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Livermore believed that speculation was a full time business,and not a part time endeavor.After he left his one and only job as a chalk boy,he never looked back.
Livermore used more than 50 brokers to disguise the nature of his operations.This way nobody was 100% sure if he was long or short..
Livermore was early to bed,and earlier to rise.He understood the need to be well rested and conditioned for the trading day.Market hours were for making money,after the close was time to live..and live he did..
Livermore's stop loss was set at 10%,unlike the 2-4% most pro's adhere to today.He wanted some leeway to let the stock breathe,since he knew that it was almost impossible to get the absolute low/high on any given cycle.
Livermore strongly believed that one had to play only the market leaders,since if money could not be made with the strongest stocks,how was money to be made with the weaklings..
Livermore rarely chased the market.He let it come to him.If nothing was going on,he went to Palm Beach until conditions improved.
Livermore was a class act.Even though he was not obligated to do so,he always paid back his creditors when he made his comebacks.He had been declared bankrupt on more than one occasion.
Livermore's suicide should teach us all that human beings are flawed by nature.No matter how much money you have,or how on top of the universe you appear to be,there is no escaping the enemy within..Learn to co-exist with your demons,as any other approach is futile....
Livermore is probably the only trader that held the market by the short and curly's for one day,when JP Morgan asked him to cover his shorts or risk bringing down the usa financial system,as legend has it...
Livermore's view on worry;
"every profession has its aches and pains.Me i worry,but given the choice between worry and poor,i'll take worry anyday"
Livermore used to scale into his positions gradually.He would send out probes as he liked to call them to test if the trend was in his favor.Once confirmed he went in full force.To him it was about being right,the money was just an added bonus lol..
Livermore lived a life of luxury,one of the advantages of living in the early part of the 1900's,when a dollar was worth a dollar.It is estimated that at his peak net worth,he would be a billionaire in todays peso's(lol dollars).You have to remember that he had 5 homes fully staffed at all times,cars,boats,toys etc.The estimated upkeep of all that he enjoyed 100 years ago in todays dollars could easily run him 25 million a year imho...
Those were the days folks!Today being a millionaire puts you at the lower middle class level,lol....
Livermore lived by the numbers.From the time he went to bed,to the time he drove from Evermore to his offices.Pre market was his quiet time,where he caught up on all the news around the world.His offices were a maze,with secret entrances and next to impossible to get access to him during the trading day.Talking was not permitted as his employees constantly updated the quotes on the huge blackboards.Loyalty was top priority and his employees were very well paid...
Livermore has been described as half the greatest trader who ever lived,and half the worst trader who ever lived,by Richard Dennis..
Livermore understood the work ethic required to succeed in the markets.It took him five years to formulate his strategy to consistently take money out of the markets.The markets are not a lazy mans game,as many find out while staring at a 0.00 account balance.
Livermore showed us all one thing about money.It is much easier to make it,than it is to hold onto it.
Livermore had a strong opinion on tips.Dont listen to any!!!!He concluded that when he was on his game that he would make money 7/10 trades..One of his regrets in later years was not adhereing to his rules all the time.Mistakes have many cousins was his favorite phrase.
Livermore understood that human nature never changes.We are all governed by;greed,fear,euphoria,hope,panic etc, therefore he concluded that the numerical formations always tend to repeat since human nature tends to repeat the same cycle.
Livermore set up his short position a full year before the crash of 1929,and had the patience to sit and wait.As he recounted on numerous occasions'"its the sitting and waiting that made me the big money"As fate would have it,he walked away with 100 million 1929 dollars.When he arrived at his home that night,his wife had packed all of their belongings certain that he had been wiped out.At this he laughed,and told his family that he had a great day and was sitting in cash lol....
Livermore was a very complex man.Numbers came natural to him.He was in sync with the tape,and tried to ride along side it.He also loved women,food, drink,toys etc..Market hours were for making money,while after market hours were meant for enjoying life to the fullest..
Livermore's new years eve ritual was to spend the night in the vault of his local bank with his trading summary for the year.He felt it was importatnt to see and feel the cash along with a careful analysis of his trades the previous year..
Livermore learned early on to trust his instincts as witnessed by his spectacular short on Union Pacific stock right before the earthquake of 1906.As his peers were greedily buying it on margin,his gut told him to go short,and short it he did...Accounts vary as to his final take,but it is estimated between 300k-3 million in 1906 dollars:)
Livermore understood that time is time and money is money.There would be times when he would not be in the market at all,but when the conditions satisfied his criteria,he would go all in without hesitation..
Mr livermore has inspired way too many traders to be left unattended lol..
Good stuff. I have some questions for you and would appreciate if you would be upfront. What is your interest with the board where you asked me to read this ? Do you own stock over there or plan on owning stock ?
Highly recommended,much more detail,and great photos as well
*-*
I need to read that one,thanks.
If memory serves its in his autobiography,by Richard Smitten,great read *-*
LOL
Where did you find that quote?
More of the Master;
"Boys keep your money in your left hand pocket,pickpockets always go for the right hand pocket.Keep your money close to your balls,and dont drop your balls"
Thanks for the welcome and note about "How to trade..". I'll get it from the local library to read to see if I should pick up for my personal library. Have a great one and lets all make some money.
Welcome
How to trade has the same basics as Reminiscences with a few more details.
Hi all, new here. I've read 'Reminesences' twice - finished 2nd reading last week. Great Stuff (again)! Need to get my hands on "How to Trade..' . Thanks for putting up this board.
