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Douglas uncovers the underlying reasons for lack of consistency and helps traders overcome the ingrained mental habits that cost them money. He takes on the myths of the market and exposes them one by one teaching traders to look beyond random outcomes, to understand the true realities of risk, and to be comfortable with the 'probabilities' of market movement that governs Douglas uncovers the underlying reasons for lack of consistency and helps traders overcome the ingrained mental habits that cost them money. He takes on the myths of the market and exposes them one by one teaching traders to look beyond random outcomes, to understand the true realities of risk, and to be comfortable with the 'probabilities' of market movement that governs all market speculation. The author repeats himself. The book is full of pop psychology and bad science to illustrate or prove his points.
If cut down to the core, the book could probably make a very nice five page magazine article. And yet, for traders, I think this book is invaluable. Most could benefit from reading it again and again.If you trade, and cannot make yourself consistently successful, then the chances are that you harbor some beliefs that work against your success as a trader.
The trick is to find, and ne The author repeats himself. The book is full of pop psychology and bad science to illustrate or prove his points. If cut down to the core, the book could probably make a very nice five page magazine article. And yet, for traders, I think this book is invaluable. Most could benefit from reading it again and again.If you trade, and cannot make yourself consistently successful, then the chances are that you harbor some beliefs that work against your success as a trader. The trick is to find, and neutralize, these beliefs.
The goal is to eliminate fear and greed as operative emotions. It seems pretty easy to explain and to understand. It's much harder to put into effect.So what does a trader need to believe:1) Anything can happen.2) You can make money without knowing what will happen next.3) An edge defines a random distribution of wins or losses for a given set of variables.4) An edge says nothing more than that, over a large enough sample, one thing will happen more than another.5) Every moment in the market is unique.Basically, the trader's goal is to think like the casino.
Keep the size of the bets is small enough in relation to overall capital to reduce the chance of a ruinous event. And find an edge and simply trade it. That's all it takes to be successful. And yet, 95% of traders fail, and they fail because they let their emotions (fear and greed) or other beliefs (the ego's need to be right) get in the way.The lesson is simple to understand, but very hard to learn.
That's why it bears repeating over and over again. Top practical trading book read-to-date.The book covers the psychological aspect within one-self that prevents him/her from reaching consistency. The most common logic for new traders is to try to learn every method available to them. If they fall short of success, they attend more webinars, seminaries, and read more books, only to confuse themselves further. They've succeeded at 'step 1' but continue to fall back into trying to find new/more trading methods/tools (indicators, charting systems Top practical trading book read-to-date.The book covers the psychological aspect within one-self that prevents him/her from reaching consistency.
The most common logic for new traders is to try to learn every method available to them. If they fall short of success, they attend more webinars, seminaries, and read more books, only to confuse themselves further.
They've succeeded at 'step 1' but continue to fall back into trying to find new/more trading methods/tools (indicators, charting systems etc.). How do we get to 'step 2'?Have you ever hesitated on putting on a trade?
Did you get pissed off when a stock did exactly what you thought it would but you just couldn't pull the trigger? This is why we have analysts as talking heads on T.V. They have an 'edge' in the markets because they're able to perceive the markets from an objective standpoint (from the markets perspective) but as soon as they put their own money on the line, they start to perceive the markets in a threatening way; essentially, the trader's own beliefs, ingrained in their mind, cause them to perceive the market in a threatening way. And that is why most traders fail in this business.So 'step 2': re-wire our thinking about the markets and learn to think in probabilities.Trading successfully is a paradox. What makes people successful in today's society, will not make one successful in the trading world. And it all comes down to our beliefs.I encourage anyone trying to reach the next step in their trading to read this book, its the most practical book you'll ever read.One truth mentioned in this book: we need to be completely reconciled with the risk put on a trade. If we don't genuinely accept the risk, then we'll cut our winners short, we'll cut a trade flat only to see it work in the direction once you exit, and the list goes on.
We start to narrow our focus on the pain that we try to avoid! We put over-emphasis on every down-tick or up-tick. We no longer watch the price action in an neutral state of mind, instead we start to trade our core beliefs that make us unsuccessful.
