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An incredibly popular stock trading book and one that we feel is deserving of its top rating in many “best trading book” lists, Insider Buy Superstocks by Jesse Stine is a contrarian trading system that utilizes a series of fundamental and technical guidelines to seek out high-potential, lower-priced growth stocks before they make explosive moves to the upside.
|Author||Jesse C. Stine|
|Publisher||The Superstock Letter|
|Dimensions||8.5″ x .6″ x 11″|
|Published||May 21, 2013|
About Jesse Stine
Jesse Stine strikes us as a down-to-earth guy who genuinely wants to teach others the important lessons he’s learned about achieving huge gains in the stock market. Throughout his career, he’s suffered a fair share of setbacks but his persistence and willingness to work hard has rewarded him with returns that few can match (turning $46K into $6.8 million in 28 months).
What You'll Learn
Insider Buy Superstocks is an enjoyable read. In addition to learning about Jesse Stine’s background, traders are also given a nice overview of his stock trading system, entry/exit rules, and warnings about costly pitfalls to avoid.
The following is a breakdown of the book’s chapters, a summary of each chapter’s contents, and a few of our favorite quotes.
“I am a specialist who focuses on one single ‘bread and butter’ approach, and my results indicate that I do it better than the biggest names in the business.” (page 12)
In this introductory chapter, Jesse Stine provides the reader with some details on his background, personal life, and the drama-filled journey that brought him to where he is today. Unlike many other authors who choose not to mention past failures, Stine recalls many of the bad decisions and hard lessons he’s learned along the way which hopefully will save others from making the same mistakes.
“The boundless freedom the trader is faced with requires the utmost in self-discipline (a never-ending quest for me) which very few people possess.” (page 37)
Chapter two provides a basic overview of the mindset needed to be successful with Stine’s approach. Covered are topics such as going big, taking calculated risks, stepping outside of one’s comfort zone, and avoiding mainstream “groupthink”.
“I dare say that nobody on this planet consistently makes money by following what they read and see in the mainstream media.” (page 45)
In chapter three, Stine makes a strong case for completely ignoring the mainstream media. Following the herd and allowing yourself to be influenced by mass media “noise” can have devastatingly negative impacts on your trading results.
“Their clear objective when issuing a ‘buy recommendation’ is to get the dumb money (retail investors) to buy at the precise moment that their trading department is establishing massive short positions.” (page 56)
Jesse Stine cautions the reader about media manipulation and presents several examples of why it’s critical not to follow stock upgrades and downgrades issued by major Wall Street firms such as Goldman Sachs.
“Since the stock market is nothing more than global psychological warfare, and human emotion is reflected in the form of market prices, learning to master your emotions is absolutely essential to compete effectively.” (page 61)
In this chapter, Stine deals exclusively with the topic of trading psychology and why it is vital to master one’s emotions. Good traders are made not born and you’ll learn more about the dangers of overconfidence, trading discipline, embracing losses, being patient, how to take care of yourself, and more.
“Blockbuster chart patterns combined with 5-star research will forever stand the test of time.” (page 72)
Chapter six begins to transition into Stine’s trading approach and he shares why he believes that a simple, laser-focused strategy will always yield the best returns. A system that requires hard work and a serious time commitment to master, the Insider Buy Superstocks method carefully evaluates stocks based on price, fundamentals, and technicals.
“The critical component of a Superstock’s future success is its chart pattern.” (page 80)
In chapter seven, you’ll learn why it’s important to evaluate chart patterns before researching a company’s fundamentals. Jesse Stine also lists his “Top 5 Must-Have” requirements that a superstock must have at breakout to be a buy candidate. He also provides several other requirements that are important including the “magic line” rule, fundamentals, and insider ownership.
“The game is 100% about low-risk entries in combination with high likelihood of price appreciation.” (page 105)
While drawdowns have the potential to be more significant with the Insider Buy Superstocks system, chapter eight presents several guidelines which help to skew the reward to risk ratio in your favor. Stine discusses the importance of technical support, EPS, limiting risk, using strict stop losses, and waiting for ideal entry points.
“While most investors are buying when buzz about their stock is hitting a crescendo, we want to be on the lookout for situations where the noise has died down and our strong stock presents limited downside.” (page 111)
Chapter nine discusses why large pullbacks and long periods of base building are required to set the stage for major advances. Stine also shares some details on his “BLT” indicator and the importance of getting in early.
“There is no way around it; where you sell a stock is 1,000 times more important than where you buy a stock.” (page 128)
When to sell is an incredibly important topic that typically doesn’t get the coverage that it deserves in many stock trading courses. In chapter ten, Jesse Stine debunks the myth that there’s a surefire way to consistently pick tops and stresses the importance of selling into strength. Also discussed are warning signs to watch out for, stop loss guidelines, and fundamental sell signals.
“Think of this as the Cliffs Notes for Superstocks.” (page 152)
Chapter eleven provides a concise, bulleted summary of the Insider Buy Superstocks system. While there are important details not mentioned in this chapter, it’s a helpful resource for reviewing the major points of the approach.
“If you want to make serious money in the market, you need to study these charts.” (page 154)
Presented by Jesse Stine as the most important chapter in the entire book, chapter twelve includes several examples of prior superstocks to study.
“If all of your time is consumed by reading dozens of books, you may become good at several different methods, but you will never become GREAT at one.” (page 185)
Chapter thirteen discusses additional books and websites that the author recommends.
“Yes, I said that several of the top traders have learned immensely from gigantic portfolio losses but you don’t have to experience such dramatic results in order to learn the lessons. Learn from my failures, and promise yourself that you won’t repeat them.” (page 188)
As mentioned earlier in this review, we appreciate the fact that Jesse Stine is so willing to admit and discuss his previous failures as it serves as a warning to others who may be inclined to make the same mistakes. Chapter fourteen is chock-full of wisdom and lists many destructive trading pitfalls to avoid.
“What everybody knows is not worth knowing. What everybody does is not worth doing. You must stand on your own and live life to the beat of your own drum. In so doing, you must invest entirely different than just about everybody else in order to put yourself in a position to radically outperform.” (page 195)
In chapter fifteen, Stine once again stresses the importance of thinking for oneself and being willing to think outside of the box. It is always those who are willing to do what others aren’t who achieve supercharged results.
“Remember that everything worthwhile is just a few feet outside of your comfort zone.” (page 202)
In this final chapter of the book, Jesse Stine wraps everything up with a motivational challenge to the reader to continue learning, applying, and growing.
Chock-full of valuable trading wisdom…
Chock-full of valuable trading wisdom, this book is a must-own and one that you’ll want to read several times in order to fully absorb and put into practice what is presented. While the method outlined in the book takes a lot of work to implement (in the form of research and chart review), the potential payoff for time invested is great.
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