goes on low volume and then just pulls back down to kind of a fake out breakout three to four consecutive lower lows on high relative volume more down bars more down bars and candlesticks than up so you can use bars you can use Canucks whatever whatever you want to use and again I would just say whatever visually works best for you to identify the vcps use that so if you do that better with bars use bars if you do that better with candlesticks use candlesticks that simple wheat closes few strong closes a close below the 20-day moving average soon after the breakout is a very bad signal even worse if it closes below the 50 day very soon after the breakout volatile price action in terms of to the downside as well okay price should really just go to the upside the stock squats after the breakout and doesn't reverse high so it kind of goes pulls back down on that day and then it just doesn't reverse back high it just then kind of falls back down into the uh into the pivot so that there is concluding that section in the next section we're going to be going into how how do leaders act I've got some really interesting charts lining them up versus the market so you can get a much better sense of how do these leading stocks Act how do leaders act so the best stocks is quote from minovina the best stocks make their lows before the market bottoms so I've got some really interesting charts to be taking you through let me just explain it first so what we've got on the top chart is we've got a chart of a stock in this case for the first one we have got eBay but we're going to be looking at we're going to be looking at eBay Amazon Amgen all sorts we're going to be uh we're going to be going through so we've got eBay loaded on the top on the weekly chart and then below that we have got the NASDAQ Composite and I've lined the dates up as well so both of these are weekly charts now there's some key points that I want to illustrate to you what is happening from a structural perspective what is happening from a relative strength perspective as well so we can see with eBay eBay bottoms here in just before two and just before 2001 so in Q4 of 2000 eBay puts this bottom in here and then it starts building higher lows in the base but what do you notice the NASDAQ comp does well the NASDAQ Composite actually makes a lower low so see here where eBay in October of two thousand 21 is putting in a higher low what is the NASDAQ Composite doing the NASDAQ Composite in the same period is making a lower so eBay higher lows now is that composite being the index putting in lower lows which is stronger eBay right and that's why you're seeing the relative strength line turn up this is relative this is relative strap then if we look at eBay here to where the NASDAQ Composite puts in its low so in October of 2002 do you see how eBay has gone higher low higher low whereas the NASDAQ Composite has gone lower low lower low so while the NASDAQ Composite is on its lows eBay is trying to come out of this vcp do you see that and how Ebates consolidating around these key moving averages look at the 52-week cars look at the 52-week cars whereas the NASDAQ Composite is below all of its longer term weekly moving averages down here so when the NASDAQ Composite puts on its low on the same week eBay is trying to come out of a vcp base that there is fascinating so this is where the relative strength Point by the end of this section the relative sharp point should really be hitting home okay because if you think about some of the biggest winners in the market you think about coming out of bear markets you think about the ebays the Amazons the amgens the Teslas whatever it may be the market doesn't miss the best opportunities it doesn't miss it okay how do we find what the market deems the best opportunities are relative strength focus on the relative strength line let me go through I've got Fair few examples to be going through and hopefully it will really start syncing out so if we take a look at Amazon this is in the early naughties bear market so Amazon puts in its low here okay in around about September of two of 2001 Amazon puts its low in here okay but the NASDAQ Composite thereafter makes a lower low okay see how it's making a lower low into September or October of 2002. see that how it's making a lower low what does Amazon do Amazon puts in a big high low do you see the discrepancy here that Amazon puts in a big high low reclaiming all key moving averages and tightening up here so some vcp action getting really really tight the volume dries up whereas the index is making a lower we all know what Amazon then did over the next 20 years right I'm not saying that you will then held it for the next 20 years but the market doesn't miss the best opportunities there are just too many smart operators smart just haul hide investors in the market to miss it relative strength is how we find it do you see the 52e cars coming through as you see it 52 week after 52 car the market doesn't miss the best opportunities this is Amazon again this is in and this is in 2020 so the covered bear Market see how as Amazon pulls back down here look at the 52-week highs coming through you see Amazon's relative shrimp then it puts in this little kind of low this low pivot low cheat in here tightness in here and it's nearly above all the key moving averages whether whereas the index isn't focus on the relative strap another one this is Netflix so sure you're all aware of this so Netflix went on an absolute tab following the great the great financial crash so Netflix actually puts in its bottom over here July roughly July August so the summer of 2007. look at what the NASDAQ Composite did over that time period so now that's that composite matches here and then it puts in these lower lows into the low of October 2028 and then a further low okay into into 2009. but where is Netflix well the price of the NASDAQ Composite is below all of these key moving averages it's been making lower lows Netflix is up here Netflix is making higher lows high lows higher lows so then as that proverbial basketball okay is being lifted out that pressure of the market holding the basketball underneath water is being lifted and the market starts to Trend up Netflix just goes on an absolute absolute tap next one here this is mnst so this is this is maybe the best example and when we go on to the fundamentals I'm going to show you the importance with monster beverages because it went on a huge run you can see nine and a half thousand percent here I'm going to show you the importance of importance of accelerating earnings sales and auto margins but you see here look at the NASDAQ Composite during the same time period it's making lower lows lower lows what's Monster Beverage doing high low high low high low and it's really hard to see here but the tightness that was coming through ridiculous this is kind of a perfect VCB it's probably the most perfect vcp you'll ever see on the monthly chart um as as well look at the 52 each highs in the base if the stock is hitting 52-week cars in the base is extremely strong and then it starts breaking out here the weight of the market is lifted and this basketball is just released from being underneath water Up and Away it goes phm so we're now going back to the 1980s same principle do you see how P how phm here see how it's building high lows it gets this vcp action look at how the volume dries up look at the 52 Week cars whereas the market is making a series of lower lows so this stock here even though the market then goes on to so July 1982 this stock is breaking out of this vcp and then goes up eight it goes up 800 percent whilst the index in the same time period goes up 80 so this stock goes up 10 times more 10x more 10 volt more than the index it's breaking out before the index even makes it load the stock is extremely strong and then it's breaking out on the weekly chart with a 52 week high do you see the importance of relative strength in the 52 Week highs Tesla stock that I'm sure you will know so point that I want to make on this one is if you take a look at Tesla on the weekly chart pulls back down to this red line which is the 40 week which is a 200-day moving average so you see at this point here Tesla holds above the red line the 40-week moving average where's the index it's below its 40 week it's also below its 100 week as well this kind of navy blue light so this is relative strength