From the March 01, 2011 issue of Futures Magazine • Subscribe!

Trade Like an O’Neil Disciple: How We Made 18,000% in the Stock Market

Trade Like an O’Neil Disciple: How We Made 18,000% in the Stock Market
By Gil Morales & Dr. Chris Kacher
John Wiley & Sons, Inc.
$60; 365 pages

Most investors and traders are familiar with IBD – Investor’s Business Daily – and its founder William O’Neil. He was the consummate stock market researcher as he identified, analyzed and catalogued the key characteristics of the best performing, institutional quality stocks in bull and bear markets over decades. His approach became known to the public as CAN SLIM, and he has written multiple investment bestsellers espousing his principles.

On the other hand, most investors are probably not aware of two of O’Neil disciples – Morales and Kacher – who worked at William O’Neil + Company, Inc. as senior proprietary internal portfolio managers. They learned and applied O’Neil’s methodology to reap significant market profits in both bull and bear markets. This book was penned by these two individuals who subsequently have moved on to manage their own and clients’ money at Moka Investors, LLC.

The authors certainly give credit for their initial and continued success to O’Neil and his methodology. According to the authors, O’Neil has helped thousands of investors, traders and institutions achieve success, and “is likely the world’s greatest investor.” They point out that this book was written without O’Neil’s or his company’s assistance or endorsement. Their goal was to provide insight into how he operated and succeeded by applying research and hard work to his passion of stock investing to become a master investor. They also encourage investors to read all of O’Neil’s books and to view the educational materials at investors.com.

The first chapter focuses on the basic tenets of O’Neil’s approach. Interestingly, the authors blend in some of the investing principles espoused by Jesse Livermore, Richard Wyckoff and Nicholas Darvis.

Chapters 2 and 3 provide details on the trading success of Kacher and Morales, respectively. They both provide insight into how they achieved their outsized gains, including the stocks bought and sold, the market conditions at the time, and their thought processes and decisions made in real-time.

One 60-page chapter focuses on their biggest trading/investing mistakes along with their analysis of their thinking and decision-making during difficult periods. They both improved their trading by keeping meticulous diaries and learning from the feedback, as they did not want to repeat expensive mistakes. On a number of occasions, their mistakes led to new trading techniques such as the “pocket pivot,” which was fully explained in a separate chapter. Very few authors even mention their mistakes, let alone provide a comprehensive look at them and what they learned. This chapter is one of the most instructive in the book.

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