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Black Belt Trading: Investing Like a Pro 179

some of the great trading legends, including Bill O’Neil, Nicholas Darvas,
and Jesse Livermore. This became his “Trading Manifesto,” which detailed
his personal strategy to take advantage of his inherent strengths and laid out
the trading rules that he would be bound to from that day forward.
Immediately after that, Charles began to have “big success” in the market,
running his personal account up over 1,500% over the next 18 months.
Unfortunately, Charles learned the hard way that great success often
results in an inflated ego, and during the brief bear market that took hold
from July 1998 through early October 1998, Charles lost three-quarters of
his money: “My failure was brought on by my own hubris, and I continued
to trade stocks despite the fact that the environment was treacherous, and
the odds were against me. I had lost my discipline and self-confidence and
almost gave up trading altogether, figuring that my earlier success was just
beginner’s luck.” Having earned his CFA designation several months earlier,
he applied for an analyst position at a money management firm.

Up Over 1,000% in 1998
Thankfully, Charles did not receive an offer, because as the market turned
in October 1998 to begin the last leg of the great bull market, he went back
to the rules that led to his earlier success and reclaimed both his discipline
and confidence. In 1999, Charles had a huge year in his personal account
and was up over 1,000%. Upon hearing of his success in the market, he
remembers Bill saying to him, “Just remember, we all put our pants on one
leg at a time.” Based on his own successes over the years and having worked
with dozens of traders, Bill knew that successful traders often get a “swelled
head. Maybe he was trying to warn me not to get too carried away with
myself. I wish I would have listened.”
Toward the end of 1999, Charles approached senior management and
expressed his desire to be a portfolio manager for Bill. A couple of weeks
later, after his trading results were reviewed, Bill took Charles to lunch and
explained that he didn’t need a portfolio manager but was looking for some-
one to support the current portfolio managers as a research analyst. Bill
added, “Maybe in the future, you’ll get some money to run.”
In January 2000, Bill moved Charles to a cubicle just outside his office
and had him research stocks that he and the portfolio managers were inter-
ested in. During the first eight months of 2000, Charles was up over 800%
in his personal account. After observing his trades, Bill gave Charles money
to manage in June 2000, which coincided with the beginning of a brief, yet