Page 870 - How to Make Money in Stocks Trilogy

132 HOW TO MAKE MONEY IN STOCKS SUCCESS STORIES

• A trading log with appropriate notes on why he bought each stock
• The stocks that he decided to trade in the mock portfolio and the gain
or loss for each one

3. Then he compares his theoretical portfolio results to his actual portfolio
and sees where he can make improvements.

Studying Historical Charts
Tom Ellis has read How to Make Money in Stocks five or six times cover to
cover. He scanned the 100 charts that appear in the beginning of the book
and put together a spreadsheet that contains every cup-with-handle base
pattern and the pages where the chart pattern appeared in the book.
He did the same thing for all of the other base patterns so that he could
go back and study each pattern in detail.
Tom realized the importance of learning to read charts well from some-
thing that Bill O’Neil wrote in a pamphlet titled, How to Recognize Great
Performing Stocks. Bill said, “You must learn how to read and interpret
daily, weekly, and monthly price and volume charts because they can tell
you if a stock is behaving properly or not and shows whether the stock is
under accumulation (institutional buying). Charts measure the actual sup-
ply and demand for a stock and indicate the best time to begin buying as
well as the more risky times to continue holding a stock. Reading charts well
and recognizing when stocks are coming out of base patterns gives investors
an enormous advantage in finding the next big winners when combined
with superior fundamentals like strong earnings and sales.”
Whether it’s Tennessee Coal from 1898 or Apple in 2004, chart patterns
of the biggest winners are the same, cycle after cycle.
Tom also saves PDFs of eIBD each day so he can go back and study
charts of the market’s biggest winners. By saving the paper each day, he can
also look up what the fundamentals were of a stock at that time.