How to Make Money in Stocks by William O’Neil [Book Summary – Review]

Anxiety is a common reaction for many individuals when considering a stock investment. What happens if the economy crashed and you lost everything? What if you invest in a loser when other top companies rise all around it? The reality is that such activities do occur frequently. It’s a terrifying prospect. Watch a shaky video of the onset of the financial crisis or go back to the tech boom to witness a scene of terror and frenzy.

However, things don’t need to be this way. There are tried-and-true techniques. These would assist you in making wise investment decisions, picking lucrative companies to make investments in, and avoiding unsuccessful alternatives. You must take a lesson from the past—from the greatest victors and losers in the share market

By doing that, you can plan to optimize your profits and minimize significant losses. You will discover a number of these successful strategies in such sections, from a red flag market graph to the ideal business sectors to engage in.

The following sections will teach you

  • what a “mug with grip” indicates in financial lingo;
  • what GM Company and Cisco Operating Technologies include in similar; and
  • how genuinely inventive businesses can outperform the competition.

Chapter 1 – You need to become familiar with one type of market graph.

You will find that many aspects have not changed much over the financial industry’s background. There are tremendous victors and big losers in every era: equities that have soared quickly, the ones that have fallen, and the ones that simply limped along unsustainably.

In other words, you may apply what you’ve learned about historical stock performance to the current. You may gain knowledge from history, whether that is the tremendous changes in the Great Northern Railroad at the start of the 20th century or Macintosh in the twenty-first.

Reading stock market indices is the most efficient method for achieving it.

The main takeaway from this is that you need to master market trend lines, specifically one trend.

In practically every area, we evaluate the current situation before deciding how to proceed. Consider the X-rays, Functional magnetic resonance imaging, and neural correlates physicians utilize to diagnose patients early on in their diseases. Or think about how scientists investigate tremors or assist firms in discovering undiscovered oil sources by using scientific waves.

We could make choices about how to behave at the moment by developing the ability to recognize repeated trends. In investment, the same holds. We may look for trends using each of the stock exchange information from the previous 100 years. We will then be able to decide when and how to buy or sell a stock. Many traders make this mistake, and unless they are extraordinarily fortunate, they lose their entire investment.

Therefore, what patterns in market graphs ought to you be watching for? Put, pricing trends.

There are several cost trends, but one that should stand out in your memory resembles a mug with a grip. In actuality, it is called a Mug with Grip.” Thus a company will frequently decline after gaining for a while. It occasionally forms a rounded gradual incline as it descends, which is followed by a continuous horizontal line. This serves as the “mug’s” foundation.

This foundation is crucial. Since the market may easily crash without a solid foundation of supporters, however, thanks to this strong base, the market will climb appropriately if its conditions shift. It will shape the opposite side of the mug as it rises. At that precise moment, it sinks back down and forms the “grip.” This is the exact time that you need to get in. The price will almost always soar higher.

This reliable stock exchange trend has produced excellent returns for traders throughout the years if the business is Macintosh in the 2000s or Marine Containers in the mid-1960s.

Chapter 2 – The far more crucial characteristic of a great stock is a rise in profits.

Prosperity is the secret to any profitable organization, and it couldn’t be simpler. Additionally, a successful company typically has rising stock prices. It makes sense that you choose stocks by looking for significant profit growth.

The major takeaway from this is that a solid stock must have rising profits as its defining characteristic.

First of all, history supports this. Think of Google and Apple, the second and third largest technology companies today. In 2005, Google’s price of stock was $95; by 2008, it had risen to $800. Apple then increased its price of the stock from $22 to $302 in just 50 months.

Indeed, both businesses were transforming their respective industries. They did, however, also exhibit a large rise in profits shortly when their stocks soar. When this stock took off, Google reported earnings increases of 115 and 125 percent. Before the market’s significant increase, Apple’s profits increased by an astounding 360%.

There seem to be drawbacks to this strategy, because there are so many things in the trading volume. Each of them is being taken in by reports of significant expected profits. For example, there were a lot of risky shares during the significant dot-com bubble in the mid-1990s. They could not demonstrate their actual profits. But because they were so overcome with hope at the time, companies got into them.

When the dot-com bubble burst, these businesses experienced steep drops. Messenger and Yahoo!, two Internet businesses that did have significant earnings, fared significantly better. Thus, the key takeaway is to only invest in businesses that have sustainable, rising profits.

You need to pay close attention to the profits figure when looking for such successful businesses. The entire after-tax earnings of a corporation are divided by the number of securities outstanding to arrive at this figure. You would look for businesses whose profit has experienced significant, steady percentage growth.

Naturally, you should just not base your stock purchase solely on profit growth. In the succeeding sections, we will examine some additional crucial elements. However, the most crucial aspect to consider while deciding to purchase is the percentage growth in earnings.

Chapter 3 – Investing in entrepreneurial ventures can yield high returns, however, you have to determine when to do it.

