Archives of “JESSE LIVERMORE” tag

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Trading Wisdom – Andrew Gordon

  
  Education
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Legendary stock trader Jesse Livermore had it right: The big money is in the big moves … and the trick to making the big money is knowing how to sit tight and ride the trend for all it’s worth. As obvious as that may seem, many investors have trouble doing it.

They are, as cognitive psychologists like Daniel Kahneman and Amos Tversky would say, “risk-averse.” The pain they experience in losing money is far greater than the pleasure they experience in making it. As a result, these investors typically sell their investments too soon for fear of incurring a real or even a paper loss.

To profit the most from an investment, you need to be able to wait long enough for it to achieve its full potential. So if you’re “risk-averse” by nature, it might be a good idea for you to avoid paying too much attention to the news. If you’re watching television and the nightly business report comes on, change the channel. Set aside the business section of the paper to read on a rainy day. Ignore cocktail chatter about investing. That way, you’re more likely to stick to your trading plan instead of letting your emotions overpower your better judgment. 

6 Random Thoughts

  
  Education
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1) Everyone needs a “mental break” from trading once in a while. The best time to take one is during corrective markets. It helps you protect capital and confidence.

2) If you have a -50% loss, it takes a +100% gain to get it back. In other words, CUT YOUR LOSSES!

3)  If you have trouble with discipline and staying away from the market, turn off your computer and get out of your chair. If you sit in the barbershop long enough, you’ll eventually get a haircut.

4) The “fear of missing out” is the downfall of most traders.

5) Whoever said that money doesn’t buy happiness clearly didn’t know where to shop.

6) “There is nothing new on Wall Street. What has happened in the past will happen again and again and again. This is because human nature does not change, and it is human emotion that always gets in the way of human intelligence. Of this I am sure.” — Jesse Livermore

Trading Wisdom

  
  Education
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  • Buy from the scared, sell to the greedy.
  • Buy their pain, not their gain.
  • Successful traders are quick to change their minds and have little pride of opinion.
  • I made my money because I always got out too soon. (Bernard Baruch)
  • Don’t try to buy at the bottom and sell at the top. It can’t be done except by liars. (Bernard Baruch)
  • Throughout all my years of investing I’ve found that the big money was never made in the buying or the selling. The big money was made in the waiting. (Jesse Livermore)
  • The faster a stock has climbed, the quicker it will fall.
  • The more certain the crowd is, the surer it is to be wrong. (Menschel)
  • Bear markets begin in good times. Bull markets begin in bad times
  • Never confuse genius with a bull market.
  • Always sell what shows you a loss and keep what shows you a profit

legendary speculator Jesse Livermore

  
  Education
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legendary speculator Jesse Livermore on LETTING YOUR WINNERS RUN

(Chapter V) … “I think it was a long step forward in my trading education when I realized at last that when old Mr. Partridge kept on telling the other customers, “Well, you know this is a bull market!” he really meant to tell them that the big money was not in the individual fluctuations but in the main movements – that is, not in reading the tape but in sizing up the entire market and its trend.”

In all of “Reminiscences” this crucial idea that the Really Big Money is always earned by prudently riding the large trends over time and not in day trading every minute fluctuation is one of the central themes of the book.

“be right and sit tight”

(Chapter V) … “And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying and selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine – that is, they made no real money out of it. 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 a stock operator 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.” (more…)

Gems of Jesse Livermore

  
  Education
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Jesse Livermore

What beat me was not having brains enough to stick to my own game — that is, to play the market only when I was satisfied that precedents favored my play. There is a time for all things, but I didn’t know it. And that is precisely what beats so many men in Wall Street who are very far from being in the main sucker class. There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. No man can always have adequate reasons for buying or selling stocks daily — or sufficient knowledge to make his play an intelligent play.

The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages.

It takes a man a long time to learn all the lessons of all his mistakes. They say there are two sides to everything. But there is only one side to the stock market; and it is not the bull side or the bear side, but the right side. It took me longer to get that general principle fixed firmly in my mind than it did most of the more technical phases of the game of stock speculation.

Nobody offered to point out the essential differences or set me right. If somebody had told me my method would not work I nevertheless would have tried it out to make sure for myself, for when I am wrong only one thing convinces me of it, and that is, to lose money. And I am only right when I make money. That is speculating.

Weekend -Trading Quotes

  
  Education
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Trading Journal

“Show me a trader with good records, and I’ll show you a good trader.”