And remember, our core beliefs (things we've learned in our upbringing) DON'T make us successful as traders.Just read the book if you want to reach the next level. It doesn't matter if you have a wealth of knowledge if you don't have the wisdom to apply that knowledge. This book totally blown my mind! It must be number 1,2,3,4.20 book in the list, seriously!Because it unveils the nature of trading to the core! It exploded my mind.No other book on psychology comes close to this.I have only read 30 /143 pages and this was enough to get deeply impressed!the author just opened my own mind and pointed to me the distinction: trading is total freedom without rules, where rules have to be set by me AND followed,abide by me as well!trading offers complete freedom this book totally blown my mind! It must be number 1,2,3,4.20 book in the list, seriously!Because it unveils the nature of trading to the core! Considering how highly and oft mentioned this book is, I was rather unimpressed.
The authors main points are fine and good. But boy does he ramble and bullshit. There is so much bad science and pop psychology in this book. And many times he says things like, 'I wont go into depth about this,' but then he rambles about that or another subject.For instance about 3/4th of the way into the book he spends time talking about what a trend is and how to identify it. Not only should the reader Considering how highly and oft mentioned this book is, I was rather unimpressed. The authors main points are fine and good. But boy does he ramble and bullshit.
There is so much bad science and pop psychology in this book. And many times he says things like, 'I wont go into depth about this,' but then he rambles about that or another subject.For instance about 3/4th of the way into the book he spends time talking about what a trend is and how to identify it. Not only should the reader already have such elementary knowledge before reading this book, he contradicts himself by giving any time to such matters.The bottom line is that there is nearly too much hot air in this book to make it worth it. You could read it and not be worse off, and you can always skim (and not miss a thing), as I resulted too, but if you're serous about trading and education you'll probably learn the same in a better manner elsewhere.(Here's another fine review of the book: ). This book is one of the favourites for traders.
I have heard enough stories about how this book has helped traders make the necessary mental shift to become profitable traders. Instead of believing in what others said, I read the book and judged it for myself. I will not say that it had such a fundamental impact to me but I cannot deny the book did helped me figure out certain things in trading. Not everyone can pick up the same amount of useful ideas from the same book. Different people have di This book is one of the favourites for traders.
I have heard enough stories about how this book has helped traders make the necessary mental shift to become profitable traders. Instead of believing in what others said, I read the book and judged it for myself. I will not say that it had such a fundamental impact to me but I cannot deny the book did helped me figure out certain things in trading. Not everyone can pick up the same amount of useful ideas from the same book. Different people have different background, experience and objectives, and are triggered by different thoughts. Although I may not have gotten a lot from it, it does not mean you would not. Nonetheless, I enjoyed the book and being able to get a few perspectives from it still makes it a good book.More Knowledge Does Not Prevent LossesI was guilty about a mistake that Mark pointed out in the book – I lose money because I lack market knowledge.
To him, it is not true.“This means that no matter how much you learn about the market’s behavior, no matter how brilliant an analyst you become, you will never learn enough to anticipate every possible way that the market can make you wrong or cause you to lose money.”He said that losses are not a result of your reading of the market. No one can learn enough to score 100% wins in all his trades.
Hence, it is never about being the super analyst who never make any mistake. This person does not exist.“Why do you think unsuccessful traders are obsessed with market analysis. They crave the sense of certainty that analysis appears to give them.
Although few would admit it, the truth is that the typical trader wants to be right on every single trade. He is desperately trying to create certainty where it just doesn’t exist.”“The consistency you seek is in your mind, not in the markets. It’s attitudes and beliefs about being wrong, losing money, and the tendency to become reckless, when you’re feeling good, that cause most losses – not technique or market knowledge.”Hence, do not expect your methods or the market to perform consistently. Do not be disappointed when you are wrong, or become overconfident when you are right. It is about implementing your method consistently regardless of wins and losses.