The United States has been a catalyst for transformation for more than a century. It has introduced breakthrough innovation to the remainder of the globe, including Silicon Valley’s technological transformation and Thomas Edison’s blazing lamp.

Shares are also impacted by this. If you look at the charts from 1890 onward, you will discover that businesses that developed groundbreaking innovations also saw their asset values soar. Creativity and high returns from stocks are complementary.

The main takeaway is that investing in technology products can yield significant returns, however, you have to recognize when to do so.

Over time, creativity has contributed significantly to market price rise. Northwestern Pacific was the initial railway to run across the country. Its stock rose 4,500 percent in just 2 decades starting in 1920!

Consequently, between 1915 and 1916, General Motors’ modern cars drove a 1,487 percent increase in stock price.

Consider Cisco Technologies, which developed networking tools that enabled businesses to connect their small rural communications systems. Between 1980 and 2000, its shares increased by an astounding 80,000 percent.

The United States keeps attracting entrepreneurs from throughout the globe. As a result, there will be several additional chances similar to those we have listed. So do not panic if you lost out on Macintosh or Google. There will be more. To find things in advance, you only have to engage in the necessary effort.

However when exactly is “in time”? A truly outstanding, the inventive business will frequently keep growing tremendously, far above expectations. So disregard the conventional wisdom that dictates “take some profits, sell at a profit.” Therefore, do not be hesitant to purchase when a stock appears to have already reached a peak place.

Consider Cisco Technologies as an example. In 1980, it had already reached an all-time peak. That was also before its astounding 80,000% increase. In fact, according to research by Entity’s Enterprise Journal, equities like these tend to set record levels throughout stock market cycles. Additionally, shares that continuously fall to new depths do so as well!

There exists a proper moment to purchase a stock, as we discovered in the earlier section. It has solidified its roots at that point and is set to explode. A definite indicator of this is the “Mug with Grip.” The takeaway from this is to search out outstanding, innovative businesses. Aim to engage in them during the appropriate moment. By doing this, you will have the upper hand.

Chapter 4 – Choosing stocks involves taking into account demand and availability.

Availability and demand affect the cost of almost every item. Therefore, the cost of items you purchase daily, such as soap, butter, or office supplies, is determined by the quantity of each item that is available and the demand for it.

Likewise, the share price is subject to the rule of supply and demand.

The main takeaway from this is that demand and availability play a significant role in stock selection.

Consider two businesses with 60 million and 6 billion shares, respectively, granted. In a business with 6 billion shares, a tremendous quantity of purchasing is necessary to achieve a market surge. However, the 60 million shares of lesser stock might increase considerably more swiftly. Cost increases would become more pronounced because there is considerably less “supply” for the low availability.

But a supposedly comparatively tiny stock has the potential to rise sharply as well as fall sharply. Therefore, even though the benefits might be greater, the drawbacks can occasionally be far greater. A corporation that has a large number of outstanding stock makes a less hazardous investment. This occurs because it takes a lot of sales before the actual changes in price.

A tiny business can therefore produce more dramatic outcomes, and a large business could be a more sustainable venture, according to the supply and demand principle. It also depends on who holds those shares.

It is indeed a promising indicator in both large and small businesses if the senior executives hold a sizeable portion of the company’s stock itself. So then, they might not hold a substantial stake in the company’s performance, making the stock risky for your holdings. However, the company will often be a sound value if executives own at least 2 to 4 percent of a huge corporation and even more in local firms.

Organizations repurchasing their existing stock should be included as well. This is encouraging. It implies that the business anticipates better profitability in the future and, as a result, anticipates that the desire for its stock will increase.

Chapter 5 – You ought to purchase market leaders.

We frequently engage in our favorite firms because they inspire us to be happy. Consider brands with popular products and enduring brands, such as Pepsi or Adidas. Nevertheless, in a speculative bubble, brash new rulers can occasionally overtake time-tested favorites such as these and leave them in the dirt.

The main takeaway from this is to purchase market leaders.

Generally speaking, you ought to invest in the top firms in their industry. A “winning corporation” need not be the biggest or have the strongest recognizable brand. They have the greatest sales increase, fastest annual and monthly corporate earnings, largest profit ratios, and fastest return on investment. These businesses will also offer an original and cutting-edge item that is responsible for these outcomes.

For example, over the years, the writer’s huge successes have all come from individuals who ruled their specific fields. They were all leaders in their respective fields, whether it was Pick ‘N’ Spare between 1978 and 1985, Genentech between 1992 and 1993, Messenger between 2000 and 2001, eBay between 2003 and 2005, or Macintosh between 2005 and 2008.

Investing in these innovative products is usually preferable to purchasing nostalgic old favorites. During the significant speculative bubble of 1981 and 1982, this was evident. Wang Laboratories, Redhat, and Datum, the three most competitive businesses at the time, experienced up to sixfold growth. In the meantime time, the venerable computing behemoths IBM and Hewlett remained mostly unchanged. They weren’t necessarily capable of generating the kind of big gains that the top corporations produced just due to their history of dependability.

