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Mark Minervini further deepened his trading system in Stock Wizard II, focusing on refined trend tracking, dynamic risk control and psychological game , and helping investors capture "super strong stocks" in complex markets through actual cases and data verification. The following is a summary of his core strategy:
Pricing Structure :
The stock price must break through a "compact base" (such as a VCP pattern), and the base adjustment time is shortened to 3-6 weeks (the first generation required 6-12 weeks);
A breakthrough must be accompanied by a significant increase in trading volume (at least 50% higher than the 30-day average).
Industry resonance :
The target stocks must belong to the current leading industries (such as AI computing power and new energy), and the industry index must simultaneously break through key resistance levels.
Short signal :
The stock price fell below its 200-day moving average and its 50-day moving average was trending downward;
The rebound was blocked near the 50-day moving average, and the trading volume shrank;
Deterioration of fundamentals (e.g. continuous decline in gross profit margin, share reduction by senior executives).
Case : In 2022, Meta (Facebook) fell below the 200-day moving average after its financial report exploded, rebounded to the 50-day moving average and then fell back, with a drop of more than 50%.
VCP 2.0：
Strong VCP : The adjustment range is <15%, with only 1-2 contractions (institutions are highly controlled);
Complex VCP : more than 3 contractions, but the amplitude decreases gradually (e.g. -25% → -12% → -6%);
Sideways VCP : Price volatility <10%, time compressed to within 4 weeks (such as Nvidia's pre-breakout pattern in 2023).
Profit Acceleration :
The net profit growth rate in the most recent quarter is ≥50%, and the growth rate is higher than that in the previous quarter (e.g. Q1+30%→Q2+60%);
Institutions raise their earnings forecasts ≥ 3 times (e.g. sell-side analysts collectively raise their target prices).
Industry status verification :
The target stock must be in the top 3 in market share in the sub-sector (e.g. CATL accounts for 35% of the global power battery market);
The number of patents or R&D investment leads the industry (for example, Huawei's annual R&D investment exceeds 100 billion).
Price breakthrough : The volume breaks through the base high point, and the closing price on the first day is in the upper 1/3 of the range;
Sector synergy : at least two leading stocks in the same industry break through simultaneously (such as Nvidia and AMD in the AI market);
Institutional support : The proportion of holdings by top funds increased by more than 5% quarter-on-quarter (such as Hillhouse Capital’s increase in holdings).
Adding to the position after the first profit :
If the stock price rises by 10% and there is no pullback, add 20% to the position and move the stop loss up to the cost price;
When breaking through the historical high (no resistance zone), increase the position by 30%, and use the 10-day moving average as the dynamic stop loss.
Case : After Tesla broke through $900 in 2020, the stock price was increased every time it rose by $50 until it fell below the 20-day moving average and then the stock was cleared.
Stop loss layering :
Initial stop loss: 7% below the low point of the buy candlestick;
Floating stop loss: After a profit of 20%, the stop loss moves up to 3% below the recent low;
Trend stop loss: If the price falls below the 50-day moving average and fails to recover within 3 days, clear all positions and exit the market.
Take profit signal :
The daily turnover rate is >20% and the closing price is lower than the opening price (such as the GameStop 2021 peak signal);
RSI daily level top divergence (price reaches new high but RSI goes down).
Low volatility stocks (such as consumer leaders): maximum position 15%, stop loss relaxed to 10%;
High volatility stocks (such as technology stocks): maximum position 10%, stop loss tightened to 5%.
Systemic risks :
When the S&P 500 falls below its 200-day moving average and the VIX index is >30, the position falls below 30%;
Hold cash or an inverse ETF hedge (like SQQQ).
Individual stocks crash :
If the market opens and falls below the stop loss level, the market order will be immediately exited;
If the stock is suspended, liquidate all positions within 30 minutes after it resumes trading (such as the Luckin Coffee fraud incident).
Single-day drawdown > 3% : stop trading for 1 day and review trading records;
Monthly drawdown>10% : Forced reduction of positions to 50%, adjust strategy and fight again.
Overconfidence : Relaxing risk control after consecutive profits (such as increasing leverage);
Loss aversion : holding a losing position and waiting to be “unwinded”, violating stop-loss discipline;
Herd mentality : chasing hot stocks (such as the metaverse concept) and ignoring fundamental verification.
Trading log : record the reasons for buying each transaction, emotional state and improvement points;
Simulation review : backtest historical cases every week to strengthen "conditional reflex" operation;
Isolate interference : turn off real-time market information push, and execute according to the plan without watching the market.
Patience : 90% of the year is spent waiting, 10% of the year is spent trading;
Ruthless : Stop loss without hesitation, stop profit without greed;
Elasticity : Adapt to market style switching (such as growth stocks → value stocks).
Fundamentals : Demand for AI chips exploded, with quarterly revenue growth jumping from -20% to +101%;
Technical analysis : VCP has been sideways for 6 weeks, and the trading volume doubled when it broke through $300;
Selling point : After the stock price rises to US$500, the daily turnover rate is 18%, and the RS strength falls below the 80th percentile. Clear the position to lock in profits.
False breakout characteristics : lack of fundamental support after a large-volume breakthrough (cyclical decline in demand for mining machines);
Stop loss execution : Exit the market when the price falls 7% below the support level to avoid a subsequent 80% decline.
Compared with the first generation, the advancement of Stock Magician II is reflected in:
Strategy refinement : VCP mode classification, short selling rules, volatility adaptation positions;
Extreme risk control : layered stop loss, black swan manual, account drawdown control;
Mental professionalism : emotional management tools and trading journal system.
Minervini's ultimate philosophy :
"Trading is a game of probability. Success = discipline of small losses + patience of big profits + practice of fighting against human nature."