Because wins and losses will stir your feelings and cause you to act irrationally, and result in self-sabotage.“To be consistent, you have to learn to think about trading in such a way that you’re no longer susceptible to conscious or subconscious mental processes that cause you to obscure, block, or pick and choose information on the basis of what will make you happy, give you what you want, or avoid pain.”I think the above quote is true – we see what we want to see. We filter information every second and we do that in trading too. We will filter out the information that will cause us pain and select information that gives us pleasure. And doing these seldom lead us to profits.Why People Love Trading?I love the way Mark explained why people love trading, and I think to some extent I felt it is true for me.“Trading is an activity that offers the individual unlimited freedom of creative expression, a freedom of expression that has been denied most of us for most of our lives.”However, he cautioned that many of us do not have the necessary psychological makeup to survive the market when we have no rules to govern our trading in the boundless market.“The freedom is great. All of us seem to naturally want it, strive for it, even crave it.
But that doesn’t mean that we have the appropriate psychological resources to operate effectively in an environment that has few, if any, boundaries and where the potential to do enormous damage to ourselves exists. Almost everyone needs to make some mental adjustments, regardless of their educational background, intelligence or how successful they’ve been in other endeavors.”.
This is a watershed text on investing and trading psychology. Too often we underestimate the importance of individual mindset, psychology and particularly emotion on the effectiveness of our investing or trading systems. If we can our understand traits, strengths and weaknesses, then we can personalise a system which will improve returns. Douglas articulates the common dangers of trading, such as failing to take responsibility, and then gives us principles and tools to overcome them. Thinking in This is a watershed text on investing and trading psychology. Too often we underestimate the importance of individual mindset, psychology and particularly emotion on the effectiveness of our investing or trading systems.
If we can our understand traits, strengths and weaknesses, then we can personalise a system which will improve returns. Douglas articulates the common dangers of trading, such as failing to take responsibility, and then gives us principles and tools to overcome them. Thinking in terms of probabilities and not ‘right and wrong’ is perhaps the most important single understanding. When we shift our thinking in this regard, and then devise objective rules in an effective trading or investing system, then we can be more objective and consistent. This book is a must anyone’s library.
MoreRegards, Lee M. Spano, Investor & Creatness International CEO. This book is so well written - it goes through in detail the psychological reasoning behind consistency with trading. I got a lot from it- and its changing the way i trade.
Stick with it though, there are quite a few 'in-depth' chapters but through explaining these with repetition and associating them with an analogy, Mark taps into our learning and gets the info required through to us! You needs to study psychology? I learnt so much and am so grateful that this book was writtten as it address t This book is so well written - it goes through in detail the psychological reasoning behind consistency with trading. I got a lot from it- and its changing the way i trade. Stick with it though, there are quite a few 'in-depth' chapters but through explaining these with repetition and associating them with an analogy, Mark taps into our learning and gets the info required through to us! You needs to study psychology?
I learnt so much and am so grateful that this book was writtten as it address the REAL challenge with trading - our brain! Must read for anyone who is in trading. It wont teach you how to trade, but It may enlighten you as to what real trading is about (hint: is NOT about KNOWING what the market is going to do).If you have been trading for some time, it probably wont be as revealing as if you are new to the discipline. But it still can give you one or two pointers/reminders to keep you on the right track.Hope this review helps! Must read for anyone who is in trading. It won´t teach you how to trade, but It may enlighten you as to what real trading is about (hint: is NOT about KNOWING what the market is going to do).If you have been trading for some time, it probably won´t be as revealing as if you are new to the discipline.
But it still can give you one or two pointers/reminders to keep you on the right track.Hope this review helps! A good book to read if you are trying to develop you mindset, and remove emotion from your trading. I found this book very beneficial, but it is more useful to newbie traders, rather than experienced traders that have been trading for 3+ years.
The problem for most traders is human emotion, and maybe reading this book, will help potential traders reducing their emotion levels. It is one of the better trading related books that I have read. Well written, easy to follow and understand. I enjoyed r A good book to read if you are trying to develop you mindset, and remove emotion from your trading. I found this book very beneficial, but it is more useful to newbie traders, rather than experienced traders that have been trading for 3+ years. The problem for most traders is human emotion, and maybe reading this book, will help potential traders reducing their emotion levels. It is one of the better trading related books that I have read.
