Jesse
Livermore, in his office in 1929 just after the "Crash"--when he
made over 100 million dollars.
Few investors have made and lost fortunes
to equal those of the legendary Jesse Livermore, a notorious stock
market speculator during the first half of the 20th century. He often
remarked," Markets are never wrong; opinions are."
Human nature is no different today
than it was back in the 1920s and 1930s when Jesse Livermore was a
major force on Wall Street. Investors have the same hopes and fears
today that they had seventy or eighty years ago. Mr. Livermore saw
repeatedly that the opinions of many of his colleagues were frequently
wrong, as the market went on its own merry way in a direction contrary
to what they had expected.
In these periods of gyrating markets where
it is difficult to know the markets trend, Livermore remarked over 80
years ago:
"Men who can both be right and sit tight are uncommon. I
found it one of the hardest things to learn. But it is only after an
investor has firmly grasped this that he can make big money. It is
literally true that millions come easier to a trader after he knows how to
trade than hundreds did in the days of his ignorance."
Never buy a stock because it
has had a big decline from its previous high.
If a stock doesn't act right
don't touch it; because, being unable to tell precisely what is
wrong, you cannot tell which way it is going. No diagnosis, no
prognosis. No prognosis, no profit.
Don't blame the market
for your losses.
Never add to a losing
position. A losing position means you were wrong.
Stocks are never too high
for you to begin buying or too low to begin selling. But after the
initial transaction, don't make a second unless the first shows you
a profit.
Always sell what shows you a
loss and keep what shows you a profit.
Don't argue with the tape.
Do not seek to lure the profit back. Quit while the quitting is
good--and cheap.
There is only one side to the
stock market; and it is not the bull side or the bear side but
the right side.
The speculator's chief enemies
are always boredom from within.
A man must believe in himself
and his judgment if he expects to make a living at this game.
Bulls and bears make
money, but pigs get slaughtered.
Use money management
at all times.
Establish your trading
plan before the markets open.
Detailed your plan for
each trade.
Establish entry and exit
points and understand risk reward rations.
Accept small losses as
part of the game if you want to win.
Trade markets from the
short side.
Stand aside from a
position, knowing you have taken a position.
Develop a trading plan
for each potential situation you may face.
Do not look at quotes
during the day.
Do not concentrate on
break-even levels when you are losing.
Don't liquidate a winner
to keep a loser.
Develop and maintain an
exit plan. Follow this plan with rigid discipline.
Sustain your patience.
Big movements take time to develop.
Don't be overly curious about the rationale behind a move. The key to wealth in trading is
simplicity.
