I love this quote from legendary stock market trader Jesse Livermore and highly recommend the book that describes his life as a trader… Reminiscences of a Stock Operator.

I truly believe that the best way for the average person to build wealth is through the stock market speculation.

I will say though, as a real estate professional, that the same idea holds true in real estate.

The big money is made by having the ability to hit homeruns.

In real estate, one of the biggest homeruns I witnessed was hit by a few people I worked with years ago.

They bought some land owned by a church just past an intersection where they knew a road was going to be extended.

Because that extension was going to create a signaled intersection, they speculated that they could get the zoning changed from residential to commercial.

It took a few years, but they got the zoning changed, and then they built a shopping center anchored by a grocery store.  They ultimately sold the property for over $7 million after buying the land for less than $300,000.

Each partner netted about $2 million on the deal.

Now, prior to that, they had owned a variety of investment properties and had also developed land for housing.  So, they did hit a bunch of singles and doubles along the way.

Eventually though, the people who make the most money through speculation will make it by hitting a homerun trade from time to time.

George Soros, Stanley Druckenmiller, Paul Tudor Jones II, and others have built fortunes for themselves and clients by swinging for the fences, while also avoiding big losses.

That was a lesson that Livermore never learned, as he died penniless.  He made and lost several fortunes during his career.

How to hit a homerun trade

Obviously, this is easier said than done.

To hit a homerun trade, you need to have a strategy in place that allows you to capture a big winning trade.

If you sit at home day trading, you can certainly make some big wins on a given day, but you can’t watch a $10,000 investment turn into $100,000 or more very often by day trading, unless you are using leverage.

This is the chart of Nvidia, the leading AI stock in the stock market.  This is a classic example of a homerun trade that is actually still ongoing.

I’ve drawn a few lines on the chart to indicate what is known as a cup with handle pattern, if you are not familiar with that term.

Often prior to a stock making a historical move like NVDA, the price of the stock will form a pattern that looks like a cup.

The left side of the cup represents the old high price of the stock.  The rest of the cup represents a decline that may have been caused by a recession or other event, and the recovery of the business.

The handle is formed when the stock price gets close to its hold high prices and stalls for a few weeks.

The buy signal occurs when the stock trades above that handle.  In this case, the buy price was around $282.

Capturing the bulk of these moves is how to generate big returns in the stock market.

With that said, it’s still not easy.

There will be many losing trades along the way, and you have to have the ability to stick with a position as it continues to move in your favor, or when it pulls back a bit.

I know a few people who were invested in the stock, but sold below $500 and the stock price has nearly doubled again.

In any event, to catch a big move like this, you need to employ a trend following strategy.  I’ll be discussing some basic strategies down the road.

To learn more about this Cup With Handle Pattern, I recommend picking up a copy of William O’Neil’s book, How to Make Money in Stocks.

Get to work!