Well written, easy to follow and understand. I enjoyed reading it. 3.5 stars If you've explored stock trading to any serious degree, you've undoubtedly realized that it's an endeavor that doesn't always align well with human emotional programming. To be successful, you have to accept that no trade, no matter how good the setup, is guaranteed to work out. You have to have the resolve to open a position when you're getting the right signals, the resolve to stay in as long as the trade is working, and the resolve to close it when the signals are telling you that 3.5 stars If you've explored stock trading to any serious degree, you've undoubtedly realized that it's an endeavor that doesn't always align well with human emotional programming. To be successful, you have to accept that no trade, no matter how good the setup, is guaranteed to work out.
You have to have the resolve to open a position when you're getting the right signals, the resolve to stay in as long as the trade is working, and the resolve to close it when the signals are telling you that the trade is likely to stop working. Unfortunately, all are easier said than done. In the first two cases, you have to fight your fear of taking a risk, and in the latter, you have to fight against greed and the need to be right.In this book, widely regarded as a 'classic' in the profession, Mark Douglass addresses the emotional and psychological side of trading, so significant to the experience, but so overlooked in favor of the analytical aspects. He breaks down all the ways in which traders can be derailed by analysis paralysis, unreasonable positive or negative emotional associations with a particular security/setup, beliefs, biases, expectations, self-doubt, or blind overconfidence. The 'zone' that traders should aspire to reach, according to Douglas, is the same place that well-drilled professional athletes can get to, a mental space in which they are able to accept that 'anything can happen' and cooly respond to a dynamic situation.
Their ability to react isn't undone by the fact that the opposing team did something that wasn't part of the initial plan (anyone who traded these past few years has probably seen a position suddenly collapse and thought, 'ohmygod, what did he tweet now?' )The value of this book, IMO, is less about Douglas's advice, which consists mostly of self-help-y generalizations and is undermined by some new agey talk about 'energy', and more about recognizing the struggles that traders have with their emotions, as they try to interpret the market's often-conflicting signals.
I agree with him that successful stock trading is often a lot simpler than traders believe it to be and that most people would be well-served to stop questing for perfect analysis or infallible indicator, learn to accept risk, and learn to manage their own egos. As a mentor pointed out, traders can be handed a perfectly good system (in that someone else consistently makes money with it), understand the rules of the system intellectually, yet still make a lot of bad trades, because their emotions keep convincing them to bend the rules. Sometimes they don't even realize it consciously. Trading in the zone is not only in my top 10 trading books but probably number 1! Still can't believe that Mark Douglas died in 2015. This was my the second time I was going through this book and still found a lot of value in it. It is hard to implement the professionals trader mindset.
Even if you understand it intellectually there is a long way in order to function from a probabilistic mindset.Most of the traders loose money because they focus on a single trade. However, it is impossible to kn Trading in the zone is not only in my top 10 trading books but probably number 1! Still can't believe that Mark Douglas died in 2015. This was my the second time I was going through this book and still found a lot of value in it. It is hard to implement the professionals trader mindset.
Even if you understand it intellectually there is a long way in order to function from a probabilistic mindset.Most of the traders loose money because they focus on a single trade. However, it is impossible to know the result of a single trade and when you put too big a position size eventually you get blown out. That is way you should focus on a sequence of trades. For example if you make a 100 trades you should have 65 of those trades winners but you do not know the sequence of the winning and the loosing trades. This concept alone is quite major: Do not concentrate on single trades but on a number of trades!Emotions are another huge aspect of trading.
There are two major types of emotions in trading and the first one is the fear. If you operate in a state of mind of fear you can be missing out a signal to enter into a trade because you are afraid to loose. Or you may be getting to early in the position because you are afraid of not participating in the market.
The other major emotion is euphoria. This happens when you have crossed the normal threshold of normal confidence into super confidence.
As a result you start to get into more trades and with bigger positions. Eventually you will get blown out and of matter of second you will get from 'heaven' to 'hell'.Using sample sizes of 25 trades to find out if you edge is working. This approach allow you to build confidence in your trading methodology and find out how good results you can accomplish.
