Archives of “JESSE LIVERMORE” tag

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Lessons from the Wizards

  
  Education
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All successful traders use methods that suit their personality; You are neither Waren Buffett nor George Soros nor Jesse Livermore; Don’t assume you can trade like them.

What the market does is beyond your control; Your reaction to the market, however, is not beyond your control. Indeed, its the ONLY thing you can control.

To be a winner, you have to be willing to take a loss; (The Stop-Loss Breakdown)

HOPE is not a word in the winning Trader’s vocabulary;

When you are on a losing streak — and you will eventually find yourself on one — reduce your position size;

Don’t underestimate the time it takes to succeed as a trader — it takes 10 years to become very good at anything; (There Are No Shortcuts)

Trading is a vocation — not a hobby

Have a business/trading plan

Identify your greatest weakness, Be honest — and DEAL with it

There are times when the best thing to do is nothing; Learn to recognize these times
(Nothing Doing)

Being a great trader is a process. It’s a race with no finish line.

Other people’s opinions are meaningless to you; Make your own trading decisions
(The Wrong Crowd)

Analyze your past trades. Study what happened to the stocks after you closed the position. Consider your P&L game tapes and go over them the way Vince Lombardi Bill Parcells reviewed past Superbowls

Excessive leverage can knock you out of the game permanently

The Best traders continue to learn — and adapt to changing conditions

Don’t just stand there and let the truck roll over you

Being wrong is acceptable — staying wrong is unforgivable

Contain your losses (Protect Your Backside)

Good traders manage the downside; They don’t worry about the upside

Wall street research reports are biased

Knowing when to get out of a position is as important as when to get in

To excel, you have to put in hard work

Discipline, Discipline, Discipline !

Jesse Livermore’s Money Management Rules

  
  Education
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If you haven’t read this book “Reminiscences of a Stock Operator” written in 1923, read it! It is purpordetly the unofficial biography of one of the greates traders ever; Jesse Livermore.  The rules Jesse followed back at the turn of the last century are still very much applicable today.

1) Don’t lose money. Don’t lose your stake. A speculator without cash is like a store-owner with no inventory. Cash is your inventory, your lifeline, and your best friend. Without cash, you are out of business. Don’t lose your line. There is no place in speculating for hoping, for guessing, for fear, for greed, for emotions. The tape tells the truth.

2) Always establish a stop. A successful speculator must set a firm stop before making a trade and must never sustain a loss of more than 10 percent of invested capital. I have also learned that when your broker calls you and tells you he needs more money for a margin requirement on a stock that is declining; tell him to sell out the position. When you buy a stock at 50 and it goes to 45, do not buy more in order to average out your price. The stock has not done what you predicted; that is enough of an indication that your judgment was wrong. Take sour losses quickly and get out. Remember, never meet a margin call, and never average losses. Many times I would close out a position before suffering a 10 percent loss. I did this simply because the stock was not acting right from the start. Often my instincts would whisper to me: “J.L., this stock has a malaise, it is a lagging dullard. It just does not feel right,” and I would sell out of my position in the blink of an eye. I absolutely believe that price movement patterns are repeated and appear over and over with slight variations. This is because humans drive the stocks, and human nature never changes. Take your losses quickly. Easy to say, but hard to do. (more…)

MANAGING RISK

  
  Education
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Well, perhaps the best way is to emulate some of the trading principles used by the pundits of yesteryear who beat the stock market no matter the emotions and mechanics of the institutional herd. For instance:

Bernard Baruch – Some 70 years ago, he would research a stock, buy it, and then each time the stock rose 10% from his purchase price, buy an additional amount equal to his first purchase. If the stock began declining he would sell everything he had bought when the drop equaled 10% of its top price …

Baron Rothschild – His success formula was centered on the famous quote attributed to him – “I never buy at the bottom and I always sell too soon.” …

Jesse Livermore – This legendary speculator profited enormously by calling the various 1921 – 1927 advances correctly. In 1929 he reasoned that the market was overvalued, but finally gave up and became bullish near the top in the fall of that infamous year.

He quickly cut his losses, however, and switched to the “short side.” Livermore listed three major points for his success:

1. Sensitivity to mob psychology

2. Willingness to take a loss

3. Liquidity, meaning that stock positions should not be taken that cannot be sold in 15 minutes “At the market” …

Addison Cammack – A stockbroker from Kentucky who swore by the two-point stop-loss rule. “If you’re wrong,” he said, “you might as well be wrong by two points as ten.” He followed this method successfully and was one of the few bears to make a fortune on Wall Street and keep it …

Interestingly, all of these disciplines have one thing in common. They all adhere to Benjamin Graham’s mantra, “The essence of portfolio management is the management of RISKS, not the management of RETURNS. Well-managed portfolios start with this precept.”