Usually, steer clear of second-rate or imitation businesses. Almost invariably, the victor will exceed all. But frequently, individuals invest in such second-rate businesses in the hopes that they can eventually catch up to the sector innovator in terms of brilliance. Unfortunately, that rarely happens.

The phrase “the initial guy receives the oyster; the next, the shell” originates from entrepreneur George Mellon. The industry is always driven by true innovators and visionaries. You could consider investing in one of the following businesses.

Chapter 6 – You ought to search for stocks backed by institutions.

Several companies put in funds instead of buying individual stocks. An investment fund is a diverse collection of unique equities combined into one transaction.

They are known as equity funds in the US. Large organizations are the ones who supply this funding. They are managed by investment advisors who hand-select the shares to be featured. To be a successful individual market dealer, you need to investigate the stocks that these professionals have chosen.

Here, the most important tip is to hunt for stocks with corporate backing.

The majority of stock purchases worldwide are made by these large organizations. And as a result, they affect the consumer and drive up or down equity markets. Given this, it is indeed crucial to pay close consideration to what they accomplish. You will notice an increase in the equities in your holdings when you hold equities that large businesses are purchasing.

Particularly, you want to keep an eye on what the top-performing portfolios are doing. Such investments are overseen by the finest astute traders and produce the highest average growth. Use tools like Entity’s Enterprise Journal and to learn further about the finest equity funds. The best assets of such equity funds are also shown on

Regardless of whether it comes from the highest funds, corporate investment counts overall. The price of the shares will increase if numerous investors are investing in them.

It’s important to understand these organizations’ equity methodology in addition to examining their operations. By reading their brochure, which is available to either purchase or acquires directly from the company, you may gain from the finest. The brochure will outline each fund’s methodology as well as the categories of equities it has bought.

It’s important to keep in mind nevertheless that large organizations may end up “over-owning” certain equities. Even if a company isn’t doing well, certain purchases are made regularly. Imagine Photocopying. It had an incredible track record and became a favorite among establishments in the 1980s. However, several perceptive experts realized that things were not right in the organization. The price started to decline very quickly.

The takeaway is to carry out your research in addition to learning from the greatest. Nothing compares to doing your research.

Chapter 7 – Pay close attention to the industry’s overall trend.

The value of specific shares is limited. You will take a loss if the market declines.

Remember the 2009 financial crisis? It did not matter how well you choose your stocks for the overwhelming portion. You would have made a loss if you had not sold in time. The reality is that if the industry as a whole is declining, two out of every three equities will decrease in value.

The main takeaway from this is that you must pay close attention to the industry’s overall trend.

What does the broader market mean? In general, it provides a summary of all significant share prices, including the Standard & Poor 500, American Stock Exchange, and Composite Index. Those could be followed online.

Look to see whether there was a substantial amount of purchasing or selling to gauge the industry’s overall sentiment. An Acquisition Score for a certain benchmark, such as the Nasdaq, can be found in a publication like Entity’s Enterprise Journal. It reveals if traders are investing in a specific index by purchasing or selling. That will reveal whether they are confident in the industry or worried about a decline.

These indexes need to be closely monitored because changes can occur in as little as a few days. When you do not pay close attention, a huge crash can completely erase your profits, leaving you standing there gaping in shock.

For example, the industry may be approaching an economic downturn, in which values decline if equities consistently start high and close down. On the other hand, the first indication of a bullish trend may appear if you see that equities begin poorly and finish firmly. However, if you didn’t regularly monitor the industry, you would never be aware that this was taking place.

What you should also not do is read too several market-related publications from investment bankers or traders. These are typically pricy diversionary activities. Contradictory “specialist” viewpoints will only serve to perplex you instead of explain. The greatest approach is to keep an eye on the marketplace itself.

Consider it to be somewhat similar to watching wildlife. The finest material to use when researching lions would just be actual lions. Even if you read every book there is on lions, nothing could ever compare to seeing the creatures in their local habitat. The share market, another domesticated animal, has the same characteristics.

How to Make Money in Stocks: A Winning System in Good Times or Bad by William J. O’Neil Book Review

Before making any stock market investments, you need to understand how to detect equity trends. The “Mug with Grip” trend is one type, in general, to keep an eye out for. You should ensure that your selected investment is solid in other aspects in addition to equity trends. For example, it must be a market leader, presumably with a novel item or brand, and, most significantly, it must demonstrate a rise in profits. Lastly, keep an eye on what the best institutional investors are doing while also performing your research.

Stop losing money!

You ought to be aware of both the best times to enter and exit a stock. Unless you intend to suffer a significant financial loss. Generally speaking, you should dispose of a share once it drops to 9% below your purchase value. In this manner, you could pursue large winnings while limiting your losses.

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