– Dr. Alexander Elder


“The fruits of your trading or investment success will be in direct ratio to the honesty and sincerity of your own effort in keeping your own records, doing your own thinking, and reaching your own conclusions. You cannot wisely read a book on ‘ how to keep fit’ and leave the physical exercise to another. “

– Jesse Livermore


Risk Management

“Risk comes from not knowing what you’re doing.”

– Warren Buffet

 

Money Management

“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.”

– George Soros


“If you have an approach that makes money, then money management can make the difference between success and failure… … I try to be conservative in my risk management. I want to make sure I’ll be around to play tomorrow. Risk control is essential. “

– Monroe Trout


“Every winner needs to master three essential components of trading; a sound individual psychology, a logical trading system and good money management. These essentials are like three legs of a stool – remove one and the stool will fall, together with the person who sits on it. Losers try to build a stool with only one leg, or two at the most. They usually focus exclusively on trading systems. Your trades must be based on clearly defined rules. You have to analyze your feelings as you trade, to make sure that your decisions are intellectually sound. You have to structure your money management so that no string of losses can kick you out of the game.”

– Dr. Alexander Elder


“The most important advice is to never let a loser get out of hand. You want to be sure that you can be wrong twenty or thirty times in a row and still have money in your account. When I trade, I’ll risk perhaps 5 to 10 percent of the money in my account. If I lose on that trade, no matter how strongly I feel, on my next trade I’ll risk no more than about 4 percent of my account. If I lose again, I’ll drop the trading size down to about 2 percent. I’ll keep on reducing my trading size as long as I’m losing. I’ve gone from trading as many as three thousand contracts per trade to as few as ten. “

– Randy McKay


“All traders make mistakes, great traders, however, limit the damage.”

– Unknown


“My trading style blends both the risk-oriented and conservative personality of my personality. I take the risk-oriented part of my personality and put it where it belongs to : trading. And, I take the conservative part of my personality and put it where it belongs to money management. My money management techniques are extremely conservative. I never risk anything approaching the total amount of money in my account, let alone my total funds. “

– Randy McKay


“I’m more concerned about controlling the downside. Learn to take the losses. The most important thing about making money is not to let your losses get out of hand. “

– Marty Schwartz


“I’m always thinking about losing money as opposed to making money. Don’t focus on making money, focus on protecting what you have.”

– Paul Tudor Jones (more…)

Minervini, Trade Like a Stock Market Wizard-Book Review

  
  Education
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Mark Minervini, U.S. investing champion in 1997, averaged a 220% return per year from 1994 to 2000 for a compounded total return of 33,500%. Yes, we all know that these astonishing figures coincided with a major bull market, but how many traders came anywhere close to his record during this period?

In Trade Like a Stock Market Wizard: How to Achieve Superperformance in Stocks in Any Market (McGraw-Hill, 2013) Minervini shares his SEPA (Specific Entry Point Analysis) trading strategy. It’s essentially a trend following/breakout strategy that screens for such variables as earnings surprises and relative strength and that looks for catalysts driving institutional interest. It relies on both fundamentals and technicals. Its focus is on youthful small- to mid-cap stocks.

There are strong echoes of Bill O’Neil, Ben and Mitch Zacks, Richard Donchian, even Jesse Livermore in Minervini’s work. That he borrows from such luminaries is not surprising. Having dropped out of school at the age of 15, he subsequently became “a fanatical student of the stock market. … Over the years,” he writes, “I’ve read an incredible number of investment books, including more than 1,000 titles in my personal library alone.” (p. 3) (more…)

Jesse Livermore: Preparation And Experience Is Required For Success

  
  Education
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“Of course the same things happen in all speculative markets. The message of the tape is the same. That will be perfectly plain to anyone who will take the trouble to think. But people never take the trouble to ask questions, leave alone seeking answers. The one game of all games that really requires study before making a play is the one he goes into without his usual highly intelligent preliminary and precautionary doubts. He will risk half his fortune in the stock market with less reflection than he devotes to the selection of a medium-priced automobile.”

Keep a Cash Reserve & Be Patient

  
  Education
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There are times when playing the stock mar­ket that your money should be inactive – waiting on the sidelines in cash – waiting to come into play.

In the stockmarket – time is not money – time is time ­and money is money.
Often money that is just sitting can later be moved into the right situation at the right time and make a vast fortune – patience – patience.

Patience is the key to success not speed.
Time is a cunning speculator’s best friend if he uses it right.

Remember the clever speculator is always patient and has a reserve of cash.

Jesse Livermore

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