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Jesse Livermore: Lessons From a Legendary Trader

Jesse Lauriston Livermore
Written by Andy

Jesse Livermore should have a monument to him on Wall Street in NYC. His wife found out about his “secret apartment” after his death so she took the money from the Will set aside for his burial monument and had him buried in Massachusetts w/ a plain gravestone.

“It is emotionally difficult to review your mistakes, since the speculator must review his own bad trades. And these are not simple blunders; these are blunders that cost money. Anyone who has lost money by investing poorly knows how difficult it is to re-examine” – J. Livermore

“Once a stock trade is entered, hope springs to life. It is human nature to be positive, to hope for the best. Hope is an important survival technique. But hope, like its stock market cousins ignorance, greed, and fear, distorts reason.” – J. Livermore

“And only make a big move, a real big plunge, when a majority of factors are in your favor….every once in a while you must go to cash, take a break, take a vacation. Don’t try to play the market all the time. It can’t be done, too tough on the emotions.” – J. Livermore

The last one is so true.  Having big positions all the time is exhausting mentally.

“Finally. there came the awful day of reckoning for the bulls and the optimists and the wishful thinkers and those vast hordes that, dreading the pain of a small loss at the beginning, were now about to suffer total amputation without anaesthetics. It was October 24, 1907.” – J. L

“Your money is no good here Mr. Livingston, we aren’t taking any more of your bets at this bucket shop. Good riddance!”

“Money cannot consistently be made trading every day or every week during the year”

Great line. Expecting the market to spit out profits like an ATM on your demand is arrogance. Calibrating to conditions and only trading when your edge presents itself is the key. Less is more.

“As long as a stock is acting right, and the market is right, do not be in a hurry to take profits”

Jesse traded stocks, but this applies to any market. If the trade is working, stay in the dam thing! We are all guilty of finding a reason to close a trade that’s working perfectly well. You’ve done the hard work, now let the market work for you!

“Never average losses”

We famously saw the quote “losers average losers” on Paul Tudor Jones’ office wall. Averaging into trades has been the downfall for too many potentially great traders. Just make it a golden rule. A line in the sand.

“The human side of every person is the greatest enemy of the average speculator”

I wonder what Livermore would have thought about algos?! Anyway – he’s right of course. Discipline, rules, emotions and being a human can be a trader’s worst enemy. Constant work is needed. Be aware of your emotions and the impact they have on your trading.

“It is much easier to watch a few than many”

Obviously, Livermore was talking about stocks here. But the same applies to any market. Don’t spread yourself too thin. Focus on a handful of markets at most. Get in tune with a few instruments that have a decent daily range and there’s more than enough opportunity.

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