as well visually whereas the price of the stock in terms of relation to its moving averages versus say the index or the group or other stocks as well so Tesla is holding its 40 week whereas the index being the NASDAQ Composite is below the red light by some March as well Tesla learning goes and builds this cup and handle 52-week highs 52-week highs do you think the market had identified that this could be a extremely strong stock of course it did so there's your cup and handle type action there's the tightness in price so you get that vcp action on the weekly chart Up Up and Away Tesla goes looking at a couple of angem back in the 1980s so you see how the market is basically going sideways here maybe there's a little lower low here but what do you notice amjinstone Amgen is building higher lows higher lows higher lows Contracting look at the 52-week highs coming through as well look how the volume dries up I know I'm banging on here but it's really important to understand that relative strength will lead you to the best opportunities in the market if you trust the Market's judgment this one here this is this should be screaming at you okay so this is Amgen here in the 1990s look look at what the market is doing look at these lower lows that the Market's making so from early 1990 to late 1990 into kind of autumn get into into September November look at the market the market just falls off of a cliff here especially here as well but as the market is just tanking here what's amjin doing amgen's above pretty much all key moving averages and it's just making a series of higher highs and higher lows look at the 52-week highs coming through okay then from the first trigger bar so this bar in here Amazon goes up 300 while the index goes up nine percent do you want to be in the index or do you want to be in the leading stock focus on the leaders relative strength is how you identify the leaders this one here this is odf out so again this is in the early noughties bear Market so what is the index doing well series of lower lows lower highs lower lows lower highs lower lows lower highs lower lows lower highs lower lows lower highs what is odfl doing this is a trucking stock as well what's it doing here well it's actually putting in higher lows and making higher highs and then look at all these 52 week highs in here and then you see how price it builds this little vcp what decent size vcp on the weekly chart gets really tight the volume dries up I know it's hard to see 52e cars all over the place and then up up and away again it's coming out of a base before the index even makes its eventual look at the 52-week cars the stock is screaming at you if you focus on relatives this one here this is an extreme example okay this is nxgm see how the index hit early naughty's bear Market lower lows lower highs lower lows lower highs lower lows lower highs what's the stock doing High highs high lows High highs highlights High highs highlights so look look at this here when the index puts in its low in September of two of 2002 this stock is coming out of a vcp it is one contraction here's two contraction here's three contraction volume Drive 52 week highs focus on the leaders guys next one here this is GE General Electric back in the 1980s so more in kind of its growth grow effect but the market is making lower lows lower highs lower lows lower highs lower lows lower highs what are you doing high lows higher highs high lows higher highs high lows higher Heights so it's coming out of a base while the index is still down here on its legs look at the 52 it cars it's telling you something and then the final one I've got of these is you're probably fed up with them this one here is Deckers Outdoor so see how the stock pretty much goes sideways during this time in here look at the RS line turning up in the 52 cars what's the market doing well the market is making lower lows lower highs lower lows lower highs lower lows lower highs versus stock is pretty much going sideways and then look at the tightness that comes through here okay see the tightness that comes through and then as the market starts trending up so that proverbial weight of the market pushing that basketball underneath water is lifted and you start to get that longer term Trend remember what we would looked at with the NASDAQ Composite and the monthly 10 email as that weight is then lifted and it can Trend up these are when these explosive stocks the strongest ones in the market as identified by relatives can really get going so hopefully that that there was uh was enlightening for you in the next section we're going to be looking at fundamentals of growth stocks so what are the most important fundamentals of growth stocks well in my view there are three and in minovina's view there are three as well its earnings its sales and it is after tax net margin so earnings sales margins and you'll see in his books he referred to them as a code three when all three are accelerating so earnings sales margins are the other three most important things to be focusing on so sales how can a company increase sales well they can raise prices and or they can sell more units of existing or new products how does a company increase their margins well they can raise prices they can cuss they can cut costs of goods sold they can improve productivity they can remove losing and inefficient operations as well now arguably one of the most important things is actually margins for increasingly earnings per share because stocks ultimately are driven buy buy their earnings I think it's a Warren Buffett quote where it says in the short term the market is a uh in the in the short term the market is a voting machine in the long term it's a weighing machine and what he means by the weighing machine is in ultimately it comes down to the companies the company's earnings but a company can see massive price advances on the expectation of future earnings as well so I just want to give you this example then we're going to start breaking down a a couple of things so this is Monster Beverage and we looked at this on the weekly chart versus the nasda.com but here it is here on the monthly chart do you see it so this is in the early naughties bear Market take a look at these 52 cars coming through you see this 52 cars on the RS line the stock was screaming at you at Social the market does not miss the best opportunities it just doesn't that is my belief so see how you get these contractions you get one contraction two contraction three contraction you get nice ShakeOut demand Tails as well and then remember what we were talking about the one two punch the trigger bar really hard to see because it's so tight but sitting there right there on the monthly 10 EMA you get this trigger bar this one two type action and then the stock goes up around about nine thousand percent in the space of 35 months now what was going on from an earnings per share a sales and a net profit margins perspective well in 2003 the earnings per share was 75 and the sales were plus 20 and the net profit margins for the year were 5.4 versus 3.3 for the prior year in 2004 we see an acceleration so the earnings per share for the year are up to 214 Sales Plus 63 acceleration in the net profit margins from 11.3 percent from sorry up to 11.3 from 5.4 we see a further acceleration in the earnings per share plus 195 Sales Plus 93 net profit margins accelerating from 11.3 to 18 so when a company starts significantly accelerating its earnings its sales and really importantly its net profit margins which I'm going to show you on the next slide and you get kind of the technical action setting up as well as you can see here with monster beverage you can get some Almighty moves in the uh in in the stock market so let's just take a look here at the importance of margins so this area is really telling so let's imagine we have a software company and we've got a couple of scenarios so this software companies its revenue is 10 million and its profit margin is 15 and it has 1 million shares outstanding so we can work out the earnings per share and ultimately in the end the company is going to be valued by its earnings so you think about why is why is Amazon so big why is Apple so big why is Microsoft so big it does it does ultimately come down to the earnings of the company so this company here is earning a dollar fifty in terms of the earnings per share okay what if we if for a scenario