However, when you start trading real account usually there is a profit gap between what your methodology allows to get from the market and what you are actually getting.Finally, I have gone through most of Mark's materials and the DVD series 'Thinking like a professional trader' is my favorite. This book is a must for any trader that would like to achieve consistency in his results. This book has a clear path for those who may be interested in the crazy world of stocks/futures/crypto/anything-trading (especially day trading). I have been studying this field for the last 4/5 years, I made it as my main income source and that has been a journey of knowledge.From Price Action to Tape Reading, you will find out very early that the technical part is easy to learn (at least the basics/enough) but it is very hard to keep your mind stable to trade efficiently and put your knowledge This book has a clear path for those who may be interested in the crazy world of stocks/futures/crypto/anything-trading (especially day trading). I was recommended this book by an experienced trader, to help me become a better trader myself.I am so very grateful he told me about this book. It is an incredible asset.
I learned so much things about the trading game that would have probably otherwise taken me a lifetime to learn.The really cool thing about this book is that the lessons learned are actually quite general, and you could very well improve your other aspects of life if you apply them. They are not purely focused on trading itse I was recommended this book by an experienced trader, to help me become a better trader myself.I am so very grateful he told me about this book. It is an incredible asset. I learned so much things about the trading game that would have probably otherwise taken me a lifetime to learn.The really cool thing about this book is that the lessons learned are actually quite general, and you could very well improve your other aspects of life if you apply them. They are not purely focused on trading itself. It's just that the author zooms his focus on their applications in bettering your trading specifically.If looked at in general, i'd say this could even be passed as a self-help book.
Absolutely wonderful stuff! I found only a small part of this book useful, specifically, the exercise at the very end which went over in a simple step-by-step way to set up a trade following all of the principles discussed in this book. I skipped the examples he used throughout the book to explain the concepts behind the trading principles, like a kid being bitten by a dog and thereafter always being scared of dogs. He went over them far too much and far too long to reinforce his point, where even a single, short story wou I found only a small part of this book useful, specifically, the exercise at the very end which went over in a simple step-by-step way to set up a trade following all of the principles discussed in this book.
I skipped the examples he used throughout the book to explain the concepts behind the trading principles, like a kid being bitten by a dog and thereafter always being scared of dogs. He went over them far too much and far too long to reinforce his point, where even a single, short story would have sufficed. However, there were a few interesting things throughout this book that have definitely helped me be conscious of before and when I start to trade.
Financial markets are full of surprises, letting some get enormously richwhile others (who are in majority unfortunately) lose all their capitals.But being patient and striving to perfect their skills many of those wholost in the very beginning still have their chance to become luckymillionaires someday. On the other hand those who got rich in the beginningthus becoming all too confident and stubbornly righteous may someday turninto complete failures complaining about the injustice of financial markets.The stories of those failures are dull and monotonous and you can read themon any forum dedicated to trading, while the stories of those who succeededand falling from the top climbed their again without losing their confidenceare inspiring.
Earning a lot of money dealing in volatility arbitrage is notrocket science. To keep one’s earnings augmenting the capital is a moretricky business. Many great traders and financiers became famous only afterthey managed to find their way in trading after a series of failures.Jesse Livermore is an example of such trader. He was a genius of trading whomade millions only to lose them and to make them again. The press nicknamedhim the Great Bear of Wall Street as his trading had its impact on themarket, while the lad even had no secondary education! His trading careerbegan at the age of 14, when a son of a simple farmer mastered a three-yearcourse of math just in a year. Having done so he decided to look for anyother trade except farming and left his home.
His initial capital amountedto $5 and the clothes he had on. He ran off to come to Boston. Thestagecoach he rode stopped in front of a bookmaker’s office. Thiscoincidence gave birth to a great career in trading. The year was 1891 andthe bookmaker’s office hired him to write down on the board the quotescabled from the stock exchange. The office profited from the bets for pricechanges. The office gained from the losses of the betters.
Having amathematical mind and good memory Jesse noticed the repeating figures andstarted to record them. Grasping certain regularity in the repetitions Jesseunderstood that he can forecast changes in the figures sometimes. His firstwinning bet amounted to $3. Improving his skills he soon managed to becomemore accurate in his forecasts, achieving great excellence.
