I’ve just finnished reading a book of Richard Smitten “Jesse Livermore World’s Greatest Stock Trader”. Amazing read. For those who want to know how important psycholigal influence on trading, this is a book to read. I’d like to say a few things about greatest trader. He failed in the market when he started going to other women, he stopped being focused on the market, his 3-d wife (who brought him 2 beautiful boys Jesse Jr and Paul) Dorothy was his soul companion as later his son Jesse Jr will say. Jesse Livermore made 100 millions during October 1929 crash, at that time he was one of the richest men in the world, in 1932 his wife filed for divorce and took away their 2 boys from him, he was empty, depressed, sitting on his cash, understanding that he’s life is actually a failure(its why he later commited a suicide). Its when he started losing it all. No one knows his trades after 1932, but the majority were losses and then he finally filed bankruptsy. He still had 1 million untouchable fun for his kids and about 3 million dollars in cash(in his apartment in New York), his 4-th wife took it 3 million in cash in the bags out of house after he commited suicide( his son Paul tells about it). (more…)
Archives of “JESSE LIVERMORE” tag
rss8 Skill Every Traders must have
- Passion. The best investors I’ve seen truly love what they do. It’s the only way they are able to put in the time needed to become great.
- Experience. The pros have seen it all. They’ve been through all sorts of market cycles. Long periods of sideways choppiness, uptrends, and downtrends. And not just the short term 15-20% corrections but the big 50% corrections too.
- Adaptability. Markets change. And the strategies that were working in one market may eventually deteriorate. Good traders will change their methodology to match the new market conditions.
- No ego. None. If you go into trading with an ego the market will eat you alive. The elite investors are able to admit when they’re wrong. They even embrace it. Being wrong quickly means they can move on to being right faster.
- Emotionless. This goes hand in hand with ego. Along with pride, investors face a daily trio of emotions of hope, fear, and greed. The worst investors allow their emotions to control their trading; the best avoid any emotional attachment at all. (more…)
7 Things for Traders
The definition of man·age:
- To direct or control the use of; handle.
- To exert control over.
- To make submissive to one’s authority, discipline, or persuasion.
- To direct the affairs or interests of.
- To succeed in accomplishing or achieving, especially with difficulty; contrive or arrange.
1. Traders must be great risk managers.
“At the end of the day, the most important thing is how good are you at risk control.” -Paul Tudor Jones
2. Traders must manage their own stress.
Trade position sizes that keep your stress level manageable, if you can’t talk calmly to someone while trading you are trading too big.
3. Traders have to be able to manger their emotions, we have to trade our plan not our greed or fear
“There is nothing more important than your emotional balance.” – Jesse Livermore (more…)
10 Trading Quotes
“Good investing is a peculiar balance between the conviction to follow your ideas and the flexibility to recognize when you have made a mistake.“ –Michael Steinhardt
Do not stay bullish or bearish go with the current flow of the market>
“There is only one side of the market and it is not the bull side or the bear side, but the right side.”-Jesse Livermore
Putting it all together, it is more than just numbers>
“Successful trading depends on the 3M`s – Mind, Method and Money. Beginners focus on analysis, but professionals operate in a three dimensional space. They are aware of trading psychology their own feelings and the mass psychology of the markets. Each trader needs to have a method for choosing specific stocks, options or futures as well as firm rules for pulling the trigger – deciding when to buy and sell. Money refers to how you manage your trading capital.” – Alexander Elder
The money is in the primary market trend, not jumping in and out>
“I think it was a long step forward in my trading education when I realised at last that when old Mr. Partridge kept on telling 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.” – Jesse Livermore
This is one of the best ways i Know to measure short term trends, and be on the right side of the primary moves>
“The 10 day exponential moving average (EMA) is my favourite indicator to determine the major trend. I call this “red light, green light” because it is imperative in trading to remain on the correct side of moving average to give yourself the best probability of sucess. When you are trading above the 10 day, you have the green light, the market is in positive mode and you should be thinking buy. Conversely, trading below the average is a red light. The market is in a negative mode and you should be thinking sell.” – Marty Schwartz
Why it is so important to let your winners run and cut your losers short>
“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
Eliminating the risk of ruin in one easy step>
By risking 1%, I am indifferent to any individual trade. Keeping your risk small and constant is absolutely critical.” Larry Hite.