one we increase the revenue by 50 percent so instead of the company's Revenue being 10 million the only fact that we change is 15 million okay sorry with the only the only Factor we change is the revenue so we're going to increase it by 50 which would be an increase of 5 million so the company's revenue is now 15 million profit margin stays the same 15 shares outstanding says the same of 1 million shares so now we can work out the company's earnings per share is 2.25 which is a 50 increase in the EPS now let's factor in the margin so this is potentially why you saw such a huge advance in Monster Beverage because the net profit margins went from 3 to 18 so yes having the earnings growth yes having the sales growth is very important but having the margins improve as well is significant let me explain why so in scenario two we're going to keep the revenue the same as scenario one so the 50 increase relative to our beginning example over here but now we're going to increase the profit margin okay we're going to move our profit margin from 15 to 30 and you may be saying that isn't very much it's only 15 increase watch this so the shares outstanding stay the same at a million but now when we work through the calculation here we now go up to 4.50 earnings per share that is a 200 increase so do you see the dramatic effect by if a company can increase its profit margin increase its margins the effect that it can then have on the earnings per share it can be to a much greater extent more kind of impactful than the than the sales going up okay really really key to focus on the margins accelerating as well because that can drive huge earnings per share increases so let's go through a couple of other fundamentals as well and this here is a quote from minovina so stocks very often top out while earnings still look good now I've got three stocks to be um three stocks to be showing you I think I've got Zoom I've got paletin and I've got a PPS apps as well so this one here is actually Zoom so we can see from the classic classic kind of uh stage stage price cycle we can see so the price cycle and and the various stages we can see stage one down here stage two stage three and then stage four what do you notice about the earnings coming through appreciate it may be a little bit hard to see but when the stock tops out when Zoom tops out here the earnings are plus 999 on the markets method remember there's that there's that discounted trial if you're interested in that in a market Smith Market Smith chart in the comments below so you see in here 999 999 but the stock tops out very interesting isn't it so the stock can very often top out when the earnings are actually at their Peak why because the market often views things is are things getting better or are things getting worse so there was actually then a deceleration in the earnings thereafter and this is about trusting the Judgment trusting the opinion of the market so earnings then slip from 999 to 713 to 560 they're still huge numbers coming out but then look 48 12 6 minus 22 minus 23 minus four minus five so the market was then discounting the material slowdown that was going to come through in the earnings so it can be very kind of illogical at first to kind of understand that well hang on a minute the stock is reporting its biggest earnings and yet it tops out this is where looking at the earnings focusing on it thinking is this unsustainably high and how far has price come in the context of its price cycle has it just undergone a four for a fifth stage base has it just run up from 80 to 600 odd dollars okay context is very very important this here I think this one is Peloton so Peloton builds a stage one base here it runs up this stage to uptrend and you can see for a couple of quarters the company is profitable you can see 259 211 190 the earnings per share but the company then tops out here whilst it's reporting these very good earnings coming through on a quarterly basis well then look there are then no earnings to speak of so the market is then discounting the fact that well there's no earnings it's not it's not going to live up to the hype that kind of future expectation that Peloton had or the big earnings of people kind of staying at home and that product and stuff like that fell away and then you go stage three into stage four here so the earnings really important to to focus on for these um growth stocks this one here this is I believe this is apps this is apps so we can see here the earnings are accelerating during this stage two uptrend 67 160 200 320 400. so the company is then topping out between its highest reported earnings on a quarterly basis but it's in year over year the percentages so 320 here to 400 here is when the stock starts topping out so remember that minivani quit the slots can up and top out when the earnings look very good and then you start to see the Slowdown so where is still high in triple digits it is then materially slow 162 193 133 56 12 minus 23 minus 41 and it's in obviously then this stage four in this stage four decline interesting right so let's take a look here so this one here this is Arista Network sticker for this one is a net ridiculously strong stock at the minute and if we take a look well earnings per share on a year-over basis continue to Ticker so going from 1.40 to two dollars to two and a half dollars to 2.87 to four and a half dollars to five dollars to six and a half dollars for the estimates guidance coming through is good and the revisions are up you can see that 27 plus 11 and then take a look at the earnings in the sales here do you see how the earnings are accelerating on a quarterly basis and these percentages are year over year to just out the seasonality 35 59 69 72 here 27 31 49 57 55 look at the relative strength line look at the stock breaking out of this big vcp base on the weekly chart ridiculously strong stock at the minute but you can see the earnings you can see the sales coming through there and they are accelerating really really really important this one here this is smci super micro computer so huge earnings coming through at the time of filming this and huge sales coming through as well so the earnings in the most recently reported four quarters 210 223 490 270 and the Sales Plus 51 plus 53 plus 79 plus 54 and you've got an acceleration generally in the margins as well from 6 to 8 to 10 so earnings up sales up margins up look at what the stock is doing look at these rslans ridiculously strong and then I've just circled in Black here well we get a good sense of what are the large operators up to around the earnings so we can see Gap UPS here on volume and preferably well preferably you'd like to see strong closes but a lot of these closures are pretty strong as well we can see it in here and here and here and here to a lesser extent here and the earnings at the time of filming well when I put this slide together are coming out in a couple of weeks time so we'll see the reaction to the earnings currently basing quite well but focusing on earnings accelerating sales accelerating margins accelerating and what is the reaction to the earnings that's that's the most important thing it's not it's not what you're you're kind of reading the statement going oh I think this I think this focus on the market reaction to the uh to the earnings this one here another ridiculously strong stock which is on this is on the weekly chart Great reaction to the earnings coming through huge relative volume coming through in there look at the estimates coming through for the this year and next year with the guidance up look at the sale who's accelerating 61 42 89 four quarters of triple digit earnings coming through this is a ridiculously strong stock so hopefully that there was a very good kind of overview of fundamentals focus on for growth stocks in the next section we're going to be going through how to screen for vcps so how did you go about screening for vcps well minivini refers to his 95 club which is characteristics of the biggest winning stock so this is a study that he did study that O'Neill did as well and it's called Factor modeling so what he's looking at is okay the biggest stocks the stocks that have gone on the the biggest runs those winning stocks what were the characteristics of them and then you reverse engineer it basically so 99 of them were above the 200-day moving average and before I read out this list this is