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Jesse Livermore: Original Trend Follower and Great Trader

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The unofficial biography of Jesse Livermore was Reminiscences of a Stock Operator published 1923. Below are selected quotes:

  • Another lesson I learned early is that there is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.
  • I told you I had ten thousand dollars when I was twenty, and my margin on that Sugar deal was over ten thousand. But 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 have 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.
  • It takes a man a long time to learn all the lessons of 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.
  • There is nothing like losing all you have in the world for teaching you what not to do. And when you know what not to do in order not to lose money, you begin to learn what to do in order to win. Did you get that? You begin to learn!
  • 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.
  • The reason is that a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight. Old Turkey was dead right in doing and saying what he did. He had not only the courage of his convictions but the intelligent patience to sit tight.
  • ?the average man doesn’t wish to be told that it is a bull or bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesn’t even wish to have to think. It is too much bother to have to count the money that he picks up from the ground.
  • To tell you about the first of my million dollar mistakes I shall have to go back to this time when I first became a millionaire, right after the big break of October, 1907. As far as my trading went, having a million merely meant more reserves. Money does not give a trader more comfort, because, rich or poor, he can make mistakes and it is never comfortable to be wrong. And when a millionaire is right his money is merely one of his several servants. Losing money is the least of my troubles. A loss never bothers me after I take it. I forget it overnight. But being wrong- not taking the loss- that is what does damage to the pocketbook and to the soul.
  • What I have told you gives you the essence of my trading system as based on studying the tape. I merely learn the way prices are most probably going to move. I check up my own trading by additional tests, to determine the psychological moment. I do that by watching the way the price acts after I begin.
  • Of all speculative blunders there are few worse than trying to average a losing game. My cotton deal proved it to the hilt a little later. Always sell what shows you a loss and keep what shows you a profit. That was so obviously the wise thing to do and was so well known to me that even now I marvel at myself for doing the reverse.
  • The loss of the money didn’t bother me. Whenever I have lost money in the stock market I have always considered that I have learned something; that if I have lost money I have gained experience, so that the money really went for a tuition fee. A man has to have experience and he has to pay for it.
  • In booms, which is when the public is in the market in the greatest numbers, there is never any need of subtlety, so there is no sense of wasting time discussing either manipulation or speculation during such times; it would be like trying to find the difference in raindrops that are falling synchronously on the same roof across the street. The sucker has always tried to get something for nothing, and the appeal in all booms is always frankly to the gambling instinct aroused by cupidity and spurred by a pervasive prosperity. People who look for easy money invariably pay for the privelege of proving conclusively that it cannot be found on this sordid earth. At first, when I listened to the accounts of old-time deals and devices I used to think that people were more gullible in the 1860’s and 70’s than in the 1900’s. But I was sure to read in the newspapers that very day or the next something about the latest Ponzi or the bust-up of some bucketing broker and about the millions of sucker money gone to join the silent majority of vanished savings.
  • There are men whose gait is far quicker than the mob’s. They are bound to lead- no matter how much the mob changes.

100 TRADING TIPS

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1)Nobody is bigger than the market.

 2)The challenge is not to be the market, but to read the market. Riding the  wave is much more rewarding than being hit by it.
 
 3)Trade with the trends, rather than trying to pick tops and bottoms. 
   
 
 4)There are at least three types of markets: up trending, range bound, and  down. Have different trading strategies for each.
 
 5)In uptrends, buy the dips ;in downtrends, sell bounces. 
   
 
 6)In a Bull market, never sell a dull market, in Bear market, never buy a dull  market. 

   
 7)Up market and down market patterns are ALWAYS present, merely one is  more dominant. In an up market, for example, it is very easy to take sell  signal after sell signal, only to be stopped out time and again. Select trades  with the trend. 
  
 
 8)A buy signal that fails is a sell signal. A sell signal that fails is a buy signal. 
   (more…)

Lessons Learned

“So far in 2009, what are the  the most important thing I had  learned about investing, trading, and/or the markets?”

lessons-learned

  • Success takes longer than expected

  • That you must learn to trade and trust yourself and not to become so dependent on the opinions of others, which ultimately keeps you from becoming the best you can be
  • Keep it simple
  • The very best profit opportunities occur in the midst of extreme emotional sentiment
  • Always think opportunistic verses too bullish or bearish
  • Persistence and dedication to a daily routine is key
  • Developing an edge is the first step for trading successfully. Without that, disciplined trading will only make sure you gradually losing money
  • The market is one unforgiving bitch!
  • It is challenging to find non-correlated markets
  • You have to respect the market even if you think it is under some kind of manipulation
  • Keep your eyes open and powder dry
  • If you fall in love with a stock keep 100 shares and let the rest go
  • I’ve learned to be patient in waiting for my patterns to appear
  • The value of ETFs
  • The importance of finding special situations that will be profitable no matter what the market does
  • Stay away from light volume when the only thing trading is the black boxes
  • The importance of focusing only on one technical setup in order to improve one’s skill set
  • I now think that buy and hold is a serious mistake
  • Think big and think long term
  • Don’t try to predict the markets
  • Don’t be afraid in bear markets, just another opportunity
  • The odds are stacked against the retail investor
  • There’s no such thing as a sure thing
  • The harder I work at it the more likely I am to succeed
  • Conserving one’s capital is vital
  • I know the rules – I just need to notch-up my discipline
  • Smaller entry positions can be helpful
  • Opportunities are everywhere
  • The market is primarily psychologically driven
  • Trade with the trend instead of trying to pick tops and bottoms
  • Know where and when to get out before you get in
  • As Johny Cash put it “You got to walk that lonesome valley, you got walk it by yourself. Nobody else can walk it for you. You got to walk it by yourself.”
  • The difficulty of avoiding over-optimization/curve fitting
  • Overtrading can be, and often is, a recipe for disaster
  • To breathe before executing a trade
  • Trading is not a profession for pessimists
  • Never feel confident even when winning. Humility is a good thing
  • You need to be quick and brutal with the trading decisions
  • It is okay to sit out a potential move – risk management over reward chasing
  • Don’t bet the farm in either direction
  • There is no consistent logic to trading the market
  • Some trades need to be taken when they appear, not just when you are ready
  • There’s no rule that quality stocks must go up
  • Don’t chase any overbought stocks
  • When a sector (like financials) look so hopeless as it did in March there is potential to make a lot of money if things turn around even just a little
  • Hope is a four-letter word and has no place in a trading strategy
  • Patience. It is ok to sit out once in awhile
  • Wait until you have an proven strategy supported by data before trading for keeps
  • Anything can happen. Trading is all about probabilities

  • Technically Yours-ANIRUDH SETHI ,BARODA ,INDIA

 

Anirudh Sethi's Lessons From 2008 : Part – II

 

1)In panics there is almost nowhere to make money without taking excessive risk
2)Timing entries and exits to oversold & overbought conditions helps achieve low-risk/high-reward entries
3)There is no such thing as a safe investment
4)Markets are dysfunctional, corrupt, and have no oversight
5)To let a stock prove itself to me, prior to jumping in based on my analysis alone (more…)

Anirudh Sethi's Lessons From 2008 : Part – I

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Last week …Many Traders had asked me :Dear Anirudh Sethi… “What would you say is the most important thing you’ve learned about investing and/or trading in 2008?”
Here are some of the replies ….I had given (more…)