Never add to a losing position becasue you are fighting the trend>
“Losers average losers.” this was posted in Paul Tudor Jones’ Office
This is successful stock trading summarized>
“My basic philosophy is: Expose your portfolio to the best stocks that the market has to offer and cut your losses very quickly when you’re wrong. That one sentence essentially describes my strategy.” – Mark Minervini
Trend Trading in a nut shell>
“It is always the best discretion to let the market show us where it is going and just simply follow (this would be prudent), rather than predict where the market is going and place a position (this would be gambling).” -Anne-Marie Baiynd
Classic Wall Street Quotations
Soros, Buffett, Templeton, Livermore, Rothschild – This is the remix. I’ve updated their classic quotations for the modern investment world. Vote for your favorites below…Enjoy!
“We simply attempt to be greedy when others are fearful and to make others fearful when we do not have enough long positions on our sheets.” – Warren Buffett
“Capital goes to where it can escape taxation and be used to pay employees in sacks of rice.” – Walter Wriston
“Stock market bubbles don’t grow out of thin air. They have a solid basis in the creation and marketing of ETFs.” – George Soros
“It takes 150 years to build an investment bank and only five minutes to convince you to sell me preferred stock in it at a 10% interest rate.” – Warren Buffett
“The four most dangerous words in investing are ‘It’s the Lightning Round!'”. – Sir John Templeton
“Only buy something that you’d be perfectly happy to hold if the market had a Flash Crash.” – Warren Buffett
“Markets can remain irrational longer than you can pretend that Treasuries yielding a half a percent are a safe buy.” – John Maynard Keynes
“History has not dealt kindly with the aftermath of protracted periods of my policies” – Alan Greenspan
“Obviously the thing to do was to be bullish in a bull market and bearish in a bear market and a renter in the housing market and open-minded to exotic sh*t at Jean-Georges’ Spice Market.” – Jesse Livermore
“Give me control of a nation’s money and I care not how much it owes China.” – Mayer Amschel Rothschild
“Man looks in the abyss, there’s nothing staring back at him. At that moment, man gets a text message, an eFax and two Twitter DMs. And by the time he’s updating his Facebook status and feeding his virtual farm animals, he has no idea what ‘abyss’ you’re talking about.” – Lou Mannheim, Wall Street
“How do we know when irrational exuberance has unduly escalated asset values? How about around 2007 when I was walking around with a crown and a scepter, spraying Crystal on chicks in the VIP room. I was probably a little irrationally exuberant right around then, holmes.” – Alan Greenspan
“Money is like manure, you don’t have to spread it around, you can just sell it to Potash Corp as fertilizer.” – J. Paul Getty
“The time of maximum optimism is the time to sell and the time of maximum pessimism is the time to start a blog and write 20 posts a day about gold.” – Sir John Templeton
“Rule No. 1 – Never Lose Money. Rule No. 2 – When you do lose money, call in Becky Quick and the camera crew for some folksy chit chat over root beer floats.” – Warren Buffett
Trading Wisdoms
“I absolutely believe that price movement patterns are being repeated; they are recurring patterns that appear over and over. This is because the stocks were being driven by humans- and human nature never changes”.
-Jesse Livermore (Considered by many to be the greatest stock market operator ever. Made 100 million dollars in 1929 stock market crash. Made several other multi-million dollar fortunes in his trading career).
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“You have to cut your losses fast. The secret for winning in the stock market does not include being right all the time. The key is to lose the least amount possible when you are wrong”.
-William J. O’Neil (In my opinion, the best stock market operator in the world today. Has made an incredible fortune trading the stock market. O’Neil is the founder of Investors Business Daily. Much of my stock market education and training has been from William J. O’Neil).
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“Whatever method you use to enter a trade, the most critical thing is that if there is a major trend, your approach should assure that you get in that trend”.
-Richard Dennis (Turned 400 dollars into a fortune of at least 200 million dollars by using his remarkable trading skills).
