Momentum / technicalb. 1965American

Mark Minervini

SEPA and the volume-confirmed breakout

A self-taught trader who turned the vague idea of 'buy strength' into a checklist. Minervini's contribution is not the entries — it is the ruthlessness about exits.

Minervini has no formal training and did not finish high school. He learned by trading badly for several years, keeping detailed records of why, and gradually turning what he found into a set of rules strict enough that they could be applied when he did not feel like applying them.

SEPA — Specific Entry Point Analysis — is the result. It combines a trend template (price above rising moving averages, high relative strength, well off its 52-week low) with a fundamental filter for accelerating earnings, then waits for a tight consolidation to break on expanding volume. Each condition individually is unremarkable. The discipline is in requiring all of them.

The part most people skip is the exit. Minervini's rule is that a position that closes back below the level it broke out from is sold, without renegotiation. He is explicit that his win rate is unexceptional and that the returns come almost entirely from the asymmetry between his average win and his average loss.

Where it fails: in choppy, trendless markets the strategy produces a long string of small losses as breakouts fail one after another. Minervini's answer is to stop trading, which is correct and almost nobody does it.

The ideas that survived

Volume confirms, price alone does not: A breakout on ordinary volume is noise. The volume expansion is what says institutions are accumulating, and it is the single filter that removes most false breakouts.
Stage analysis: Adapted from Stan Weinstein: a stock is basing, advancing, topping or declining. Buy only in Stage 2 advances. Most losses come from buying a Stage 4 decline that looks cheap.
The trend template: A mechanical set of moving-average and relative-strength conditions a name must satisfy before it is even a candidate. The point is to make the screen refuse to show you things you would rationalise.
Cut losses first, always: Minervini's stated edge is that his average loss is small. Momentum strategies do not survive on hit rate; they survive on the size of the mistakes.

Books

Trade Like a Stock Market Wizard2013
Think & Trade Like a Champion2015
Mindset Secrets for Winning2019

Biographical reference only. Nothing here is investment advice, and no affiliation with or endorsement by the people profiled is implied.

The ideas that survived

Volume confirms, price alone does not

A breakout on ordinary volume is noise. The volume expansion is what says institutions are accumulating, and it is the single filter that removes most false breakouts.

Stage analysis

Adapted from Stan Weinstein: a stock is basing, advancing, topping or declining. Buy only in Stage 2 advances. Most losses come from buying a Stage 4 decline that looks cheap.

The trend template

A mechanical set of moving-average and relative-strength conditions a name must satisfy before it is even a candidate. The point is to make the screen refuse to show you things you would rationalise.

Cut losses first, always

Minervini's stated edge is that his average loss is small. Momentum strategies do not survive on hit rate; they survive on the size of the mistakes.