Archives of “JESSE LIVERMORE” tag

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Top 10 Trading Influences

  
  Education
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If New Trader University had a campus this would be the professors:

Dan Zanger is a world record holding trader that taught me to use in the money stock options on the biggest monster stocks to amplify my returns with no added risk at key points. He is the king of chart patterns.

Alexander Elder taught me how the trader’s Mind, Method, and Money Management have to all work together for a trader to be successful.

Michael Covel showed me how the best trend following traders in the world win over the long term by simply following the trend. Finding the big trends is now my focus above all else.

Jesse Livermore knew how to make a fortune in bull and bear markets, in commodities or stocks. His only weakness was the management of the risk of ruin. He made some of the biggest fortunes in the history of trading and also blew up his account more times than other legends.

Nicolas Darvas showed me how to ride monster stocks 100 points farther than anyone else seemed to believe they could go. His lessons also showed me how to miss bear market draw downs.

Van Tharp‘s marble game on how to manage the risk of ruin was a game changer for me. Managing risk is really what determines a trader’s long term survival not stock picking.

William O’Neil showed me how to pick the real winning stocks based on historical models not opinions. He has studied what has really made money in the stock market historically better than anyone else I know. I get my stock watch list from his publication Investor’s Business Daily’s IBD 50.

Ed Seykota is truly a master trader and he has the returns to prove it. Mr. Seykota believes that a trader’s psychology determines a trader’s success more than any other factor.  I believe him.

Jack Schwager wrote “Market Wizards” and really got into the specific nuts and bolts of what makes them win.

Paul Tudor Jones I have picked up a lot of trading wisdom form his documentary, quotes, and interview. He is truly one of the greatest  traders of our time.

If you decide to study these great traders keep what actually makes you money in the long term and discard what does not.

On Trading Psychology

  
  Education
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From “Reminiscences of a Stock Operator” by Edwin Lefevre, the 1923 classic pseudo-autobiography of legendary trader Jesse Livermore:

… I didn’t always win. My plan of trading was sound enough and won oftener than it lost. If I had stuck to it I’d have been right perhaps as often as seven out of ten times. In fact, I always made money when I was sure I was right before I began. 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.

Sometimes the best play is to not play at all. When playing the market, you have to let the opportunities come to you, and take advantage of them when the odds are in your favor. If you don’t, you’ll get very frustrated — and you’ll lose money.

Trend Following Lessons from Jesse Livermore

  
  Education
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Remember, you do not have to be in the market all the time.
Profits take care of themselves – losses never do.
The only time I really ever lost money was when I broke my own rules.
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. (more…)

Trading Wisdom From Jesse Livermore

  
  Education
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Don’t Avoid Exit Strategies

“It was the same with all. They would not take a small loss at first but had held on, in the hope of a recovery that would let them out even. And prices had sunk and sunk until the loss was so great that it seemed only proper to hold on, if need be a year, for sooner or later prices must come back. But the break shook them out, and prices just went so much lower because so many people had to sell, whether they would or not.”
Jesse Livermore

Hope, Fear and Greed

“The spectator’s chief enemies are always boring from within. It is inseparable from human nature to hope and to fear. In speculation when the market goes against you, you hope that every day will be the last day and you lose more than you should had you not listened to hope. And when the market goes your way you become fearful that the next day will take away your profit, and you get out too soon. Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a big profit.”
Jesse Livermore

WISDOM FROM BERNARD BARUCH

  
  Education
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From the SAME AS IT EVER WAS file: Bernard Baruch, a colleague and friend of Jesse Livermore’s, who made a fortune shorting the 1929 crash, and then who later advised presidents Woodrow Wilson and Franklin D. Roosevelt on economic matters, listed the following investment rules in his autobiography published in 1958 entitled Baruch: My Own Story.  These rules are still as applicable today.