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“I am primarily a trend trader. In order of importance to me are: (1) the long-term trend, (2) the current chart pattern, and (3) picking a good spot to buy or sell”.
-Ed Seykota (One of the greatest traders of all time. Turned 5000 dollars into an incredible 15 million dollars or more).
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“The most important rule of trading is to play great defense”.
-Paul Tudor Jones (An amazingly consistent and successful trader. In 2006, earned a whopping 750 million dollars).
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“Being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong”.
-Bernard Baruch (Fantastic trader who earned ten’s of millions of dollars in the first part of the 20th century).
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“The greatest safety lies in putting all your eggs in one basket and watching that basket”.
-Gerald M. Loeb (Amassed many millions in the stock market during his long career).
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“I am looking for the strongest stocks in the market, in terms of both earnings and the technical picture”
-David Ryan (Multiple time winner in the stock division of the U.S. Investing Championships).
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“Most of my success has been due to my hanging on while my profits mounted. There is the big secret”.
-Arthur W. Cutten (Gained wealth and prominence, early in the 20th century, as a commodity trader, mostly in the wheat market.
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“I think the secret is cutting down the number of trades you make. The best trades are the ones in which you have all three things going for you: fundamentals, technicals, and market tone”.
– Michael Marcus (In a ten-year period, he multipled his company account by an incredible 2500 times).
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“Whenever I enter a position, I have a predetermined stop. I know where I’m getting out before I get in”.
-Bruce Kovner (One of the world’s largest traders in the 1980’s. Made profits of over 300 million trading for himself).
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“I try to assemble facts and decide what kind of scenario I think will unfold”.
-Bill Lipschutz (One of the most successful currency traders ever).
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“Virtually every successful trader I know ultimately ended up with a trading style suited to his personality”.
-Randy McKay (Turned $2000 into $70,000 his first year of trading. Went on to double digit million dollar gains).
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“The biggest misconception is the widespread belief that it is easy to make a living trading in the stock market”.
-Stuart Walton (Fantastic stock trading track record in the 1990’s).
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“If you decide to trade for a living, you have to treat it just like any other business endeavor and go into it with a plan”.
-Mark D. Cook (Great annual returns trading the markets).
10 Great Trades
What were the greatest trades of all time? Who made them? Here is a list of the who, what, when, where, and how of the greatest trades that were ever made.
While the risk management while executing many of these trades is not what many traders would want, we can see many of these as trend trades and the dangers of fighting the trends. These trades were not all entered into at one time, most of them were built slowly and grew by adding as profits accrued. Most were also watched closely with and eye on the exit button when a true reversal began. Livermore made many probing shorts that he had to stop out as the bull market reversed off support and continued upwards after appearing to roll over. Some of these traders had the sell button ready to push at a seconds notice in case a reversal knocked them out. Some could have been ruined with a little blind sided government intervention that modern day traders are faced with now. But you can not argue with the profits and many of these traders have very long proven records, these were not random trades and they did not just get lucky, most of these were the great play that they landed after decades of research, study, and a life time of great trading.
1. John Paulson’s bet against sub-prime mortgages made his hedge fund a cool $15 billion in 2007, that is billion with a ‘B’. he is only one of a very exclusive club that was able to make this call and win with it. That was a call of a lifetime that everyone was blind to even deep into the crises.
2. Jesse Livermore’s call on the Crash of 1929, Jesse Livermore did not need any computer models, technical indicators, or derivatives to make $100 million dollars ($1.2 billion in today’s dollars) for his own personal account during a time when everyone was bullish and then almost everyone lost their shirts. It was an amazing day when Jesse came home and his wife thought they were ruined and instead he had the second best trading day of anyone in history.
3. John Templeton invested heavily into Japan during the 1960s, when Japan was beginning its three-decade long economic miracle, Templeton was one of the country’s first outside investors. At one point, he boldly put more than 60 percent of his fund in Japanese assets. (more…)
Words of Wisdom
These generally brief phrases often include such pearls of wisdom as:
“Buy low, sell high.”