important because it feeds into your screening criteria because you want to know well what did the biggest winning stocks do and then your screening criteria has the parameters to find and that help identify these stocks that match those characteristics so they are displaying similar characteristics to previous big winning stocks so 99 we're above their 200-day moving average 96 were above their 50 day 95 had a small flow under 30 million shares outstanding 95 showed earnings accelerating 96 began their big runs from General market correction and or pullback periods 95 had a growth Catalyst such as a new product service or a positive company and or in the street range 17 reported earnings plus 20 in the most recent call to remember we're talking about the importance of earnings an 80 IPO within the previous 10 years and 98 of big winning stocks made the largest proportion of that gain in a stage two uptrend so he refers to this you want to be in the 98 club or the 2 Club as well so our screening and the vcp Tran Trend template so the minovini trend template is looking for stocks that potentially meet those characteristics so this is a trend template there are eight parts to it the share price above both the 150 day 30 week and the 200-day 40-week moving averages the 150 days above the 200-day moving average the 200-day moving average is trending up for at least more months preferably four or five months the 50-day 10-week moving averages is above the 150 and also the 200-day moving average the current share price is at least 25 above its 52 Eagle the current share price is within at least 25 of its 52-week height IBD relative strength is greater than 70 preferably in the 90s William O'Neill's study found that the average relative strength rating so from one being terrible 99 being fantastic the average relative strength rating was greater than 87 for the stocks when they actually broke out and went on run to focusing on those top percentile stocks really really key in the market from a relative strength basis current share price is trading above the 50-day moving average but within eight percent for low for low cheats and that there it feeds into your screening criteria and it's based on the fact that okay what are the big winning what are the big winning stocks do what what characteristics did they resemble and then your screening parameters are helping you to try and identify those stocks which meet those which meet those criteria so you can run these Trend templates in uh in the likes of Market Smith they have their own minivani Trend templates you can create it in in other charting softwares as well if you uh if you want and then on the next slide we're going to be going more into risk management I'm going to take you through optimal risk versus reward ratios okay here we go with optimal reward to risk ratios now this is going to feed into the risk management aspects but also what I'm then going to cover thereafter this slide is the when to sell so getting into some of the sales so minovine is quite a hit you always want to get odds on your money so what we have here is we have risk versus reward and we have the Breakeven win rate so you want to get odds on your money because if your risk is three units and you're only getting one unit of return your Breakeven win rate is 75 you have to be right 75 of the time just to break even however if you start getting odds on your money so let's imagine that you risk one unit and you get three units back overall over a large over a large um over a large series of Trades your Breakeven One Rate doesn't have to be 75 it has to be 25 so this is about building in Failure to your to your system not having to be right all the time so maintaining and controlling a healthy reward to risk ratio is very very important now I've got a couple of examples down here so we've got optimal this should say reward to risk ratio of two to one and then optimal reward to risk ratio of three to one now I just want to give you an analogy here because this does then feed into the risk management and when to sell as um as well so let's just do let's do this one over here okay and let's just do a hypothetical example let's say you go to the you go to the to the to the horse racing and there's going to be there's gonna be ten there's going to be 10 races okay and you're gonna bet your entire Capital which isn't prudent in my view but you're gonna you're gonna bet your entire capital on each race okay and the question is if you were to win on your winning trades on your winning races if you were to win three times more than on your losing races but your win rate was only 30 what would you pick what percentage would you pick for those winning races so remember that your winning races are gonna be three times greater than your losses so your wins will be three times greater than your losses on these proverbial horse races what would you pick would you say well I want to win I want to win 30 on the on the winning races and I want to then lose 10 on the losing races would you say I want to win nine percent on the winning races and I then want to lose three percent on the on the losing races so remember you're gonna have three winning races but you're gonna have seven losing races and this is compounded as well so there is actually an answer to this because it is just it's maths so what is optimal there well the optimal would be 21 to win on those three races and then to lose seven percent on those seven losing races because you have a 30 memory that would give you a 10 trade a kind of 10 Race if you like compounded return on investment of 6.59 that there is optimal nothing is more optimal at a 30 at a 30 win rate if we were to do that same scenario okay with a two to one so reward to reward to risk ratio of two to one and again it's the same kind of horse racing analogy that you were going to win four races out of ten so you're gonna have six losing horse races well you may say what I want to win a hundred percent on my on my four winning races and then I want to lose 50 because it's two to one on my um on my six losing races well actually at the end of that you would have lost 75 of your Capital the correct answer if you like is actually 20 on the four winning races and then losing 10 on the six losing races ten traded ten trade compounded return on investment at 10.2 so this feeds into the trade management aspects and I'm sure this is why William O'Neal is about how to make money in stocks gonna use the seventh the seven eight percent and he was indicating for people to sell around about 20 okay but this here feeds into the when to sell part and the risk management side as well so maintaining the risk versus Ward and I've got scenarios later on is really really really really key so once it's out many Beanie cell rules are focused around these areas reward achieved as a multiple of risks so remember that break even win rate late stage Basin and uptrend price fails to hold key moving averages such as the 20-day or 50-day rapid price advance in a relatively short period of time so I've got some examples of all of these when we get into it so the general rules for selling or reducing when swing trading that's what minivania says selling into multiple of risk is achieved consider selling half and moving stop on remaining position to break even or at least tighten up your stock to lessen your original rest I've got some really good examples later on for you guys as well in terms of break even trades free rolling trades and thinking about that as this is a fairly complex area to um to be to be to be going through so I've got some nice examples if your profit is more than your average gain and a multiple of your risks generally two to three times consider trailing a stop or selling half and moving your stopper you could also backstop your average gain or an amount you want to lock in stock has extended and opens up on a gap consider selling at least half or Trail a tight stop next one these are general rules for selling or reducing windswing trading so selling into weakness hits predetermined stop loss out no questions closes below 20-day moving average below your purchase price soon after a breakout from a proper base reduce shares three to four days of low loads without supportive action on a three to four day increases the odds of failure heavy heavy selling with full retracement soon after low volume breakout Stell key