1.  Don’t speculate unless you can make it a full-time job.
2.  Beware of barbers, beauticians, waiters–of anyone–bringing gifts of “inside” information or “tips.”
3.  Before you buy a security, find out everything you can about the company, its management and competitors, its earnings and possibilities for growth.
4.  Don’t try to buy at the bottom and sell at the top.  This can’t be done–except by liars.
5.  Learn how to take your losses quickly and cleanly.  Don’t expect to be right all the time.  If you have made a mistake, cut your losses as quickly as possible.
6.  Don’t buy too many different securities.  Better have only a few investments which can be watched.
7.  Make a periodic reappraisal of all your investments to see whether changing developments have altered their prospects.
8.  Study your tax position to know when you can sell to greatest advantage.
9.  Always keep a good part of your capital in a cash reserve.  Never invest all your funds.
10.  Don’t try to be a jack of all investments.  Stick to the field you know best.

10 Quotes of Jesse Livermore

  
  Education
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When seasoned traders get together, we have a sort of “secret handshake” that the uninitiated may not notice.  We ask each other if they’ve read Reminiscences of a Stock Operator.  The insiders reply by telling you the number of times they’ve read the book.  Novices ask for the author’s name.

Recently, I’ve been rereading Jon Markman’s wonderful annotated version of this Jesse Livermore classic.  This special edition even has a forward written by Paul Tudor Jones.  As I revisited Mr. Livermore’s wisdom, I realized that so much of the trading baton that I’ve endeavored to pass on to my readers is directly or indirectly the result of the special batons he passed on to me.  In considering this, I feel it’s only appropriate to salute the man.  Afterall, I have patterned myself after him and my favorite quotes come from this truly extraordinary trader.  As Dr. George Lane, the creator of the stochastic oscillator, once told me over dinner, “Gatis, you can never get enough of that good stuff.” 

My trading approach is organized into 10 stages that I call Tensile Trading.  For this week’s blog, I’ve chosen a few of my favorite Jesse Livermore quotes for each of these 10 stages.
1. Money Management:
    * “I trade on my own information and follow my own methods.”
    * “The desire for constant action irrespective of underlying conditions is responsible for many losses on 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.”

2. Business of Investing:
    * “I believe that anyone who is intelligent, conscientious, and willing to put in the necessary time can be successful on Wall Street.  As long as they realize the market is a business like any other business, they have a good chance to prosper.”
3. The Investor Self:
    * “My satisfaction always came from beating the market, solving the puzzle.  The money was the reward, but it was not the main reason I loved the market.  The stock market is the greatest, most complex puzzle ever invented – and it pays the biggest jackpot…it was never the money that drove me.  It was the game, solving the puzzle, beating the market that had confused and confounded the greatest minds in history.  For me, that passion, the juice, the exhilaration was in beating the game, a game that was a living dynamic riddle…” (more…)

Investing vs Gambling

  
  Education
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“Investors are the big gamblers. They make a bet, stay with it, and if it goes the wrong way, they lose it all.”

Jesse Livermore

Not having an exit strategy before initiating a trading position is worse than gambling, where you realize that the chance to lose is too big, therefore you risk only money you can afford to lose. Not having a stop loss means that you are most likely risking more than you could afford to lose. As they say amateurs go out of business because of taking big losses. Professionals go out of business by taking small profits. Cut your losses short when your stop level is hit. Even more, make sure to put your stop loss order immediately after you initiate a trade. Put your stop loss at a place where the trend you are following will be over. Let your profits run by gradually lifting you  profit protection stop order. In order to maximize your profits you have to be willing to give some of them back.

I” don’t believe anyone ever gets wiped out in the market because of bad luck; there is always some other reason for it. Either you were off when you did the trade, or you didn’t have the experience. There is always a mistake involved.”

Nuggets from Jesse Livermore

  
  Education
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 Don’t trade until I see a pile of money sitting in the corner. Then, I go over and pick it up.

Remember, it [the market] is designed to fool most of the people most of the time.

A prudent speculator never argues with the tape.

Few people succeed in the market because they have no patience. They have a strong desire to get rich quickly.

The big money is made by the sittin’ and the waitin’ — not the thinking. Wait until all the factors are in your favor before making the trade.”

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