Great Board - enjoyed going through these gems. I have to get myself a copy!
Yup,with the wide array of financial instruments today,and his fearlessness when he knew that he was right,he would have cleaned up in no time *-*
Can you imagine the killing he would have made in the bull of the 90s and the bear afterward?
I think I've posted enough from these books to give you some idea about the man. He was one of the best there ever was. I still reread these two books often as one has a tendency to forget and slip back into old habits. I hope this encourges you to stick with the game and learn because you can win if you have the discipline and stick to it.
FTD
He was years ahead of his time,and what a mind he possessed especially with numbers.Imagine having him around today trading,makes me get shivers all over,lol *-*
thanks
I owe him a great debt. Without his wisdom from these books,I would not have made a dime in the market.
How to Trade in Stocks page 133
What all traders must be aware of is in effect a kind of arrogance,for when a stock moves against us we must decide that we were "wrong" and we must exit that trade instantly. Most traders forget that it is a proven fact that we will always be wrong on some trades;it is getting out of those trades quickly that is the key to success.
Excellent board,and a well deserved tribute to the Master *-*
"Every profession has its aches and pains.If you keep bees,you risk getting stung now and again.As a speculator,i worry from time to time depending on the size of my line.If i had to choose to worry or be poor,i will take worry any day."
Livermore's response to a reporter when asked about the daily stress involved in speculation circa early 1900's.
How to Trade in Stocks page 175
ALL TIPS ARE DANGEROUS-TAKE NO TIPS !
NOTHING EVER CHANGES IN THE MARKET-- The only thing that changes are the players,and the new players have no financial memory of the previous major cycles.
page 176
Never lose control of your emotions when the market moves against you. And never become elated with your successes to such a degree that you think the market is an easy way to make money. Never fight the tape-the tape is the truth..... seek harmony with the tape.
How to Trade in Stocks page 172
Never meet a margin call and never average down in your buying.
( somewhere in the book he says to write this permanently into your brain NEVER AVERAGE DOWN! )
Reminiscences page 27
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 its not the bull side or the bear side,but the right side.
With me I must back my decisions with money. My losses have taught me that I must not begin to advance until I am sure I shall not have to retreat. But if I can not advance, I do not move at all. I do not mean by this that a man should not limit his losses when he is wrong, he should. But that should not breed indecision. All my life I have made mistakes,but in losing money I have gained experience and have accumulated a lot of valuable don'ts. I have been flat broke several times,but my loss has never been a total loss. Otherwise, I wouldn't be here now. I always knew I would have another chance and that I would not make the same mistake twice. I believed in myself.
How to Trade in Stocks page 6-7
It is a human trait to be HOPEFUL and equally so to be FEARFUL, but when you inject hope and fear into the business of speculation,you are faced with a very formidable hazard,because you are apt to get the two confused and in reverse positions.
As an illustration: You buy a stock at 30.00. The next day it has a quick run-up to 32.00. You immediately become fearful that if you don't take the profit,the next day you may see it fade away-so out you go with a small profit,when that is the very time you should entertain all the HOPE in the world. Why should you worry about losing 2 points profit which you did not have the previous day? If you can make two points profit in one day, you might make two or three the next day,and perhaps five more the next week.
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.
On the other hand,suppose you buy a stock at 30.00 and the next day it goes to 28.00,showing a two point loss.You would not be fearful that the next day would possibly see a three point loss or more.NO,you would regard it merely as a temporary reaction,feeling certain that the next day it would recover its loss.But that is the time that you should be worried. That two point loss could be followed by two points the next day, or possibly five or ten within the next week or two. That is when you should be FEARFUL ,because if you did not get out,you might be forced to take a much greater loss later on. That is the time you should protect yourself by selling your stock before the loss assumes large proportions.
Profits always take care of themselves,losses never do.
How to Trade in Stocks page 6
Experience has proved to me that the real money made in speculation has been: IN COMMITMENTS IN A STOCK OR COMMODITY SHOWING A PROFIT RIGHT FROM THE START.
Reminiscences page 104
The recognition of our own mistakes should not benefit us any more than the study of our successes.But there is a natural tendency in all men to avoid punishment.When you associate certain mistakes with a licking,you do not hanker for a second dose,and,of course,all stock market mistakes wound you in two tender spots, your pocket book and your vanity. But I will tell you something curious;A stock speculator sometimes makes mistakes and knows that he is making them.And after he makes them,he will ask himself why he made them;and after thinking it over cold bloodedly, a long time after the pain of punishment is over he may learn how he came to make them,and when,and at what particular point of his trade;but not why. And then he simply calls himself names and lets it go at that.
Of course if a man is both wise and lucky,he will not make the same mistake twice.But he will make any one of the ten thousand brothers or cousins of the original.The mistake family is so large that there is always one of them around when you want to see what you can do in the foolplay line.
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 the damage to the pocketbook and the soul.
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There may be a few out there who will listen to some advice from a speculator who was trading in the markets before most of our parents were born.His name was Jesse Livermore and his advice is timeless, and is as true today as it was then because the essential game remains unchanged.The markets were driven by human emotion then, and they are driven by those same emotions now.I am thankful that two books were written that contain his wisdom.They put me on the road to profitability where before them, I had only lost money.
The titles are:
Reminiscences of a Stock Operator by Edwin Lefevre
How to Trade in Stocks by Jesse Livermore
Jesse Livermore worlds greatest stock trader Richard Smitten
RIP Mr Livermore,your legacy lives on
www.jesse-livermore.com
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