reversal and heavy volume and stock is extended sell at least half then we've got some sell alert so these are general rules for again selling or reducing when swing trading but these are seller that's so accelerated rate of Advance parabolic kind of blow off climactic top after extended move stock after extended move stop moves up 20 to 50 in one to three weeks 12 or 15 days up over three weeks largest update since the beginning of the move look for a reversal of churning over legs one to four days so that's where price is kind of it's not going anywhere but there's higher volume that's called uh that's called churning largest daily price spread since Advance started largest weekly price read since beginning of Advance 6 to 10 days of accelerated Advance with all but two to three days up exhaustion Gap after the stock is extended so usually the second or third Gap so this will be a stock that's trended up maybe it's up 50 70 and then it starts kind of gapping up and there's been a couple of gaps before new high on low volume new highs from late stage Bay so full fifth or six stage bases I'm going to show you that with Luv on the weekly chart heavy volume with little price progress that's kind of stalling churning action drop below the 50-day moving average line on the heaviest daily volume since the beginning of the move that can indicate that there's distribution by large operators largest one-day decline since the beginning of the move and the largest weekly the current on huge volume again institutions potentially offloading their shares and again down on largest volume institutions potentially offloading their sets so let's go for a couple of examples so this is the late stage base so this one here this is Luv Southwest Airlines company on the weekly chart so it's clearly a leader here look at all these 52-week cars coming through base one base two base three base four base five these bases do not continue forever because if you think logically about it large operators were accumulating in the lower bases and then up here they're then looking to offload their shirts they've made their money they've made their returns to stock here from the base one moves from around about 14 15 up to a high of around about 45 they've made their money and up here this is where actually you've got to be a little bit cynical you could get some really bullish news articles coming out on mainstream media Outlets potentially the company as we saw like with the zooms or the pelotons are reporting very big quarterly earnings coming through and then the earnings are going to start slipping so large operators then stop getting out ahead of that I cannot stress how much more informed large operators are than you they are ridiculously well involved relative to you as a retail Trader so again but really really really focused on the Judgment of the market a price and common sense if you can count base one base two base three base four base five is probably getting a little bit long in the uh in the tooth and you've got to then be expecting that that stage two uptrend is going to turn into a stage three Distribution on top at some point price fails to hold key moving averages such as the 20-day or 50 day so this one here this is FedEx and you can see nice vcp action okay reaction to the earnings then it holds up tightness one two Punch coming through in here and then the black line is the 10 EMA the blue line is the 21 EMA for me I use the 21 EMA so that's what I put on my chart and then the purple line here is the 50 SMA there's the close below the 50 SMA so again thinking about trailing stops as well we're going to talk about kind of free rolling so improving your worst case scenario many vehicles it's getting to break even and then thinking about trailing stops so if you're an intermediate term Trend followed that's probably more so going to be say the 20 day or the 21 EMA and also the 50 SMA so the 50-day moving average as well this purple line here so thinking about riding those intermediate time Trends and then this one here price fails to hold key moving averages such as the 20 day or 50 day so this is this is Overstock that's where I bought it coming through in here so vcp action type you get the one two punch lowest volume above in the bass and then it gets out here and then here's the break of the 21 here's the break of the 50s maintenance stock goes on a run from 28 to over a hundred dollars up there but you can then see when you start taking out these moving averages and those violations start piling up of kind of what I call bearish synchronicity so widespreads increase volume slicing through key moving averages thinking logically about okay the stocks made a big run here looks like it's kind of topping out here just negative price action coming through slicing through key moving averages no longer holding them be thinking about selling so I use key moving averages as say as a trading stop after I have free rolled the trade Qualcomm so this is the rapid price advance so in a relatively short period of time so cute Qualcomm builds a nice base here one contraction two contraction three contraction look how the volume dries up 52-week highs in the base as well remember what we've sent 52 cars in the base it's extremely strong and then in the space of three weeks goes up around about 97 and look at the high volume coming through as well so we know the larger operators are active because of the high volume and Qualcomm was kind of a can a can slim leader of the time um and as well but then you have to think we've got huge volume prices gone up nearly 100 in three weeks is this more likely institutions accumulating up here or potentially Distributing or offloading some of their shares what do you think again apply a little bit of Common Sense think about the price cycle so on and so forth what I would say and this is just me personally this is not a minivani kind of um rule it's just something me and my own trading if I start to see a stock that's had a rapid price advance in a relatively short period of time I invariably won't just randomly sell it because I think it's extended I'm gonna sell it what I will invariably do is go lower the bar Lower the bar Lower the bar lower the bar certainly on the daily chart so I will go lower the bar so lower the day lower the day lower the day lower the day maybe with part of my stop loss or all of my stop loss on the remaining part of the position for me I found that's a much more effective way to be choking off when you see these rapid price advances in a relatively short period of time so IE price gets extended from the 10 from the 10 EMA so if you went lower the bar Lower the bar Lower the bar Lower the bar you'd be choking off up here so rather than trying to like randomly guess because well on this day here on the open hit you may have thought at 70 oh this is really really extended well then price went up to over 100 on this day here so for me my biggest mistakes are actually selling winners too early so a rule that I have for myself is I'd much rather go lower the bar Lower the bar Lower the bar so you see in here see this prior rally here as well well if you went imagine on this bar here you went ah this is really really extended look at it it's extended um it's gapped up again following the earnings there's huge volume I'm getting out well lower the day lower the day lower the day lower the day lower the day lower the day you're going to be taking out somewhere up here for me lower the bar Lower the day is much more effective touches my own kind of experience that I'm throwing in there and in the next section we're going to be going on to risk management okay risk management which is arguably the most important Concept in minivini's books and also of this presentation here so this is probably where a lot of you are going to fall asleep and hit and hit snooze and turn off this video but I actually think this section here risk management is the most important section of the video so let's go through a couple of quotes for many because I just want to kind of give you a broader overview of his of his philosophy and his mindset around risk management not losing big is the single most important factor for winning big as a Speculator not not sorry as a Speculator losing is not a choice but how much you lose it so the first sentence at not losing big is the single most important factor for winning big not