10 Great Quotes of Jesse Livermore

  
  Education
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“Do not anticipate and move without market confirmation—being a little late in your trade is your insurance that you are right or wrong.” -Jesse LivermoreJL-ASR

“The good speculators always wait and have patience, waiting for the market to confirm their judgment.” -Jesse Livermore

“{Limit} interest in too many stocks at one time.  It is much easier to watch a few than many.” -Jesse Livermore

“Experience has proved to me that the real money made in speculating has been: “IN COMMITMENTS IN A STOCK OR COMMODITY SHOWING A PROFIT RIGHT FROM THE START. ” -Jesse Livermore

“As long as a stock is acting right, and the market is right, do not be in a hurry to take a profit. You know you are right, because if you were not, you would have no profit at all. Let it ride and ride along with it. It may grow into a very large profit, and as long as the “action of the market does not give you any cause to worry,” have the courage of your convictions and stay with it.” -Jesse Livermore

“It is foolhardy to make a second trade, if your first trade shows you a loss. ” “Never average losses. ” Let that thought be written indelibly upon your mind.” -Jesse Livermore

“One should never sell a stock, because it seems high-priced.” -Jesse Livermore

“Profits always take care of themselves but losses never do. ” The speculator has to insure himself against considerable losses by taking the first small loss. In so doing, he keeps his account in order so that at some future time, when he has a constructive idea, he will be in a position to go into another deal, taking on the same amount of stock as he had when he was wrong.” -Jesse Livermore
“It is significant that a large part of a market movement occurs in the last forty-eight hours of a play, and that is the most important time to be in it.” -Jesse Livermore

“A speculator should make it a rule each time he closes out a successful deal to take one-half of his profits and lock this sum up in a safe deposit box. The only money that is ever taken out of Wall Street by speculators is the money they draw out of their accounts after closing a successful deal.” -Jesse Livermore

Trading Quotes for Traders

  
  Education
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The tape tells the truth, but often there is a lie buried in the human interpretation
~~Jesse Livermore~~

 
 Your human nature prepares you to give up your independence under stress. when you put on a trade, you feel the desire to imitate others and overlook objective trading signals. This is why you need to develop and follow trading systems and money management rules. They represent your rational individual decisions, made before you enter a trade and become a crowd member.
~~A. Elder~~

 
 Charts not only tell what was, they tell what is; and a trend from was to is (projected linearly into the will be) contains better percentages than clumsy guessing
~~R. A. Levy~~ 

 
The biggest risk in trading is missing major opportunities, most of enormous gains on my accounts came from 5% of trades.
~~Richard Dennis~~

 
Take every gain without showing remorse about missed profits, because an eel may escape sooner than you think
~~Joseph de la Vega~~

 
Losing is part of trading. The best traders don’t get perturbed by losing trades, since over the long run they know they will be successful more often than not. When you are afraid of losing, you end up losing or missing opportunities because you are afraid to trade.
~~Trading to Win, Ari Kiev~~

 
In trading, the vast market consists of neophytes who are looking for magical answers to make lots of money quickly and with little risk. They want specific ideas. They want to be told exactly what to do. Those looking for such things will not find them. They will not be successful as long as they continue to favor the easy over the
truth.
~~Curtis Faith ~~ 

 
The difficulty in trading lies not in the concepts but in the application.
Curtis M. Faith

The Wisdom of Jesse Livermore

  
  Education
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Here are seven lessons from Jesse Livermore who is considered by many as one of the greatest traders who ever lived.

Lesson Number One: Cut your losses quickly.

As soon as a trade is contemplated, a trader must know at what point in time he’ll be proven wrong and exit a position. Risk management should dictate the size of the trade and how much you can lose. Deciding where to exit when a position is going against you is not a winning strategy.

Lesson Number Two: Confirm your judgment before trading a larger than average position.

Livermore was famous for throwing out a small position and waiting for his thesis to be confirmed by it going in his favor. Once the stock was traveling in the direction he desired, Livermore would maximize his trading size for out sized wins.

There are many ways to add to a winning position — pyramiding up at key pivot points, building a position as the trade goes in your favor, being 100% in no more than 5% above the initial entry — but the take home is to buy in the direction of your winning trade –  never when it goes against you. Never add to a losing position.

Lesson Number Three: Watch leading stocks for the best action.

Livermore knew that trending issues were where the big money would be made, and to fight this reality was a loser’s game. Shorting monster stocks is a very dangerous undertaking when they are under accumulation by large funds. (more…)

Trading Wisdom

  
  Education
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What I say to the youngling…
“Pray for the best, plan for the worst and go about our everyday business”

“It is one of the great paradoxes of the stock market that what seems too high usually goes higher and what seems too low usually goes lower.” – William O’Neil

“When asked if there was a technique for making money on the stock exchange, Nathan Rothschild said, “There certainly is. I never buy at the bottom and I always sell too soon.” – William O’Neil

“Only a fool holds out for the top dollars,” said Joe Kennedy, one-time wall street speculator and the father of former President John F. Kennedy. The object is to get out while a stock is up, before it has a chance to break. Gerald M. Loeb states, ” Once the price has risen into estimated normal or overvaluation areas, the amount held should be reduced steadily as quotation advance.” (At this point it’s all right to ask yourself, “Why didn’t I sell when it was going up and looked so strong?”)” — William O’Neil

“Another thing to bear in mind is this: Never try to sell at the top. It isn’t wise. Sell after a reaction if there is no rally.” – Jesse Livermore

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