Recently, I have been deeply studying the trading methodology of a trading legend, Mark Minervini. This guy's track record is truly extraordinary. When participating in the U.S. Trading Championship, he won on his first attempt with an annualized return of 155%, and a few years later, he achieved a return of 334.8%. Even more astonishing is that his worst year in his entire trading career still earned 128%, and it's said that he only experienced a loss in one quarter, which was less than 1% of his principal.

What’s most interesting is that Mark Minervini is very open and transparent. He insists on using the same trading system and methodology for many years, and even deliberately entered competitions again to prove that his method can stand the test of time. He takes trading very seriously, emphasizing that a meticulous trading plan must be in place before entering a position.

His core approach is called SEPA, which stands for Specific Entry Point Analysis. In Chinese, it’s known as the Specific Entry Point Analysis Strategy. The logic behind this method is very clear: first identify strong stocks with both fundamental and technical indicators trending upward, then enter at the right time and place, and maximize efficiency through strict risk management.

How does it work specifically? The first step is screening. Mark Minervini uses TradingView filters to automatically select targets that meet his system criteria. He has a classic screening template: the price and the 50-day moving average must both be above the 150-day and 200-day moving averages, forming a bullish alignment; the 200-day moving average should be rising for at least a month, preferably four or five months; the current price should be at least 25% above the 52-week low, ideally over 100%; and the price should be no more than 25% below the 52-week high, with closer to new highs being better. This screening standard can roughly eliminate over 90% of junk stocks.

After screening, the second step is waiting for catalysts. Key factors that can drive stock prices include new product launches, regulatory approvals, industry good news, major contracts, and disruptive technologies. At this stage, you can compare with similar strong stocks in history and roughly anticipate the subsequent trend.

The real entry signal comes in the third step, which is waiting for the price to form a VCP pattern. VCP stands for Volatility Contraction Pattern, simply meaning a consolidation where price fluctuations and volume gradually decrease. During a strong uptrend, the longer the consolidation, the larger the subsequent wave.

There are two classic VCP formations. One is the triple bottom pattern. When the stock encounters resistance during a strong rally and pulls back to form lows, it then consolidates. As volume contracts, the lows get higher, eventually forming a standard triple bottom. This horizontal or downward converging pattern usually indicates a continuation of the uptrend, with a high probability of further gains, and a breakout is often accompanied by rising volume and price.

The stop-loss is best set at the lowest point of the breakout candle, or at least below the second low.

The other is the cup and handle pattern. First, a U-shaped cup forms, indicating the price has steadily recovered after a decline, with decreasing volume during this phase. After the cup is formed, a shorter handle consolidates within a narrow range, with volume further contracting. The key is to identify the breakout of the handle, which must be accompanied by increased volume. Mark Minervini’s purchase of PAG stock in 2021 is a classic example: after a pullback in May, the stock surged in July to form a cup; in August, it oscillated within a narrow channel to form the handle; and on September 1st, he entered on a volume breakout, with a very impressive gain.

The final key is a strict exit mechanism. This is based on Mark Minervini’s many years of experience, including sell signals during market strength or weakness, and early warning signs before a crash. This complete system of entries and exits is the true secret behind SEPA’s consistent profitability. Looking at his trading history, this method has indeed been tested across different market environments.