identifying perfect vcps not identifying perfect power plays no not losing big is the single most important factor for winning bet there's a simple way to avoid a huge loss in a stock so when you have a small loss in four Decades of trading I haven't found a better way to manage risk the reason many Traders and investors failed to do this is ego so getting into the emotions or a poor understanding of risk and I'm going to show you some scenarios which will really drill really drill home in terms of understanding risk and the negative effects that large losses have on your portfolio if you want to mitigate risk effectively you simply must acknowledge that stocks don't manage themselves you're the manager and it's up to you to protect your hard-earned Capital with each buy order I enter I know the exact price where I'm going to sell at a loss if things don't work out as expected I Define this price level before I get in trading without a stop loss is like driving a car without brakes I've heard some pundit say trading with a stop loss is foolish only a full would make such a statement the goal for optimal stop loss placement is to set it at a level that will allow the stock price enough room for normal fluctuation but close enough to the danger point that there's not too much risk mathematically so we're going to go through some examples and I've got a little quiz for you as well but hopefully this slide here is really illustrating the emphasis that minovini put on risk management so what you can control what do you have control over well you have control over what you buy when you buy how much you buy and when you sell you have no control over how much a stock advances or percentage of winning trade meaning then talks about the Holy Grail so losses are a function of where you're targeting and achieving your average gain so how much can you expect to gain on average how often can you expect to be right on average so this is why tracking your statistics is very very important certainly kind of keeping a rolling five trade or ten trade or maybe even 15 trade but I would certainly say somewhere around 10 trade okay kind of tracking that over the last 10 trades is important and we're going to look at that in the Progressive exposure Point as well so we have the trading triangle we have average gain average loss and we have the batting average so the Holy Grail we have the average gain Times by percentage of winning trades divided by the average loss Times by percentage of losing trades equals the average win loss ratio and you want that to be positive preferably two to one so that there is the average win loss ratio so let's imagine we have example one Trader Trader Ray the average gain is 10 and their percentage of winning trades is 50 that average loss is five percent and their percentage of losing trades is 50 they have an average game to loss ratio of two to one that there is healthy example two that this Trader has an average gain of 15 and a PR and a percentage of winning trades of 40 with an average loss of five percent so they're three to one in terms of the risk the reward to risk and the percentage of losing trade 60 they're still coming in profitable overall at two two one so this is very important stats to be tracking and let's go through a couple of return scenarios to really drill out so scenario one this is a 50 win rate we can see that they're coming in with 14 winners and seven percent losers now it does not it absolutely does not come in this perfectly it's just to show you the importance and on the next slide of maintaining your losses so really controlling your losses I should say not letting them get out of hand because you're going to see what happens when they get out of hand so this area is coming in they have a reward to risk ratio of two to one and they are right 50 of the time 10 traded compounded return on investment that would be putting your entire Capital into every single trade I don't do that at all but that would be 33.95 just to illustrate the point over here now their win rate drops to 40 but they're still able to maintain that two to one reward to risk ratio so it's 14 percent winning trades and then the losing trade 17 still profitable off 10 trades compounded return on investment 9.27 scenario three now their win rate goes down to 30 but they're able to maintain a three to one gain to loss ratio so the winners are nine percent so it has three winning trades in this scenario of nine percent and then seven losing trade to three percent but they still come out profitable 4.64 again it's really understanding the math behind this and the importance of controlling the risk now scenario four this is more so how I how I like to trade personally I like to go for the for the big one obviously control the risk keep it really tight but try and try and get the big winner in there so this is a 40 win rate but we're putting in one one outsized gain if you like 50 coming in then 15 10 5 and then keeping the losses at three percent and five percent ten trade compounded return on investment would be 55 so this is just something something that I then want to feed into the cell rules and just illustrate the point that actually well I think it's a much and again this is what minivan is kind of talking about with trailing stops as well potentially using say the the 20 day or the 50 day or something like that to try and keep some back for the big the the big one I didn't get in the big winner is extremely extremely important it's not gonna happen every trade by by all means absolutely not but getting that getting that odd getting that odd big winner chucking in as well and maintaining a very healthy road tourist relationship I can see uh I I personally think it's very very important you can see that with the returns coming in um as uh as well so this liked it don't be these Traders okay I'm sure you will know someone um you you I'm sure you all know someone who trades like this maybe maybe it was you in a in a former former trading like so to speak but look at this here this Trader is doing the exact opposite of what you want to do they have small went three percent they're right fifty percent of the time there okay they're pleased with themselves why over 50 win rate I'm a good Trader okay wins three percent six percent nine percent twelve percent fifteen percent but their losses are way out of hand it ten percent fifteen percent twenty percent twenty five percent thirty percent ten trade compounded return on investment they've lost half their Capital they've had to draw down about 50 this Trader over here they're going well I have a 50 win rate and my average gains are coming in at 25 yeah but look at look look at average losses you're not controlling the downside so yes they have five winning trades at 25 but they have five losing trades at 25 as well they've nearly lost a third of their Capital tentro compounded return on investment after tantric don't be those Traders maintain that really healthy reward to risk ratio keep your losses in check keep them in check keep them keep them low on a relative basis especially if you're singing so let's now do some examples I've got two examples to do to try and involve you a little bit more interactive where should you place your stop loss example one so let's say the pivot is going to be here we've got a nice vcp with three contractions so our pivot is going to be a hundred dollars the three contractions lows are 90 which is 10 stop loss 95 5 9 97 3 but this is important to know well what's happened over your last 10 trades so for this example let's imagine your average gain on your last 10 trades is 10 and your winning percentage is 50 so if your average gain on your last 10 trades is 10 does it make any sense to place your stop-loss down here at 10. probably not right remember this Trader hit well I'm winning 25 yeah but your losses are 25 as well mate okay keep it in check keep that reward to risk ratio very very healthy so here it's going to make much more sense to either be at five percent or potentially three percent as well because if you're putting your stop loss at three percent then you're shooting more for a rewards ratio of three to one if your gains have been coming in around about 10 okay so somewhere between five percent to three percent would be the correct answer here let's then do another one where should you place your stop loss example number two so for this