6 Of William O'Neil's Most Important Lessons
Legendary trader & expert educator...
Today at a glance:
6 lessons from one of the greatest traders of all time
An ultimate charting resource
Let’s dive in:
There’s no doubt that William O’Neil is one of the greatest investors of all time.
But, what’s even cooler is he taught millions of people how to navigate the stock market and build wealth on their own terms.
O’Neil’s How To Make Money In Stocks was the second trading book I ever read, and I can’t even begin to describe how thankful I am. In this piece, there are 6 important lessons he lays out for investors and traders alike. Here they are:
Lesson #1: Only Buy Stocks On The Way Up
While simple, this rule is more difficult than it seems in practice. Many people will get attached to a stock because of its prior run, and then continue to accumulate shares as it breaks well off the highs.
This is a good recipe to blow up. So, what’s WON’s advice?
Only buy stocks on the way up.
And, if you are going to buy more, only do so when the stock shows you a profit.
Again, buying more of a stock when you are at a loss is a good way to lose everything!
Lesson #2: Always Buy Stocks Near Highs, Not Lows
The most powerful companies that go on to 10x in price will be reaching all-time highs and look expensive. These companies deserve your undivided attention.
A great habit to develop is scanning the new 52-week highs list on a daily or weekly basis. You’ll develop a great feel for the character stocks display when they are under institutional accumulation.
On the other hand, it’s also a great habit to go through stocks making 52-week lows and building a visual repository for the characteristics those charts display.
We want to trade names at 52-week highs, not 52-week lows.
Lesson #3: Become A Master At Taking Small Losses
"You learn to always sell stocks quickly when you have a small loss rather than waiting & hoping they'll come back." Every large loss starts as a small one - don't let them get out of hand.
I posted a tweet about this today. The better you get at taking losses, the better you are as a trader. There’s no doubt about it.
Eventually, once you master how to lose small, you’ll be able to win big. Until then, your account equity curve will be all over the place.
Lesson #4: These Are The Only Fundamentals That Matter
There’s a ton of noise made about how fundamentals are the driver of a stock’s increase in price. While this may be true, William O’Neil boiled down the most important metrics to the following:
· Profit growth
· Sales growth
· Return on Equity
You don't have to focus on anything else to get a good sense of how the company is operating. According to him, coupling this with proper technical analysis and you have the system to catch a winner.
Lesson #5: Turn The News Off!
"You don't subscribe to a bunch of market newsletters or advisory services, and you don't let yourself be influenced by recommendations from analysts, who, after all, are just expressing personal opinions that can frequently be wrong."
I highly recommend turning Twitter off as well. While external resources like YouTube, Twitter, etc are great to learn from, you have to know when to cut off.
As a trader, I’ve found my best periods of growth to be directly correlated with a LACK OF SOCIAL MEDIA.
There’s something to be said for this.
Lesson #6: You Must Learn How To Read Charts
"You also have to acquaint yourself with charts––an invaluable tool most professionals wouldn't do without but amateurs tend to dismiss as complicated or irrelevant."
There’s a ton of different ways to make money in the market, but without a doubt the one piece of many successful strategies is technical analysis.
Charts themselves are visual representations of human greed & fear, repeated over and over for decades. They allow us to view supply and demand, the two drivers of any increase/decrease in price for any instrument.
BONUS: Download America’s Greatest Companies Chart Book by WON
This is one of the best resources out there to learn and master chart reading. WON analyzes and visualizes the most important parts for investors/traders to focus on, as well as write ups on the fundamental/environmental factors surrounding the companies.
Download the resource here (RIP the late Kevin Marder, who graciously shared this link and I’ve had it bookmarked since):
Have a great trading week, inspired by the late and great William O’Neil.
Greg
Other resources to study:
2020 Best Charts: https://gregduncan.gumroad.com/l/wmfsd
2021 Best Charts: https://gregduncan.gumroad.com/l/2021
2022 Best Charts: https://gregduncan.gumroad.com/l/2022
Earnings Gap Up Mastery Free Email Course: https://upsideunlimited.com/earnings-gap-course
Consider Becoming A Paid Upside Unlimited Subscriber: https://upsideunlimited.com/sub