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New Trader, Rich Trader: How to Make Money in the Stock Market

by Steve Burns (2011)

Quick summary -- an in-depth PhD-level extended summary (10-30 pages) for this book is coming soon.

New Trader, Rich Trader: How to Make Money in the Stock Market

Executive Summary

Steve Burns, drawing from 12 years of personal trading experience and the study of over 150 investing books, presents a concise guide to the principles that separate successful traders from losing ones. The book uses a narrative format contrasting the habits and mindsets of a "new trader" (who consistently loses) with a "rich trader" (who consistently profits), making complex trading concepts accessible through storytelling.

Core Thesis

Only about one in 10 traders makes money in the market. The difference between winners and losers is not intelligence or luck but adherence to sound methodology, disciplined risk management, and proper trading psychology. Most new traders fail because they trade without a system, take losses personally, and let emotions drive decisions. Rich traders succeed because they treat trading as a business with defined rules.

Key Concepts

  1. Methodology Over Emotion: Having a tested system and following it consistently
  2. Risk Management: Position sizing, stop losses, and never risking more than a small percentage per trade
  3. Trading Psychology: Managing fear and greed, accepting losses as part of the business
  4. Trend Following: Riding winners and cutting losers, following the Nicolas Darvas system principles
  5. Perseverance: Success comes after surviving the initial learning curve of losses

Practical Applications

  • Develop a written trading plan before risking real capital
  • Keep position sizes small enough that no single loss can significantly damage the account
  • Run winning trades and cut losing trades short
  • Study the methods of successful traders and adapt them to your own personality
  • Treat trading as a business with rules, records, and accountability

Critical Assessment

The book's greatest strength is its accessibility. By using the new trader/rich trader contrast, Burns makes abstract principles tangible. The writing is deliberately simple and direct, making it ideal for beginners. More advanced traders will find the material basic, but the psychology sections remain valuable at any level. The Darvas system influence provides a solid methodological foundation.

Key Quotes

  • "When a new trader enters the stock market with money but no experience, the odds are he will quickly gain experience by losing money."
  • "Successful traders made it because they persevered through the initial losses and learned how to win in the long term."

Conclusion

"New Trader, Rich Trader" is an excellent entry point for aspiring traders. While it does not provide a complete trading system, it establishes the foundational principles and mindset required for long-term success.