His abilitiesmade his colleagues call him Boy Plunger and Wonder Boy. Having earned hisfirst capital he repaid $5 to his mother adding $300 for her help in hisescape.
Soon he became popular all over the city and in a month his betsbecame banned in every betting office in the city, as he almost never lostin betting. This was unbearable, as bookmakers make their revenue fromlosing betters.
Betting on shares Jesse managed to improve his mathematicalskills and to develop his own method of forecasting which was based ontechnical analysis. As Boston grew too small for him, Jesse went to New Yorkto earn more money on real stock exchange.He came to New York having $ 2000 in his pocket. He became a stock traderhaving no idea of real stock trading. With no skills in long-termforecasting he managed to earn his first $ 50 000 by 1906 only to lose theamount for trading on a stock exchange is very different from betting withbookmakers.
Ill luck did not break him down. He understood his mistakes andtook measures to prepare himself for the next try. He returned to his firstemployer and started studying new analysis and forecasting methods todiscover the news analysis. His inborn abilities, good judgment andpersistence help him develop a new strategy within a very short time.
Heturned back to trading during that same year to recover his losses and toearn much more. His success did not go unnoticed on the stock exchange wherehe was nicknamed a “Millionaire for a day”.It did not take much time for the nickname to be justified. Jesse preferredbear-style trading often running down the prices for many assets. In 1907his professional trading operations caused a crisis on the stock exchangewhen his bear-style trading made the whole US stock market collapse. Theowners of the New York Stock Exchange even had to ask him to suspend histrading operations in order for the stock market to recover. The collapse ofthe national stock market made Jesse a real millionaire. During the twentieshe was the most influential and wealthy trader with an office of his ownstaffed with six clerks writing the quotes down for him on a large board inabsolute silence.
He began living on a grand scale, buying expensive carsand yachts and making expensive gifts to his wife and mistresses. He alsobecame a celebrity with te press. He lost his fortune four times and eachtime he earned even more, getting back triumphantly and repaying all hisdebts and losses. His career peaked in 1929 when he made a tremendousfortune at the start of the Great Depression by predicting marketdisruption. In view of this he was declared to be the principal party guiltyof the crisis.
It was the year when many traders and brokers committedsuicide because they went broke, while Jesse could live as if nothinghappened.In the beginning of the thirties Jesse’s career came to an end. He put hisentire capital at stake and lost. This time he failed to recover and beingprone to depression he locked himself in a hotel room and committed suicide.Having outstanding analytical skills, Jesse Livermore was a great trader,but his risky temperament and ineffective capital management took him offthe top more than often. Should he spend a fraction of his analytical skillsto control the risks, he could hold Wall Street at bay much longer by hisbear-style trading.Charles Merrill was a quite different type of a successful financier. Hewanted to earn money, but he also wanted to open stock markets to anybodywho wished to trade. Despite his extraordinary abilities Charles Merrillsometimes felt the need for a piece of advice.Once he confessed to his doctor that he feels himself like a madman tryingto convince people in the coming market disruption, as nobody believes him.All the people see is the growing market and they think it will grow forlong.
The doctor reassured him by saying that if he thinks himself mad, thenthe doctor is madder still for he did as Charles told him to do, i.e. Hesold all his shares.The conversation took place in the end of 1928 in an office of a New Yorkpsychiatrist who was a customer of Merrill Lynch Investment Company.
Thepsychiatrist’s patient was none other than Charles Merrill, one of theco-owners of the Company, a successful stock trader and financier. He beganto doubt his mental health after he became almost the only one who failed toshare the excitement about the rapid economic upturn in the USA. At thestart of that year he advised his customers and friends to sell the sharesat their then current overestimated price. The unprecedented growth of themarket caused by the traders going bull was too risky and prone to abruptdisruption. The majority of his customers failed to follow the advice, so hemade another attempt to warn his countrymen of the coming danger by makingrecourse to the words of President Coolidge, a greater authority for theAmericans. He offered a retiring President to become a partner to theCompany should the President warn the Americans by a broad statement. Butthe President refused the offer, accusing Merrill of being unreasonablypessimistic.