example let's imagine your average gain on your last 10 Traders six percent so it's now dropped from ten percent to six percent and your winning percentage has dropped from 50 to 40 now where'd you place your stop loss same setup here but because of what's happened over your last 10 trades now where do you position your stop loss does it make any sense to go down here at 10 absolutely not why because the your risk is a function of where you're targeting and achieving your average gain so it doesn't make sense to have a stop loss wider than where you have been coming in with your average gain over your loss potent rate does it really make sense to even go here now at 95 at five percent probably not because again if you're if your average loss isn't coming in at five percent and you're winning six percent that's not a healthy reward tourist ratio you've got to tighten it up even more so this could be an example of a harder time a harder trading environment that you are trading through and it's what most people do is they widen their stop losses they give it more no do the opposite tighten it tighten it tighten it so here three percent would be the would be the right place to go and then you're still looking for two for two to one hopefully not that makes sense now let's go into improving your worst case scenario so this here is example number one so minivini multiple of risk achieved consider selling half and moving stop on remaining position to break even or at least tighten your stop up to less than your original risk so let's say we have got this nice vcp forming in our pivot is going to be a hundred dollars we've got one contraction two contraction three contraction and we place our initial stop loss here at five percent just underneath 95 so what minovina is selling here is multiple of risks achieved consider selling half well if the share price moves up here to 110 that is going to be two times our initial stop loss so therefore we could sell half of the position and move our stop loss to break even so if our entry is at 100 our stop loss is at 95 well two times that in terms of the risk so five percent within 10 gain would be up to 110 which we're imagining is up here so when that is achieved we could sell half the position at 110 and then move the stop loss to break even hopefully that there makes sense let me now add a little bit more spans into the work so improving your worst case scenario example number two so let me just take you through some free rolling Maps here so the three roll levels assuming everything is in single is in single digit percentages you could sell half at one times your stop loss that can be your initial stop loss or it could be where you move your stop loss to okay you do not always need to look to get Break Even or free roll where your initial stop losses you can move your stop loss up which I'm going to teach you one third of your position at two times your stop loss or one quarter of your position at three times your stop loss so let's go through an example here so let's say we are buying stock ABC and we're going to buy it through the highs of this vcp here at 100 and let's imagine we get filled at a hundred dollars I'm going to lose a buy a buy stop limit order and have kind of the limit the limit area so I know where where I'm going to get filled what's the maximum amount of shares I'm willing to pay okay that then all feeds into the trade management aspects of this as well so my entry is going to be here at 100 and let's say that I'm going to place my initial stop loss here at 95 so this second contraction five percent however in my head I know that there's this higher contraction at 97 so let's say my average gain's been coming in at 15 for the last 10 trade so I go no I can go in with that with a five five percent stock give this stock room initially as well so in here this is going to be my initial stop however when I'm planning out the kind of free rolling aspects of the trade so minivini uses the um the the analogy of improving his worst case scenario you always want to try and improve our worst case now because when we initially enter a trade it's all risk to us so what I'm then thinking here is well I could move my stop loss from 95 to 97 that's the next logical place so I can mitigate Risk by moving my stop loss up higher from 95 to 97 but initially it's a healthy reward to risk relationship because I've been coming in with 15 average gains therefore I'm going in with a five percent initial stop that's three to one okay nice and healthy but then I'm looking at this final contraction 97 which would be three percent now what I know as well as well if I was to move my stop loss from 95 to 97 then I'd need a move to 106. 106 dollars because that would be two times where my new stop loss would be okay so that means I could then sell one third of my position into 106 and then move my stop loss from 95 to 97 to free roll the trade now what minibini was talking about here and again this is all you and how that this is really this is really in the weird stuff okay this is very very advanced stuff here what minivini is saying is he would rather wait for a bigger move and then put a stop loss to break even for me how I like the three-year-old trades is I would rather see a smaller move and maintain a wider stop loss this is how I do it so in this instance here let's say we'll just keep the numbers really small let's say you buy three shares at a hundred dollars so you're total invested is 300 and our stop loss we're gonna move our stop loss from 95 to 97 in a second which is going to be three percent because this is kind of then my logical place to move it to and then I can free roll into 106. so my total risk on the trade when I move my stop loss up because you could have scenarios here of 95 and then I need a move I need to move to 1 to 110 up here like we were doing on this last one but I have multiple scenarios I'm going well I could free roll 95 into 110 um like that or I could be doing it like this so I'm working out different different kind of scenarios and pump and pump and permutations as the Traders unfolding so total risk on the trade here would be nine dollars instead of fifteen dollars down here so that means I could sell one third at 106 which would be six percent so I could lock in six dollars profit so my total risk on the trade left would be six dollars why because I have two shares with a stop loss at 97 so there's three dollars risk per share associated with that so I've locked in six dollars and then I'm selling six dollars I'm sorry I'm locked in six dollars profit and then there is six dollars risk left on the trade side free world the trade so the different permutation I'll probably do a really detailed video on this um kind of explaining mitigation maths but then what you're looking for is natural reaction tennis ball action higher highs and higher lows so in the next slide we're going to be going into Progressive exposure okay Progressive exposure so this is a quote from minovina you want to be trading your largest when trading your best and trading your smallest when trading your worst well how did you do that take a look at your results so we imagine here we've got scenario one and we've got scenario two okay and let's say for scenario one Trader Trader one these are what's happened over the last 10 trades and we could look at compounded return on investment as well that's but in order for your Capital into it I wouldn't suggest that it's just so we can get these figures coming out so here they had a win of 15 and then they lost seven seven six four three and then they had a string of winners 10 20 20 25 okay they're now potentially in they're in sync with the market the market is rewarding their strategy scenario two so Trader 2 for example has a 40 win rate and their last 10 trades look like this 15 10 7 6 minus eight minus four minus five minus six minus seven minus five they are pretty much flat over last 10 trades which Traders should get aggressive do you see how easy this concept is if you track and analyze your results like this you can visually look have a have a rolling string of your your last 10 trades or something and look and go is the market rewarding my strategy right now is this a market that I want to be fully invested in because if you're not making money at 50 invested what is the point of going to 100 invested if your last 10 trades look like