This maxim describes profitable trading in a nutshell and represents what every successful trader aspires to do. Of course, this is much easier said than done.
“Let your profits run, but cut your losses short. “
Allowing a winning position to continue making profits while taking losses quickly can make up a solid trading strategy in itself, and it is a key element of just about any good money management plan.
Many successful traders apply this as a trading rule in their trading plans in one form or another, perhaps by having a minimum risk reward ratio where the anticipated reward on a trade is always greater than the risk taken.
“Sit on your hands when you don’t have a clue.”
Knowing when you do not know where the market is going and discerning when to stay out of the market because of difficult trading conditions or because of your individual portfolio situation can save a trader considerable money and frustration.
Remember, good trading opportunities eventually arise for those who wait for them patiently.
“No one ever went broke taking a profit.”
This seems a wise and yet somewhat limiting expression perhaps. Famous trader Jesse Livermore used to say this and then finish with “but no one ever got rich taking three or four points out of bull market”. Taking profits will always add to your account, but by “letting profits run”, a substantially higher profit can often be had.
“It’s never too low to sell or too high to buy.”
Typically, markets will continue moving in the direction of the general trend. When a high or low is made, often a sufficient amount of momentum will propel the price to an ever higher high or lower low.
“Price discounts all.”
The mantra of technical analysts, the saying refers to the belief that news about any event related to the trading instrument – whether it is related to current events or supply and demand – will already be included in the price of a currency.
“All news is old news.”
A variation on “Price discounts all”, this saying refers to the idea that the market has already moved to factor information into the currency pair’s exchange rate regardless of what the news that came out was.
“Buy the rumor, sell the fact.”
Buying the rumor means going long before a bullish news item ever makes it to the news wires for fundamental analysts to mull over. Trading activity then ensues based on this rumor indicating that an item of importance will soon be released. The trader wise to the rumor can take advantage of the release of this news by selling out their position once it becomes public.
“Plan your trade and trade your plan.”
Trading does not favor the scatterbrained over the long term, so having a comprehensive and objective trading plan which can be easily followed and implemented makes up a key component of any successful trader’s methods.
“The trend is your friend.”
Keeping abreast of the major trend in the market and following it by positioning according to its overall direction will tend to give a trader an edge.
“Markets go up the stairs and down the elevator.”
This saying refers to the slow and plodding nature with which markets often go up, whereas when prices decline, they tend to do it in a much faster and abrupt way. While less of a factor in the forex market, this is especially true of stock markets.
Basically, all of the above sayings contain valuable advice and trading wisdom that can be useful for just about anyone involved or thinking about getting involved in trading forex or any other market.
The problem of Having too much
Let me introduce you to some of the better -known victims of affluenza.I want to take you back to the year 1923 ,as a group of the world’s most suscessful businessmen met at the Edgewater Beach Hotel in Chicago for financial planning session.Present were :
The president of the largest independent steel company.
The greatest wheat speculator
The president of the New york Stock Exchange
A member of the President’s cabinet
The greatest bear on Wall Street
The president of the Bank of International Settlements
The head of the world’s greatest monopoly
Individually ,these men symbolized what the world so frequently terms “success “.Collectively ,these men controlled more wealth then there was in the U.S.Treasury.Twenty-five years later ,however their lives told a different story. (more…)
Fast Easy Money
You know, it never stop puzzling me, why people think the stock market is a place for fast easy money.
If you had read Livermore, the guy’s puzzled too.
Let me quote an excerpt from Richard Smitten’s How to Trade Like Jesse Livermore
Livermore believed that the game of speculation is the most uniformly fascinating
game in the world. But it is not a game for the stupid, the mentally lazy, or the person of inferior emotional balance, or for the get-rich-quick adventurer. They will die poor.
Over a long period of years, he rarely attended a dinner party including strangers when someone did not sit down beside him and inquire after the usual pleasantries:
“How can I make some money in the market?”
In his younger days, he went to considerable pains to explain all the difficulties faced by the trader who simply wishes to take quick and easy money out of the market; or through courteous evasiveness, he would work his way out of the snare.
In later years, his answer became a blunt “I don’t know.” (more…)