Lessons from the Greatest Stock Traders of All Time | John Boik

Summary of: Lessons from the Greatest Stock Traders of All Time
By: John Boik

Introduction

Embark on an engaging journey into the thrilling world of stock trading through the book ‘Lessons from the Greatest Stock Traders of All Time’ by John Boik. This summary gives you an intimate view of the impressive careers of five distinguished traders – Jesse Livermore, Bernard Baruch, Gerald Loeb, Nicolas Darvas, and Bill O’Neil – who have meticulously honed their skills to conquer the stock market. Delve into essential trading strategies, such as pyramiding, probing, and focusing on market trends, while understanding the significance of a strong work ethic and independent decision-making. Each of these experts offers invaluable insights into maximizing profits, minimizing losses, and navigating the challenges of the stock market.

Jesse Livermore: The Legendary Stock Trader

Jesse Livermore, born in poor family in 1877, used his natural talent for mathematics to excel in the stock market. He began trading at the bucket shops by the age of 16 and became so successful that he had to move to New York after being banned from Boston bucket shops. Throughout his career, Jesse experienced highs and lows, accumulating and losing his fortune several times. Despite his success, he struggled with depression and ultimately committed suicide just after publishing his book, How to Trade in Stocks. Jesse formulated his set of trading rules based on his extensive analysis of his trades, such as the “pyramiding” and “probing” strategies. He attributed his success to discipline, relying on his own judgment and experience, and doing his own research instead of relying on tips and advice from others.

From Office Boy to Millionaire: The Story of Bernard Baruch

Bernard Baruch, born in 1870, experienced unprofitable years in his early Wall Street career until he learned not to trade beyond his means and to be patient. At 25, he became a partner in his brokerage firm, and by 33, he was a millionaire. Baruch believed that the stock market was a gauge that revealed the economy’s temperature and that the market’s results were determined by the psychology of its traders. Keeping his emotions out of his trades gave him an advantage, and his commitment to extensive research about the companies he purchased stocks in strengthened this edge. Baruch pioneered the fundamentalist trading strategy and probed three facets of a company: its assets, product, and management. He actively traded until the 1930s, even serving under President Woodrow Wilson during World War I. Despite his wealth, Baruch spent many years in public service and donated large sums to charity later in life. He lived to 94 and died a happy, satisfied man.

The Unconventional Investment Strategies of Gerald Loeb

Gerald Loeb, an investor born in 1899, had a successful investment career, but it was not without its ups and downs. Despite making vast investment losses early in his career, Loeb remained vigilant and adapted his trading strategy to become a successful investor. He believed that the stock market was a battlefield and that traders should study strategy, remain disciplined, and accumulate combat experience. In his book, The Battle for Investment Survival, Loeb argued that traders should concentrate their holdings instead of diversifying their portfolios. He favoured an aggressive trading approach for high returns and advised traders to react quickly to changing market conditions. Despite the contrary view to traditional investing methods, his 1935 book is still considered a vital resource for investors. Loeb worked for E. F. Hutton & Co. his entire career, becoming vice-chairman in 1962. With a trading career that spanned five decades, he was an inspiration and mentor to many investors.

Achieving Success in Trading

Nicolas Darvas was a professional dancer who made a fortune in stock trading by combining technical analysis with fundamental research. He developed the “Box Theory,” where he identified patterns in stocks’ price fluctuations to create “boxes.” When a stock broke out of a box, he bought it and sold it at a profit. Despite his lack of experience in investing, Darvas made $2 million in seven years, thanks to perseverance, patience, and full-time devotion to trading and research. His approach was a combination of research into a company’s management and earnings and chart-watching, which he called the “Techno-Fundamentalist approach.” Darvas assigned less weight to a company’s fundamentals than to price movement and volume; therefore, his investment decisions relied mainly on chart trends. The book, How I Made $2,000,000 in the Stock Market, describes Darvas’s successful trading strategy and offers valuable insights into how anyone can succeed in the stock market with a disciplined and patient approach to trading.

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