How to Make Money in Stocks summary

If you study the history of the stock market, you’ll notice that many things remain the same. Regardless of the era, there are great winners and great losers: stocks that have climbed over a short period of time, those that have crashed, and those that have just plodded along unprofitably. 

This means that you can learn from the behavior of past stocks and apply it to the present. Whether it’s the dramatic movements in the Northern Pacific Railway at the beginning of the twentieth century or Apple in the twenty-first, you can learn from history. 

And the best way to do that is to read stock charts. 

The key message here is: You should learn stock chart patterns, and one pattern especially.

In almost every field, we assess current conditions to plan our next move. Think of the X-rays, MRIs, and brain scans doctors use to treat illnesses before they progress. Or consider how seismic data is used by geologists to study earthquakes or to help companies find hidden oil reserves.

By learning to see patterns that have replicated themselves time and time again, we can decide how to act in the present. The same is true for investing. We can use all of the stock-market data from the last hundred years to find patterns. That way, we know when to jump in, or out, of a stock. Many investors fail to do this, and unless they’re spectacularly lucky, they lose money.

So, what should you be looking for in stock charts? Quite simply, price patterns. 

There are many price patterns, but one of the most important to remember looks like a cup with a handle. In fact, that’s its name: Cup with Handle. So, after rising for a period of time, a stock will often fall. As it falls, it sometimes makes a rounded, downward curve, which then becomes a steady, flat line. This is the base of the “cup.”

This base is very important. Because, without a strong base of investors who believe in the stock, it could just collapse. But with this solid foundation, the stock will rise properly when its fortunes change. As it climbs upward, it will form the other side of the cup. Just then, it dips back again, and it will form the “handle.” It’s precisely at that point that you should buy in. More times than not, the stock will shoot upward. 

Whether the stock is Apple in the 2000s or Sea Containers in the 1970s, this trusty stock-market pattern has resulted in great rewards for investors over the decades.