How to Trade in Stocks by Jesse Livermore

I will just write what  the market is going to do tomorow, for that just have some patience  for time being till then  few quotes from Jesse Livermore’s book How to Trade in Stocks (one of my favorites, originally written in 1940). Pay particular attention to the first quote!

  • “Successful traders always follow the line of least resistance – follow the trend – the trend is your friend”
  • “Wall Street never changes, the pockets change, the stocks change, but Wall Street never changes, because human nature never changes”
  • “Just because a stock is selling at a high price does not mean it won’t go higher” (more…)

Characteristics of Successful Trader


  • Successful traders have absolute control over their emotions, they never get too elated over a win and too depressed over a loss.
  • Successful traders seldom think of prices too high or low.
  • Successful traders do not panic, they make adjustments rather than revolutionary changes to their trading style. (more…)

EWI Article: Blaming Market Manipulation is an Obstacle to Success

The folks at EWI (Elliott Wave International) released a provoking new article today entitled:

Blaming Market Manipulation for Losses is a Huge Obstacle to Success.

The article encourages traders to take responsibility for losses instead of finding scape-goats to blame.

Losses may have just been the result of a bad outcome from a high-probability trade… or might have been the result of a bad trading habit like doubling down on losers or chasing a fast price move.

Mr. Prechter makes the point that “Losses are part of the game” and should be used as learning experiences.

You won’t learn if your loss was a result of random probability or a bad trading behavior if you do not analyze the loss, and instead sweep it under the rug as a painful memory.

I particularly liked the quote:

“You don’t have to be perfect to win in the markets, either; you “merely” have to be better than almost everybody else, and that’s hard enough.”

The article is actually the 4th Point in an article published years ago (not during the current market melt-up!) by Robert Prechter on what it takes to be a successful trader.

It’s brief, but thought-provoking!

3 Trading Lessons

A good trade can lose money, and a bad trade can make money. Even the best trading processes will lose a certain percentage of the time. There is no way of knowing a priori which individual trade will make money. As long as a trade adhered to a process with a positive edge, it is a good trade, regardless of whether it wins or loses because if similar trades are repeated multiple times, they will come out ahead. Conversely, a trade that is taken as a gamble is a bad trade regardless of whether it wins or loses because over time such trades will lose money.

Ray Dalio, the founder of Bridgewater, the world’s largest hedge fund, strongly believes that learning from mistakes is essential to improvement and ultimate success. Each mistake, if recognized and acted upon, provides an opportunity for improving a trading approach. Most traders would benefit by writing down each mistake, the implied lesson, and the intended change in the trading process. Such a trading log can be periodically reviewed for reinforcement. Trading mistakes cannot be avoided, but repeating the same mistakes can be, and doing so is often the difference between success and failure.

For some traders, the discipline and patience to do nothing when the environment is unfavorable or opportunities are lacking is a crucial element in their success. For example, despite making minimal use of short positions, Kevin Daly, the manager of the Five Corners fund, achieved cumulative gross returns in excess of 800% during a 12-year period when the broad equity markets were essentially flat. In part, he accomplished this feat by having the discipline to remain largely in cash during negative environments, which allowed him to sidestep large drawdowns during two major bear markets. The lesson is that if conditions are not right, or the return/risk is not sufficiently favorable, don’t do anything. Beware of taking dubious trades out of impatience.

Trading firms put their money on poker experts

Reporting from New York — Chris Fargis thought his big job interview was over. But when the partners at Wall Street upstart Toro Trading finished with their questions, they broke out a deck of cards and a green-felt card table. Mind playing a few hands of poker?

It was a final test, and Fargis was relieved. The 30-year-old never went to business school or even took a finance class. But he knew poker. He had made a living playing the game online for six years from his Manhattan apartment, betting on up to eight hands at a time.

Within a few days, Fargis — with no Wall Street experience — was offered a position trading stock options, a job that entails making multimillion-dollar gambles. His poker skills sealed the deal. (more…)

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