All this made Charles Merrill turn to his psychiatrist.Reassured by the doctor Merrill stopped his attempts to warn the investorsof the future collapse, hastening to sell the stock he owned and leavingonly the chain stores and some other companies in his portfolio. Havingsafely survived the market crash in October 1929 Charles Merrill retiredtemporarily as the onset of the Great Depression made the stock marketpractically inoperable. Selling his stock in the right time he had enoughmeans to survive the Depression safely. As his company owned Safeway Storeswhich was extended and due to Merrill’s talents became the top thirdnational retailer during the Great Depression Charles Merrill returned tothe stock exchange triumphantly after the prolonged crisis was over.Young Charlie helped his father, a rural doctor and the owner of a drugstoreto sell drugs. He was tasked with preparing and selling milkshakes. Soon hisfather noticed the growing popularity of his son’s produce. It turned outthat the secret was quite simple, as Charlie added spirit to his milkshakes.Charles Morton Merrill, Charlie’s father was a wise man and instead ofpunishing his son he made use of his recipe by selling “spirited” milkshakesat a higher price.
Having noticed a talent in his son Merrill Senior senthim to college. Due to the lack of money the Merrill family moved around alot.
This resulted in Charlie’s changing many schools and seeing manydifferent people, gaining a lot of experience in life. Back in his nativetown, Charles graduates from the college and enters the law school of theMichigan University. As Charles lacked the money to pay for his education hefailed to get it in full. But during his term at the University he managedto engage a coed whose father owned Patchogue-Plymouth Mills, a smalltextile facility in New York. Soon he becomes an employee of his futurefather-in-law. The latter employed the potential son-in-law as a courier,but as soon as Charles began working there came the crisis of 19007, and thecompany went almost broke.
They needed money to save the company, but creditwas hardly available at that time. To avoid possible humiliation and refusalthe company owner decided to assign the task of getting credit money toCharles.
Charles turned out to be a good negotiator, as his experience insocializing gained during frequent relocations of his family served a goodservice to him. He succeeded not only in meeting the President of theNational Copper Bank, but in getting three hundred thousand dollars oncredit. Charles’ success was a complete surprise for his futurefather-in-law, who gave him a promotion to recognize his achievement. Twoyears later the likely son-in-law became so reputable that the owner of thetextile company viewed him as a likely partner, but Charles terminated hisengagement with the daughter of the company owner and left to work in WallStreet.After moving to New York Charles met Edmund Lynch with whom he shared a roomat YMCA hostel.
At that time Edmund busied himself selling soda waterfountains. They became close quickly due to shared dissatisfaction withtheir routine jobs and low incomes. The young men started discussing plansfor possible joint future.
While still working at the textile facilityCharles got interested in the stock market which was at its prime at thetime. On seeing the amount in circulation on the stock exchange Charlesbegan to study the market more closely. It was the time when no specialpermissions were required to become a broker therefore Charles learns thetrade very quickly only to leave the company and get employed as a brokerwith George H. Burr & Company.In two years he becomes a successful professional ready to become a head ofthe company’s bonds department. The only thing he was displeased with liedin the fact that the company remained indifferent to the success of itscustomers.
The company made its earnings from commission fees and wanted itscustomers to have as many transactions as possible regardless of theiroutcome. Such situation led Charles to the idea of reforming the company toimprove its performance. He laid his ideas out to the top management of thecompany but to no avail – the managers refused to change anything. SoCharles decided to establish a company of his own to implement the ideas inquestion.Charles E.
Merrill & Co. Was established on January 6, 1914. As brokercompanies usually dealt with major investors, it was no easy task for a newplayer on the market to find willing customers. But it did not discourageCharles Merrill.
In 1912 while employed by George H. Burr & Company he wasresponsible for the IPO of the major retail chain owned by Sebastian Kresge.The successful IPO brought experience and reputation to the young brokerwhile letting him look at broking at a different angle. The new lookresulted from the in-depth study of retail chain operations which madeCharles think that retailing can be useful not only in goods trading. It canalso find its way to trading stock through a chain of broker companies.Market studies and computations revealed to Charles that the total capitalowned by the middle class will exceed the total capital owned by the rich ifattracted to the stock market. The idea got so tight hold of him that hemade it his mission to implement it in practice. To start with, he decidedto succeed and to earn some capital. He used his reputation and connectionshe established during his work with Kresge.
