How to Make Money in Stocks Book Summary

Book Summary

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Brief Summary

The surefire way of telling whether a stock will skyrocket is to see if its price pattern shows a cup with a handle pattern. That’s the first step to guiding your investing decision.

The next thing you should do is research your company from top to bottom. Make sure the company is showing its real earnings. You can check this out by seeing the company’s ERP (earnings per share) rating. A company worthy of your investment will show signs of huge earning potential and is on its path to realizing that potential.

Lastly, target companies that are leading innovators in their fields. Once you find it, does it satisfy the above two criteria? If yes, you are most likely looking at a company that might grow exponentially in a couple of years.

About the Author

William J. O’Neil is an American stockbroker and also the owner of his stock brokerage firm. Besides his passion for the stock market, O’Neil is also a writer. He has written books about how to make the right investment decisions.

O'Neil is the founder of Investor's Business Daily, a newspaper that covers stocks analysis and the latest trends. He is also the founder of the CANSLIM investment strategy, through which you can evaluate stocks on seven distinct criteria and come to an informed investment decision.

Topics

Money & Investments

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Key Insights

All of us have thought about investing in stocks at some point in our lives. No doubt, it can make us highly anxious. After all, it is a high-risk game as if you are walking on eggshells. Even if things are looking good, an economic recession could destroy everything in a snap.

On the contrary, if you play your cards right, the rewards can be enormous. Stocks are one of the easiest ways to get rich. With the correct guidance, you will have the necessary tools and insights to make the right decisions at the right time.

All you have to do is look at the history of the stock you want to buy. With some nifty little tips and tricks, you will be able to make the best out of your stock options. How to Make Money in Stocks: A Winning Systems in Good Times and Bad by William J. O’Neil tells you all the homework you need to do before buying a stock.

Analyzing stock chart patterns is the key to harnessing the power of stocks.

To invest in the right stocks, the first thing you need to do is identify which stocks are the right ones. To do that, you need to understand the stocks’ past behavior by reading their stock charts.

Think of stock charts as brain scans and MRIs. They are tools to help you understand what is going on in the stock market. Focus specifically on the stock’s price pattern — that’s the key to everything. If a price pattern looks like a cup with a handle, the stock shows promise.

Once a stock price rises, it will often fall but not sharply. Instead, it will fall in a roundish hyperbolic curve until the price becomes flat and steady. This region of the price pattern is the base of the cup, to which you must always be extra attentive. Your goal should be to buy the stock at the base, just before it starts to climb back up.

Deep-dive into the company you want to invest in. Research, research, research.

Every business out there wants to make as much profit as possible. That is why you should invest in companies that show increased earnings over the years. Increased earnings are a good sign that a company will continue to grow.

The most famous examples to look at are Google and Apple. Google started with a stock price of $85 back in 2004. In a matter of three years, the stock price jumped to $700. Similarly, Apple’s stock started at $12 and soon ballooned to $202 in a couple of years.

However, there are drawbacks to such optimism. You might fall prey to speculation. For example, you might think a company is going to boom because of some rumors floating around, but the opposite happens. That’s why you should judge a company only by its earnings per share (EPS).