this and you've been say somewhere between 25 and 50 invested is there any point going to 100 invested absolutely not why because the market is giving you feedback and it's saying this is not the time to be pushing for you however you could then start having a couple of Trades come through like we saw here with scenario one where okay suddenly you're getting some gains coming through suddenly there's some good trades coming through they're getting out the gate well you think about those positive and negative signals that we're looking at after the breakups and you start to see more positive signals coming through you start to see the trend of the market is acting better as well so on and so forth so it's really about analyzing your own results and then just applying some content and going this is this is what my last six trades look like there's no point pushing the exposure in terms of being 100 invested in this market right now this is obviously more applicable for swing trading because the Market's just not rewarding my strategy I need to trade I need to trade lighter peel it back so the progressive exposure point is to help you trade your largest when you're trading your best okay and get more invested in the market but be kind of out of the market trading much smaller when you're potentially trading your worst or the market is more hostile to your strategy so on the next slide we're going to go into position sizing okay position sizing so the guidelines here this is minivini one and a quarter percent to two percent of risk of total account Equity per trade I actually think that's very very on the high side I don't and very virus more than one percent eight to ten percent absolute Max stop loss per trade average loss no more than five to six percent per trade never take a position larger than 50 of total account Equity shoot for optimal 20 to 25 positions you want to have four to five big positions 6 to 18 stocks Max so what he's saying is be more concentrated in the leaders so I'm just going to give you an example here to work through so let's say your account size is 100k your position size is 10 so you're going to put 10K in your stop loss is 10 so your total risk is not 10K it could be if the stock if the stock goes to zero um theoretically it is possible but your total risk on the trade is 1K which is total account Equity risk of one percent okay in account size number in sorry in example number two account size is the same position size is the same but just changing the stop loss from 10 to 5 so now the total risk is not one thousand a thousand dollars it's five hundred dollars so the account Equity risk is half so instead of going for one percent the total account Equity risk is now point five percent zero point five percent total account Equity Equity risk so you can see how you can tighten up the risk to your total account by looking for those tighter entries so remember those examples we're going through do you want to go in with a 10 stop loss of five percent stop loss three percent stop loss it all feeds in you could have the same position size but be risking much much less so hopefully that there helps a little bit on position sizing and in the next one we're going to be going into minovini trading rules okay here are 14 minibini trading rules always trade with a stop loss no way you're getting out at a loss before you get in plan your Trader never add to a losing position that's averaging down losers average losers scale up when trading well scale down when trading poorly that's the progressive exposure Point only go overweight a position in the direction of the trade cut overweight proportion of the trade If It Moves against you as soon as possible consider trimming XX position if the stock fails to move as it expected never hold a large position into a major report never let a good size gain turn into a loss move your stop loss up to break even as soon as possible so that there is the free rolling that we were talking about a little bit earlier on I like to kind of free roll and then maintain a wider stop loss by selling one-third like I was showing you but what minibini is saying there in essence as you said get to break even position yourself beyond the possibility of defeat that there is a sun tzua of War principle when there is a material change in Behavior sell immediately so be on the lookout for those change of characters look for follow-up buying after a breakout do not have favorites buy stocks in order of breakouts there's another very good quote which is do not which is do not marry stocks just date them evaluate your positions date every day always think in terms of risk versus reward minivini 17 reasons the top reasons most Traders fail so one poor selection criteria they're trading penny stocks tips rumors media hype they don't cut they don't cut losses number one mistake risk management has been a key theme throughout this presentation and it is a key theme in minavini's books add to a losing position so they average down that's the number one reason Traders blow up fail to scale back exposure when trading poorly and all the markets hostile to their style failed to scale up aggressively on the heels of success when you're in that healthy kind of easy dollar minivani refers to the environment don't nail down profits when they have them they're decent gains turn into losses over trade under Trade they don't know the truth about their training they fail to manage risk to risk versus World relationships the Holy Grail they don't commit to a strategy they have style drift shiny object syndrome want too much too fast they have an unrealistic learning curve they trade too large they over diversify they don't concentrate or they concentrate too much on reward and not enough on the risk they don't follow their own rules lack of discipline then he has 8 keys to Super performance so four keys to Big returns timing concentration turnover managing risk versus World relationship four keys to low drawdowns sell them to strength trade directionally Progressive exposure and protect your break even point then we have here developing a winning mindset so miniveini wrote a book on on mindset and I'll just give you my my kind of three my three main key takeaways from the uh from the book is have a clear vision of who of who you want to be and what you want to become it's your choice so it's empowering it's your choice what do you want to be who who is it you really want to be it's your choice reverse engineer the goal and put daily systems and processes in place to get you to the desired goal and then stay relentlessly disciplined so it's basically decide who it is you want to be then decide on reverse engineer it decide on The Daily systems process habits that that person would have and then stay very very disciplined on executing those systems those processes those habits on a daily basis and then finally improve your vcp skill sets there's three quotes here the old adage tells us that practice makes perfect except it doesn't practice only makes a habit it takes perfect practice to make perfect that's minivini quote then there's a great quote here by James clear you do not rise to the level of your goals you fall to the level of your systems your goal is your desired outcome your system is the collection of daily habits that will get you that we are what we repeatedly do Excellence there is excellent Zen that should say is not an act but a habit that's Aristotle so what are the daily systems and processes habits moving you towards your goal so three daily habits you can Implement to improve your vcp skill set over the next three months are one create a model book with 1 000 perfect vcps now 1000 may sound like a lot but it's just 11 a day can you find for the next three months 11 perfect vcps per day and put them in a model book and annotate them I think you can run daily scans so we were talking about the scans earlier to find perfect vcps like in your model books positive visualization meditation of the trader you want to be those are the three things I think you could do over the next three months to really improve your skill set so it's about having the knowledge but then it's also developing and having the skill acquisition so hopefully this has given you good knowledge but you now want to have the skill acquisition so thank you very much for watching this video and I look forward to seeing you in a future one