He busied himself with theplacement of shares of chain companies. As he was short of employees heinvited Edmund Lynch, an old friend of his having extraordinary analyticalskills. So in 1915 his company was renamed to become Merrill, Lynch & Co.Having received considerable brokerage fees and initial capital from theplacement of J.G. McCrory Co shares, the partners started buying the sharesof minor chain and grocery stores sold cheap.
Charles Merrill understood thepotential of chain stores at the time he was engaged in placing the sharesof Kmart on the market, as it is in chain stores that consumers can buyeverything they need without wasting much time. The company’s capital grewdue to the growing prices for the shares of retailers. As the owner of suchshares Charles was able to participate in the management of retailers and hedid everything in his power to improve the efficiency of their operations.In 1926 his activities resulted in gaining control over Safeway Stores, amajor chain of stores. Merging it with smaller retailers owned by MerrillLynch & Co at that time the partners managed to increase the capitalizationof the company, as well as the price of its shares.
The Great Depressionstarted soon, but Charles Merrill and his company had quite a considerablecapital.During the depression Charles Merrill handed a share of his capital and theremaining customers of the company over to E.A. Pierce & Co while busyinghimself with the management of Safeway Stores. Having considerable meansresulting from the sale of shares and a considerable income from his retailchain Charlie survived the crisis painlessly and acquired worthy experiencein the retail business. Once the Great Depression was over Charles got backto his idea of attracting the middle class money onto the stock market.
Toavoid starting from scratch he organized a merger of Merrill Lynch with A.Pierce in 1940 investing his own $2.5 million and getting 56% of the newcompany shares. Then he fixed the salary of his employees, making itindependent from the amount of customer fees, and thus allowing theemployees concentrate on studying stock purchase offers intended forcustomers, making it a point to achieve positive results. After the GreatDepression ordinary Americans became more indifferent to the stock marketand brokers did their best to attract new customers. But Charles found aneasy way to make himself known to the entire country.
To get the result hedecided to emphasize the secrecy and non-transparent nature of business doneby the Wall Street tycoons of the day. Merrill Lynch, E.A.Pierce & Cassattwas the first company to publish its last year’s profit report. It was alsothe first to publish its last year’s losses report. The company finished theyear 1940 with the losses amounting to $308 thousand.
It was like a bombexplosion – all American media covered the event advertising CharlesMerrill’s company for free. Charles turned out to be quite right – feelingconfident about the company customers started turning to it more frequently.In 1944 the company dealt with 10% of securities traded on NYSE. Withoutsticking to the result Charles began an aggressive advertising campaignaimed at improving the financial literacy of an ordinary citizen, ratherthan at the promotion of his brand. Merrill Lynch organized free seminarsfor ordinary Americans pioneering a family pair approach that involved theprovision of a babysitter to those listeners who had nobody to leave theirchildren with. Charles used to say that he needed both members of the familyto be present at the seminar so as not to hear “I need to discuss the issuewith my wife” later. Such advertising bore fruit and by 1950 the company had106 offices across the country with customers amounting to 104800.The enterprising financier benefitted from the coming cold war also, as thepurchase of shares owned by national companies was considered a patrioticact.
The chain consisting of 106 “stock supermarkets” started working at topspeed, making Merrill Lynch the most famous investment company in Americaand beyond. NYSE’s urge to materialize the idea of democratic capitalismplayed a significant role in making the company so famous – MonthlyInvestment Plan program was initiated in January 1954. The program allowedinvestors to invest in securities a fixed amount ranging from $40 to $999.During the fifties the number of shareholders in America grew at a rate ofhalf a million per year.Charles Merrill became famous not only for his talent and persistence inearning fabulous wealth, but also for the reforms he initiated on theAmerica’s stock market, allowing many simple Americans to start investingand to generate income from the stock market.