Watch What People Do

A great investor does not only have to know about finance, but must also understand psychology and be good at observation. Legendary speculator Jesse Livermore once told a story of successful investor known by the nickname “Pennsylvania Dutchman” (in Lefèvre, 1923). According to Livermore, the Pennsylvania Dutchman was an “indefatigable Missourian”. He was a great investor who believed in hearing answers with his own ears and seeing things with his own eyes. He valued the information that others gave him, but he would not believe it until it was personally verified by him.

Manipulation of a Stock

A company may be listed in the stock market for many reasons, but the most important of all, invariably, is to make money for the large shareholders. The shares of a company are usually worth a certain value, but until someone is willing and able to buy them from the holder, they remain a paper asset that cannot be converted into actual cash. By listing the company in the market, it provides a channel for the shareholders to openly distribute their shares to the public. In other words, a large shareholder of a newly-listed company is not very different from a shopkeeper with a full house of inventory: they both want people to come and buy their stock as soon as possible.

Defence is the Best Offence

Mark Minervini is one of the best traders in the stock market. From 1994 to 2000, he achieved a super performance of 33,500 percent of compounded total return, averaging 220 percent per annum, during which time he won an U.S. Investing Championship title in 1997 with a 155 percent return. He was also one of the selected traders who were featured in Stock Market Wizards (Schwager, 2001), which is a collection of interviews with America’s top traders in the stock market. But return is only half the story: during that time, he had only one down quarter, with a bare loss of a fraction of 1 percent.

Zen in the Art of Archery

The German professor Eugen Herrigel (1884-1955) was one of the first people who brought the Oriental philosophy of Zen to public attention in the West. Inspired by his love of Eastern philosophy, he travelled to Japan and taught at Tohoku Imperial University in Sendai. Under the mentorship of master archer Awa Kenzô, Herrigel studied traditional Japanese archery, or “kyudo”, from 1924 to 1929 before returning to Germany. After the conclusion of the Second World War, he published a book called Zen in the Art of Archery (Herrigel, 1948), which recounts his enlightenment through the process of learning kyudo, and it soon became one of the most famous works on Zen Buddhism of all time.

The Master Key Exercises

American businessman, philosopher and visionary Charles F. Haanel (1866-1949) is the most well-known thinker in the field of New Thought movement. His most famous book, The Master Key System (Haanel, 1916), had allegedly sold over twenty hundred thousand copies worldwide fifteen years since its publication. The book is rumoured to be the source which encouraged Bill Gates to drop out of Harvard and began his company known as Microsoft. It is also the origin of inspiration of many other famous classics of later generations, like Think and Grow Rich by Napoleon Hill (1937) and The Secret by Rhonda Byrne (2006).

On Chart Patterns

The study of patterns on price charts is one of the most time-tested tools in technical analysis. Many successful traders of shares and commodities see chart patterns as an invaluable aid, including Peter L. Brandt (1990), William J. O’Neil (2009) and Mark Minervini (2013). It is commonly believed that the price chart reflects the aggregate psychology, and it often forms repetitive and statistically reliable patterns when an imbalance of demand and supply is about to occur, hence an analysis of price charts could give a probabilistic estimate of the future market direction.

The Cycles of History

There is never a more mysterious and controversial market forecaster as William Delbert Gann (1878-1955). An independent representative of Ticker and Investment Digest, a famous financial magazine of Gann’s time, verified his amazing ability of financial forecasting, “I once saw him take $130, and in less than one month run it up to over $12,000. He can compound money faster than any man I ever met.” In addition to this, Gann had also predicted many events outside of the stock market, like one World War and the elections of many presidents like Wilson and Harding.